Labor’s Big Push for Protectionism

March 1, 1973, 9:00 AM UTC

The cause of liberal trade faces a year of enormous hazard. In announcing a 10 percent devaluation of the dollar last month, Secretary of the Treasury George P. Shultz summed up the nature of the risk, and the alternatives facing the Nixon Administration: “Our trade position must be improved. If we cannot accomplish that objective in a framework of freer and fairer trade, the pressures to retreat inward will be intense. We must avoid that risk, for it is the road to international recrimination, isolation and autarky.”

With the realignment of currencies, said Shultz, “we have achieved a major improvement in the competitive position of American business.” But the monetary system is only part of the problem. The Administration must now “lay the legislative groundwork for broad and outward-looking trade negotiations.” Talks have been scheduled to open in Geneva next September, and if they are to be productive the President must have authority from Congress to grant trade concessions. But any such legislation faces a grim struggle of uncertain outcome, for never in the postwar period have those “pressures to retreat inward” been so strong.

Protectionism has been growing along with the trade deficit, which rose on a flood of imports to a record $6.4 billion last year. Even more important than the trade deficit, however, is a basic realignment of political forces. For protectionism’s most powerful new thrust comes from the conversion of the labor movement to its gospel. Indeed, labor is now leading the protectionist pack with a missionary zeal that recalls its exuberant early organizing campaigns.

This marks a historic shift, for most of the labor movement has supported every liberal trade initiative since the first Reciprocal Trade Agreement Act of 1934. Labor participation was crucial to the massive effort to pass the Trade Expansion Act of 1962, which endowed President Kennedy with unprecedented authority to reduce tariffs. Today, by contrast, the A.F.L.-C.I.O. wants to block any grant of similar powers to the Nixon Administration, and it might well succeed.

Labor’s optimum demands are contained in the severely protectionist Burke-Hartke bill, which would, among other things, drastically roll back imports through mandatory quotas, increase taxation on multinational corporations, and empower the President to prohibit the export of capital and technology. The A.F.L.-C.I.O. helped write the bill in 1971, and last year lined up about eighty cosponsors for it in the House. But many union people are frank to admit that Burke-Hartke is an opening bid only. As labor knows, it is far from strong enough in Congress to dictate the terms of major legislation. It wins its battles instead by joining its strength and influence to those of other groups. If Burke-Hartke cannot pass in its entirety, the possibility cannot be dismissed that, in the present protectionist atmosphere, parts of it might get through.

To counter the Burke-Hartke bill, the Administration’s own trade bill will contain what Shultz called “safeguards against the disruption of particular markets and production from rapid changes in foreign trade.” Both the Administration bill and the Burke-Hartke bill will be the subject of extensive hearings in the House Ways and Means Committee. More likely than not, the committee will end up writing its own bill, possibly containing elements of both the others. The danger is that the final bill will be so full of “safeguards,” in the form of new escape clauses or quotas, as to destroy the U.S. bargaining position in Geneva. If the Administration is to secure meaningful authority to cut tariffs, it will have to face a difficult test of strength both in the country and in Congress.

Tactically, liberal traders will gain nothing by merely denouncing the fallacies and shortsightedness of labor’s new protectionism. The labor leaders who are pushing Burke-Hartke are not acting out of caprice, or malice, or simple bullheadedness. They are not, in the main, economic illiterates. They simply operate with a parochial frame of reference, rather than an Olympian perspective of the national interest. A parochial view is necessarily a selfish one, but it is a focus that a labor leader, when his members are restive, can relinquish only at his peril. In the present controversy, liberal traders must understand the reasons for labor’s mass conversion to protectionism if they are to devise an effective strategy to counter it.

Eleven years ago, when the A.F.L.-C.I.O. ardently supported the Trade Expansion Act, organized labor’s parochial interests neatly dovetailed with the national interest. In testifying for the bill, George Meany based his argument largely on economic grounds: tariff reductions would stimulate the demand for American goods. Meany allowed that imports caused some unemployment, but declared that labor supported tariff reduction “because we … will gain far more than we lose. Currently, this country is importing $15 billion worth of goods a year, and exporting $20 billion … if we built a Chinese wall around ourselves, we would lose $5 billion a year in business.”

