Fractured Business Interests and Trade Liberalization

Free-trade debates often pit outsourcing corporations against protectionist unions, as if each side has uniform policy preferences. But, as the Los Angeles Times reports, business interests are actually far from united:

Small Firms Fight Back on Trade

American small businesses, tired of being walloped by low-cost foreign competition, are increasingly asserting themselves in U.S. trade policy, leading to a growing rift with big U.S. multinational companies pushing for freer trade.

The latest example of the tension came Tuesday when the National Assn. of Manufacturers released a 2005 trade agenda that calls for getting tougher on China, including more aggressive use of penalties to counter unfair trade practices.

That isn’t exactly a revolutionary position. But executives from small U.S. companies said it took a revolt on their part to get the nation’s leading manufacturing organization to deviate even slightly from its decades-old stance that opening borders and reducing trade barriers are good for the U.S. economy.

“We wanted to see balance in NAM’s trade policy,” said David Frengel, director of government relations for Penn United Technology Inc., a 630-employee maker of precision tools in Cabot, Pa. “We don’t want to be treated like those who do their manufacturing in the United States are Neanderthals.”

NAM is among Washington’s most influential lobbying groups. And its new position on trade is certain to make it more difficult for the Bush administration to build support for a controversial trade pact with Central America and for global talks designed to open markets for farm goods and services.

That the business community’s opposition to the Bush trade agenda is coming mainly from smaller companies could prove particularly powerful.

“Small business, when it speaks with a unified voice, has historically been quite influential in Congress and in politics generally,” said Gary Hufbauer, a trade expert with the Institute for International Economics.

This political clout is similar to the one enjoyed by another protectionist interest: Big Sugar. Cane and beet producers are spread out in sixteen states, including Florida and Ohio, which allows them to lobby many congressional districts while minimizing national attention that could cause a backlash. Similarly, small businesses can be found throughout the country and exercise significant local influence.

In this light, supporters of free trade should be somewhat concerned. It’s easy to attack multinational corporate interests because they’re large and have the power to move jobs overseas. If they want to counter politically, they may struggle against protectionist small businesses that thrive on dispersion.

FILED UNDER: Economics and Business
Robert Garcia Tagorda
About Robert Garcia Tagorda
Robert blogged prolifically at OTB from November 2004 to August 2005, when career demands took him in a different direction. He graduated summa cum laude from Claremont McKenna College with a Bachelor of Arts in Philosophy, Politics, and Economics and earned his Master in Public Policy from Harvard's Kennedy School of Government.