Lessons Learned: How John Kerry Blew It on Trade in 2004

Trade is heating up again as a political issue. But if we're to have a fighting chance this time of ending America's free-trade disaster, we need to learn from our past mistakes on the issue.

Case in point: Sen. John Kerry's 2004 presidential run.

Offshoring first flared as a political controversy in that year. The thing about it that differed from previous trade-induced job losses was, of course, that it threatened the white-collar middle class.

But in the end, the controversy didn't really go anywhere, in the sense of producing serious political realignments or policy changes. Offshoring was adjudged by the two parties to be a political flashpoint but fundamentally just another political issue, which changed nothing important and should be handled the way most political issues usually are: by jockeying for advantage within the established policy consensus.

Politicians thus set out to win votes on the issue without taking the risks inherent in doing anything substantial.

The Democrats, quintessentially Sen. John Kerry in his 2004 campaign, sought to make the smallest policy proposals sufficient to position themselves as "the good guys" on the issue for voters who cared about it, while signaling to everyone else that they weren't about to go too far.

The Republicans, meanwhile, defended a status quo that they were no more or less responsible for than the Democrats using the same old Ricardian comparative-advantage (explanation) arguments that have always been used on free trade.

Both responses were standard procedure for day-to-day Washington politics--which is precisely why they occurred.

Kerry, handicapped by his vote for NAFTA in 1993, did tack left a bit in the 2004 primaries. Facing vocal NAFTA opponents in the sincere Rep. Dick Gephardt (D-MO) and the opportunistic Sen. John Edwards (D-NC), he began railing against what he called "Benedict Arnold" corporations which were moving jobs overseas.

This rhetoric effectively blunted Edwards' and Gephardt's attacks on his NAFTA vote, enabling his wins in Ohio, Wisconsin, Michigan, and other industrial states especially hurt by free trade.

Then, in May, with his nomination secure, Kerry tacked right again. In an interview with The Wall Street Journal, he claimed his Benedict Arnold reference had been misconstrued:

'Benedict Arnold' does not refer to somebody who in the normal course of business is going to go overseas and take jobs overseas. That happens. I support that. I understand that. I was referring to the people who take advantage of non-economic transactions purely for tax purposes--sham transactions--and give up American citizenship.

Offshore tax domiciling is, of course, an entirely different issue than offshoring. Kerry had folded his cards.

From that point on, the issue virtually disappeared from the campaign.

Kerry's refusal to engage George W. Bush on trade reached its nadir during the third presidential debate, when moderator Bob Schieffer of CBS asked Bush what he would say to "someone in this country who has lost his job to someone overseas who's being paid a fraction of what that job paid here in the United States."

Bush offered the stock Republican responses: he talked about creating the new jobs of the 21st century, improving primary and secondary education, expanding Trade Adjustment Assistance, increasing Pell Grants to college students, and helping displaced workers attend community college.

None of these palliative solutions are, of course, remotely sufficient. Educating people fill jobs that have been moved offshore is pointless, and Trade Adjustment Assistance is just a band-aid program to lessen the pain for the victims of free trade a bit.

Bush's position gave Kerry a clear opportunity to define himself politically with his response at a critical juncture in the campaign. The strategic window was wide open.

But instead of taking on Bush over trade, Kerry accepted Bush's basic premise that free trade is best and that his proposed solutions could work, and attacked him for cutting job training funds, Pell Grants and Perkins loans.


Amazingly, Schieffer gave Kerry another chance to exploit the issue minutes later. Kerry squandered it again, with a self-consciously defeatist answer dressed up as political courage:

Outsourcing is going to happen. I've acknowledged that in union halls across the country. I've had shop stewards stand up and say, 'Will you promise me you're going to stop all this outsourcing?' And I've looked them in the eye and I've said, 'No, I can't do that.'

In other words, trade isn't really a political issue at all, because there's nothing the government can do about it. Not only is there no meaningful difference between Republicans and Democrats on the issue, there cannot be one.

Kerry went on to talk about tangential issues--corporate tax loopholes, violations of international trade rules, subsidies by Airbus, Chinese currency manipulation, and fiscal discipline. Bush had won by forfeit.

In retrospect, it is entirely plausible that Kerry's decision to bunt on trade cost him Ohio and thus the entire 2004 election. By refusing to separate himself from Bush on economics on the single best issue for doing so--where Bush was furthest away from the opinions of swing voters--Kerry allowed social issues summed up as "God, guns and gays" to determine the election for the lower-middle and working-class voters who were his natural constituency.

This problem continues to fester: a 2008 study of the electorate in Ohio by the Center for Working-Class Studies at Youngstown State University suggests that thanks to Bill Clinton's support for NAFTA in 1993, working-class voters "still do not trust Democrats and they haven't come back to the Democrats." As a result, these voters have tended to view Republicans and Democrats as equally unlikely to protect their economic interests and have therefore voted on noneconomic issues.

In the face of economic crisis, this is a recipe for disaster.