Moreover, Meany pointed out, export-related jobs totaled four million, whereas jobs “adversely affected” by imports came to a mere 400,000. In an analysis of world trading patterns that was soon to become remarkably out of date, he cited the need “to open up our own markets to such products as British woolens, German cars, and Japanese toys.” Not a word about Japanese automobiles, television sets, or steel.

A shift in the trade winds

Meany was able to enlist in the crusade for expanded trade because his flanks were well covered. The most serious protectionist clamor in the federation had been appeased by the international cotton agreement, which met the demands of the textile and apparel unions for cotton import quotas. Most of the large industrial unions in the A.F.L.-C.I.O. followed Meany’s lead in supporting the bill.

By the mid-1960’s, doubts began to grow and attitudes shift as a rapid buildup of imports occurred in such products as steel, consumer electronics, autos, apparel, textiles, and shoes, often causing a loss of jobs. The labor movement was clearly unprepared for the speed of change in international trade; its unspoken assumption (not limited to labor) had been that a large American trade surplus was an immutable fact of life. Paralleling the surge of imports was the steady expansion of American multinational corporations abroad, leading the unions to contend that jobs were being exported—a point vehemently disputed by the corporations themselves.

Nobody knows for certain how many jobs have disappeared because of imports since labor took that ringing stand for freer trade in 1962. The A.F.L.-C.I.O. puts the figure at 900,000 in the period 1966 through 1971. This estimate was derived by extrapolation from an analysis made in detail by the Bureau of Labor Statistics for the year 1966. Import-related and export-related jobs in every sector of the economy were calculated; at the time 640,000 more jobs were said to be gained through exports than were theoretically lost through competitive imports. By the end of 1971, according to the A.F.L.-C.I.O. calculation, that net gain in jobs was replaced by a net loss of 260,000. A number of serious methodological problems beset such an analysis, as the B.L.S. readily conceded, but even if one accepts the figure of 900,000 jobs, it is not a colossal number to be eliminated over a five-year period in a work force of over 80 million. It hardly means 900,000 people permanently unemployed. That other jobs have opened up is obvious from the fact that the labor market was extremely tight as recently as 1969.

Watching the rolls go down

But an aggregate unemployment figure is somewhat beside the point in explaining union anxieties. A union necessarily takes a micro- rather than a macro-economic approach to unemployment. It is concerned, after all, with the fate of its own members. Jobs that have been lost, or are visibly in danger, stimulate a labor leader’s adrenalin and clear his mind of all extraneous perceptions. Every time a member loses a permanent job he loses seniority. Sometimes he loses pension rights as well. Thus a job loss numbered in the tens of thousands is enough to roil a union of several hundred thousand. A dozen plant closings due to imports are taken to herald the death of an industry. Workers with secure jobs feel threatened, and leaders become apprehensive as they watch the erosion of their membership rolls. William Bywater, a vice president of the International Union of Electrical, Radio and Machine Workers, voiced the characteristic anxiety of the leadership when he told a conference in 1969, “We had better wake up our people now to the facts, because we may wake up a little bit later on and we won’t even have a union around us.”

Moreover, the workers in those labor-intensive industries that have been hardest hit by imports are not easy to place in new jobs. Many are middle-aged, a large proportion are women (80 percent in apparel, 64 percent in shoes, 54 percent in consumer electronics), and in many parts of the country a high proportion are members of minority groups. These are precisely the people who cannot easily be retrained, reshuffled, and reslotted. Theories of how the economy should work continually collide with the obstinate limitations of human beings. Economist Paul Samuelson recalls telling a radio audience some time ago that “American resources should move out of cheap textiles, and for that matter shoes, and go to more efficient lines of production.” Soon afterward, he received a letter that gave him pause. “What can my answer be,” he asks, “to a fifty-nine-year-old woman textile worker, asking where at her age she can possibly find another job?”

Most workers displaced by imports do eventually find jobs, but the transition can be painful. In one survey of displaced workers, conducted in February, 1972, 26 percent had gone for at least a year without work. Those who had found jobs had worked on the average only 50 percent of the time.

The concealed label

In varying degrees, the import problem has affected most of the major unions in manufacturing, with those in the consumer electronics industry and the shoe industry sustaining the greatest pressure. In consumer electronics, the import surge began with transistor radios from Japan, which entered in large numbers in the early 1960’s. Then came bigger radios, black-and-white television sets, and later color sets. By 1971, imports from Japan, Korea, Taiwan, Singapore, Mexico, and elsewhere accounted for 54 percent of all black-and-white TV sets sold in the U.S., 18 percent of color sets, 32 percent of phonographs, 91 percent of radios, and 96 percent of tape recorders.

Imports came both from foreign companies and from American subsidiaries abroad. In no other industry have U.S. corporations moved so much of their manufacturing overseas for the purpose of exporting back to the U.S. market. Many of the big electronics companies—Admiral, Motorola, Philco, RCA, Zenith—bring in the foreign-made product under their American brand names. (Only a close examination of the chassis may reveal a Made in Taiwan label.) To the unions, this offshore move is the ultimate betrayal; it is viewed as another variant of the “runaway shop.” From 1966 through the first eleven months of 1972, employment among workers making domestic radios and TV sets fell 18.5 percent—from 128,600 to 104,800. An additional 64,000 production jobs were lost in the manufacture of electronic components and accessories.

Three major unions felt the pinch: the I.U.E., the International Association of Machinists, and the International Brotherhood of Electrical Workers, all of which moved to a protectionist position by 1970. The I.U.E. suffered most; its president, Paul Jennings, calculates that imports cost the union nearly 50,000 members over the last five years—not a trifling figure for a union of 285,000. At his convention last year, Jennings dolefully ticked off a list of eight locals “that have fallen by the wayside since 1970 as a result of this nation’s trade policies.” Their employers had closed up shop, the members had been laid off, and so the locals had gone out of business.

Thus, in 1966, Emerson closed out radio production in its Jersey City plant, having arranged to import its full line of radios from Japan. Some 1,500 workers lost jobs. In 1970 the remaining 1,000 employees were dismissed after the company made a deal with Admiral to produce Emerson TV sets in Taiwan. Similarly, in 1970, RCA discontinued operations at its five-year-old television plant in Memphis, which at its peak had employed 4,000 people. Part of the production went to Taiwan.

Down at heel

The shoe industry followed a different pattern. The manufacturers, with one or two exceptions, have stayed home, but American capital often finances overseas competition in another way: a U.S. importer pays for the entire output of a foreign plant before the shoes are produced. Italy and Spain have been big suppliers for years; today the fastest-growing flow of imports comes from Korea, followed by Brazil and Taiwan.

In 1960 imports of nonrubber footwear accounted for only 4.2 percent of domestic consumption; by 1968 the figure was 21.4 percent; and in 1972 it had risen to 34.6 percent. In an industry with a multiplicity of small plants, the mortality rate has been high. Since 1969 some 200 companies have gone out of business, according to the American Footwear Industries Association, though doubtless not all the closures could be attributed to imports. In Massachusetts, so many plants have closed that the multi-employer pension fund has been badly depleted; in 1971 the paltry top pension of $34 a month had to be reduced to $25.50. The larger of the two unions in the industry, the United Shoe Workers of America, has also taken quite a battering, its membership dropping from 58,000 to 41,500 in a decade. Last year the union decided it could no longer afford the high rents in Washington, and so after thirty-four years it moved its headquarters back to Boston.

The textile and apparel unions have been less badly hurt, but they are alarmed at the huge market penetration by imports over a relatively short period of time. The International Ladies’ Garment Workers’ Union calculates that men’s and women’s apparel imports rose from 6 percent of consumption in 1961 to 20 percent in 1970 and to 25 percent in 1971. In some categories the penetration has been higher—87 percent for sweaters, 51 percent for women’s and children’s blouses.

The garment unions have only sketchy data about plant closings attributable to imports, but it is clear that the work force has not grown appreciably and that unemployment has been higher than the national average, the rate increasing from 5.9 percent in 1969 to 9.7 percent in 1971. The recession obviously had an impact, but the unions, not unreasonably, also blame imports. Union membership has declined, despite new organizing. The I.L.G.W.U., for example, dropped from 457,517 members in 1969 to 432,331 two years later.

After the cotton agreement was concluded over a decade ago, the major concern of the unions soon shifted to wool and synthetic fibers, imports of which began rising sharply in 1965. Both presidential candidates promised relief in 1968, but it took three years of prodding by the U.S. Government before Japan, Taiwan, Korea, and Hong Kong agreed to voluntary quotas. Since then, the unions have been troubled by what they regard as loopholes in the agreement—garments have been coming in from Macao and Indonesia, for example—and they have enthusiastically lined up behind Burke-Hartke.

No audience for a free trader

The deluge of imports in apparel and consumer electronics is hardly surprising, for it is in just such labor-intensive industries that developing countries have a decided advantage. The shocker has been steel, in which American productivity long led the world but then was surpassed by advanced technology abroad. Imports zoomed from 1,150,000 tons in 1957 to 18,300,000 tons in 1971—18 percent of the market.

Steelworkers become most keenly aware of imports when a new contract is signed, for that is generally a period of unemployment after several months of frantic production and stockpiling in anticipation of a strike. When 104,000 workers were laid off in 1971, it was easier to blame imports than the industry’s bargaining cycle. The leaders of the United Steelworkers reinforce the resentment by asserting, as President I.W. Abel did in a recent speech, that every million tons of imported steel “represents the export of 6,000 full-time job opportunities.” Thus there would have been 110,000 more jobs in 1971—and no unemployment—had there been no imports. No free trader is going to stand up in a union hall against that argument, however spurious it may look to economists.

Who cares about retaliation?

Since the United Steelworkers, with 1,400,000 members, is the largest union in the A.F.L.-C.I.O., it has been pivotal in swinging the federation to a protectionist position. The union held to its traditional free-trade views until 1965, when Abel replaced David J. McDonald after a bitter election campaign. McDonald used to grumble about imports, but took no action. Abel joined the industry in a plea for quotas, which were finally negotiated in 1968 and again in 1972. The new quotas reduced imports 4 percent below the 1971 peak.

But that is modest relief indeed compared to Burke-Hartke’s quota system, which generally would roll back imports to their average annual levels during the period 1965-69. Last year a study by the Commerce Department showed that if Burke-Hartke had been in effect in 1971, imports would have been reduced by $10.4 billion from their actual levels—almost a quarter of the total for that year. Canada would have lost $3.6 billion—30 percent of its exports to the U.S.; Japan, $3.1 billion; the Common Market countries, $1.8 billion.

With cutbacks of this magnitude, retaliation would be inevitable. Yet advocates of Burke-Hartke scoff at the danger. The common response among unionists is that foreigners buy in the American market because it is to their advantage, and that they will continue to do so. Moreover, foreign countries will not retaliate because they would fear escalating retaliation by the U.S., causing them further export losses.

A more sophisticated response is offered by Stanley H. Ruttenberg, a trade consultant to the A.F.L.-C.I.O.’s Industrial Union Department, who suggests that the base period in Burke-Hartke is merely an opening bid in a negotiation. “Anybody who knows how Congress operates, and knows anything about base periods, knows that you don’t get a rollback in your base,” says Ruttenberg. Nonetheless, a quota system by definition involves restrictions, and similar restrictions are likely to be visited on American exports.

Basically, most union leaders who have been campaigning for Burke-Hartke are not impressed by the retaliation argument because the workers they represent are not in export-related industries. One of the few labor leaders who are troubled by the issue is Floyd E. Smith, president of the International Association of Machinists. He has lost thousands of members in the consumer electronics industry, which predisposes him toward Burke-Hartke; on the other hand, he concedes that I.A.M. members who manufacture aircraft (perhaps 75,000 in all) would be vulnerable if export sales fell off. Smith reports restiveness in the I.A.M.’s aerospace units about Burke-Hartke, but so far the heavy pressure has come from the members in electronics, who have actually seen jobs evaporate.

A number of unions, including the machinists, have been surprisingly late in discovering that their Canadian members are appalled by the Burke-Hartke bill, which would obviously cost them jobs. The machinists, the steelworkers, the I.U.E., and the Amalgamated Clothing Workers all passed resolutions last year calling for Canadian exemption from quotas. So far, the A.F.L.-C.I.O. has refused to go along, on the ground that there is no practical way legislatively to exclude one country from a global quota system.

A drastic therapy

The labor movement’s concern over imports is far more understandable than its campaign against multinational corporations. The job loss caused by imports is plainly visible, whereas the impact of multinationals on domestic employment is far more hypothetical. The great bulk of American-owned factories abroad do not supply the U.S. market.

Investment in overseas plant and equipment has, of course, increased enormously—from $3.8 billion a year in 1960 to $14.2 billion in 1971. Labor considers it a self-evident proposition that if production facilities and technical know-how remained at home, the same volume of goods could be manufactured here and sold abroad. The motive for setting up shop abroad, in labor’s view, has generally been to exploit tax advantages, as well as benefit from cheaper labor.

The multinationals, of course, heatedly dispute that view. Indeed, they maintain that in most cases their motive for going abroad was to jump trade barriers. Thus if they had remained at home, they would have sacrificed some foreign markets. To the extent to which this argument is true—and labor concedes its truth in some cases—no American jobs were “exported,” for they would have been lost anyway. The multinationals also argue that their foreign operations generate a good many domestic jobs in the production of components that are assembled and sold abroad.

The burden of proof that multinationals are depriving American workers of jobs should be on the labor movement, for the Burke-Hartke bill would impose a drastic therapy. For one thing, foreign taxes paid by the multinationals would be treated as a deduction from taxable income and could no longer be taken as a direct credit against U.S. taxes due. The changes in tax law would cost the companies billions—heavy punishment indeed for a mere suspicion of guilt. But when an A.F.L.-C.I.O. staffer was asked for his evidence, he said, “Let the government get the data. Why is it up to us?”

Free traders in Detroit

The one large industrial union that has resisted the protectionist trend is the United Automobile Workers, an organization of 1,500,000 members. The U.A.W. leaders have a fervent intellectual commitment to liberal trade, but the fundamental reason the union has been able to fend off the Burke-Hartke approach lies in the nature of its industries.

A couple of hundred thousand members are employed in the manufacture of airplanes and agricultural implements and would suffer from foreign retaliation against American exports. More important, there has been a buoyant level of employment in the auto industry for the last two years—despite a 15 percent market penetration by foreign cars. So long as jobs are abundant, it is relatively easy for the U.A.W.’s leaders to talk about the consumer benefits that flow from imports and the dangers of a trade war. On the other hand, the U.A.W. does favor controls over multinational corporations—ideally under international auspices—on the ground that these industrial goliaths are truly answerable to no national authority.

Only one plant shutdown has caused the U.A.W. any trouble. In July, 1971, a Chrysler assembly plant in Los Angeles closed, affecting some 1,200 workers. Inasmuch as Japanese cars had captured a sizable share of the southern California market, it was reasonable to blame imports. The U.A.W.’s Chrysler Division, headed by Vice President Douglas A. Fraser, stretched itself to take care of all the victims. Some were allowed to work outside the industry and still qualify for early retirement when they became fifty-five. The union arranged jobs for other workers in assembly plants throughout the country. Moreover, through a referendum vote of the entire Chrysler membership, the newcomers were able to retain their seniority rankings—which determine vulnerability to layoffs. The U.A.W. and Chrysler, in short, had a superb adjustment-assistance program of their own.

Nonetheless, the Chrysler union representatives from the West Coast mounted a campaign at the U.A.W. convention in April, 1972, for a boycott of cars made by Chrysler abroad. The motion was bottled up in the resolutions committee, but a vote of 15 percent of the delegates could have forced it to the floor. At a caucus of the Chrysler delegates, Fraser persuaded the brothers not to press for a floor debate. He probably would not have won his point had the workers who lost their jobs still been on the street.

Apart from the U.A.W., the only major union opposing Burke-Hartke is the United Paperworkers, an A.F.L.-C.I.O. affiliate with over 300,000 members. Joseph P. Tonelli, the president of the union, is frank in conceding that he was persuaded by the arguments of the American Paper Institute that his members would lose jobs if foreign customers cut back their billion-dollar-a-year purchases of American paper products. A good many unions in the A.F.L.-C.I.O., including those in construction and the retail and service trades, are indifferent to the issue, but most of them loyally go along with the official position. Joseph A. Beirne, the peppery president of the Communication Workers of America, is one of the few top leaders who will criticize the Burke-Hartke bill (the quota feature particularly troubles him), but Beirne believes it is useless to try to reverse the federation’s position.

The one major question mark in the union line-up hovers over the giant International Brotherhood of Teamsters, which was expelled from the A.F.L.-C.I.O. in 1957. The teamsters, who have taken no position on Burke-Hartke, have some protectionist sentiment in the Midwest, counterbalanced by a concern for foreign trade on the East and West coasts. The teamsters have been exceedingly friendly to the Nixon Administration ever since their former president, James Hoffa, was released from prison. Frank E. Fitzsimmons, the current president, remained on the Pay Board after the other labor members walked off, and the union endorsed Nixon in the last campaign. It is quite possible, if enough persuasion is applied, that the teamsters will wind up supporting the Administration’s trade proposals.

“The law is the law is the law”

Whatever the outcome of the contest in Congress, however, labor’s protectionist drive is not likely to slow down until the conditions that brought it about are ameliorated. Two improvements in the labor market would seem to be essential: an adequate program to compensate, retrain, and relocate workers affected by imports, and the return of full employment.

A plan for “adjustment assistance” was an integral part of the Trade Expansion Act of 1962. At the time, George Meany called it “indispensable to our support.” Yet the program was totally ineffective throughout most of the 1960’s, a circumstance that contributed immeasurably to labor’s new mood.

The problem was that the criteria for participation in the program were too narrow, as was the Tariff Commission’s interpretation of the law. For a group of workers to qualify for help under the 1962 act, they must show that increased imports constitute the “major” cause of their plight, and that the imports resulted “in major part” from tariff concessions granted under trade agreements. (Adjustment assistance is also available if an industry wins “escape clause” relief from the commission, but this has been an even harder route.)

Imports can cause tremendous dislocations without being triggered “in major part” by tariff concessions. Moreover, as it made clear in its second case in 1963, the commission contended that only concessions in the recent past were relevant. If they had taken place several years before the rise in imports, the commission was unwilling to impute a causal link. Since there had been no tariff cuts for four years prior to 1962, the commission’s interpretation meant that only concessions flowing from the 1962 act itself could be taken into account—and none of these, as a matter of fact, went into effect until 1968. Under this interpretation, adjustment assistance was a joke.

After the commission’s second decision, a case involving layoffs by Philco, Andrew Biemiller, the A.F.L.-C.I.O.’s chief lobbyist, and Nathaniel Goldfinger, its research director, called on Myer Feldman, a presidential assistant who handled liaison with the regulatory agencies. Feldman sympathized with their anxieties but could offer no help; he pointed out that the Tariff Commission was an independent agency. Goldfinger subsequently waited on the general counsel of the Tariff Commission, again to no avail. “All he told me,” Goldfinger recalls bitterly, “was that the law is the law is the law.”

“Flowers on the grave”

Five cases were filed with the commission in 1963; all were turned down. Discouraged, the unions did not press another application for four years. Finally, on November 3, 1969, the commission approved three applications, the largest involving 500 steelworkers. The commission, whose membership had recently changed, simply reversed itself: it was now willing to consider the impact of tariff cuts in the distant past. Since 1969, a total of seventy cases have been approved, and some 20,000 workers have received assistance.

When adjustment assistance finally arrived, it turned out to be too little and too late. Clearly, many more than 20,000 individuals have been hurt by imports. Moreover, the level of benefits, which seemed satisfactory in 1962, now appears to be unduly modest. Cash allowances, payable for as long as fifty-two weeks, come to 65 percent of the worker’s weekly wage, or 65 percent of the average manufacturing wage, whichever is lower—which in practice means a maximum of $93 a week. The program has worked so sluggishly that only some 10 percent of eligible workers have received the promised retraining. A relocation allowance is also available, but only for heads of families. Moreover, it takes so long to process each case that many workers simply receive a retroactive lump-sum payment. They are not helped to “readjust” but compensated for their pain. “It’s just been flowers on the grave after you’re dead,” scoffs George Fecteau, president of the United Shoe Workers.

Partisans of Burke-Hartke insist that they will not be bought off by more and better adjustment assistance, yet it is clear that a generous program might take the heat out of union agitation. Union leaders will still be concerned by declining membership rosters, of course, even if the workers’ needs are cared for. But the bureaucratic stake in preserving institutional power will not generate much passion, either in Congress or in the country.

Better adjustment assistance means more generous benefits for a longer period, realistic retraining schemes, and more relaxed criteria for participants in the program. There is no need to tie it to trade concessions, but merely to dislocations caused by increased imports.

The U.A.W. has suggested that the program set up for Amtrak would be a good model to follow. Two years ago, when the nation’s long-run passenger lines were taken over by a government corporation, railway workers who were dismissed or downgraded were guaranteed their full wages and fringe benefits for a period equal to their prior employment, up to six years. Not unreasonably, the U.A.W. asks why all displaced workers should not be similarly treated, while an effort is made to retrain them for new jobs. If imports redound to the general good of the country, should the country not compensate the unintended victims of a beneficial national policy? Indeed, the U.A.W. would extend the Amtrak plan to guarantee a continuance of benefits for every year of service that the worker had with his prior employer. C. Fred Bergsten, a senior fellow at the Brookings Institution who also favors the Amtrak approach, costs it out at about half a billion dollars a year (the U.A.W. thinks he is on the high side). While this is no trifling sum, it hardly bulks large compared to the $5.3 billion a year the Administration is already spending on its manpower programs.

The success, as well as the cost, of adjustment assistance depends to an important degree on the level of employment. When jobs are short, retraining only compounds frustration and assistance becomes another form of the dole. Full employment will not in itself persuade labor to abandon protectionism, but in its absence there is no hope for a changed attitude.

“We’re not isolationists”

Some may argue that labor has no recourse but protectionism—that having priced the services of its members out of the market it now must try to protect their privileged position through artificial restraints on trade. This is an unpersuasive analysis. American wage rates have long been the highest in the world, but high productivity has compensated for high wages. The deterioration in the balance of trade was related primarily to domestic inflation and rigid exchange rates rather than to increases in U.S. labor costs in real terms. Labor-intensive industries were ripe for attack, of course, and it is difficult to see how their defense can be more than a holding action, even with labor’s enlistment in the cause.

For many labor leaders, the old internationalist slogans about liberal trade were far more congenial than the present rhetoric. The word “protectionist” itself riles many union people, who regard it as a derogatory epithet that can properly be applied only to the Smoot-Hawley tariff. They prefer the terms “fair trade” or “fair but regulated trade.” And when George Meany gives a speech about the new approach he insists, “We’re not isolationists and have no intention of becoming isolationists.” Such defensiveness may hold out some faint hope of change, once conditions are right.

With additional research by Deborah DeWitt Malley.

This article first appeared in the March 1973 issue of Fortune magazine.

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