When the Thunderbird Mine shut down in May 2003, Chuck Schanno figured he had seen the last of his days working in Minnesota's open-pit iron mines.
Schanno, 48, got a new job maintaining telephone lines for Minnesota Power. The job security was a relief, but the 102-mile drive to work was a grind.
So when a Chinese steel company bought 30 percent of the mine to help reopen it a year ago, Schanno eagerly returned. And he credits one politician with helping get his job back: President Bush.
It was Bush's 30 percent tariff on imported steel that jump-started U.S. steel mills and got the Iron Range mines going again, says Schanno. Former President Bill Clinton had complained that foreign dumping of steel hurt the U.S. industry, but never took action, he observes.
"I find it ironic that it took a Republican president to put the tariffs in place," Schanno said.
Schanno knows the story is more complicated than that. After all, Bush removed the tariffs last December after the World Trade Organization found they broke trade rules. Demand from China and a global economic rebound have done more than the tariffs to get Minnesota's mines busy again.
But Schanno doesn't care. "President Bush got the ball rolling," he said.
Nothing is simple when it comes to presidential politics and trade. The issues are so complex, the politics so contorted, that Bush and Sen. John Kerry have each found ways to turn the trade issue to their advantage. Trade has taken a position of prominence in the campaign, and Americans' concerns over outsourcing of jobs have even overshadowed nuclear proliferation and terrorism for some voters.
The president is an avowed free-trader who nevertheless imposed the steel tariffs, one of the largest levies ever by a U.S. president. His administration backed the largest agricultural subsidy ever, a $190 billion package, yet continued negotiating with the European Union toward elimination of trade-distorting farm subsidies.
Kerry, for his part, has consistently voted for free-trade measures, from the North American Free Trade Agreement to normalized trade relations with China. But as a presidential candidate, he has criticized NAFTA, promised a 120-day review of all existing trade deals and named as his running mate one of NAFTA's harshest critics, Sen. John Edwards of North Carolina.
"John Kerry had an outstanding free-trade record during the 1990s," said Tim Adams, policy director for the Bush campaign. "Unfortunately, he's walked away from it in the presidential campaign."
Trade typically has been a back-burner issue in presidential politics. But this year, one topic has moved trade to the short list of topics on which the election might turn.
That issue is outsourcing. The Economic Policy Institute says 935,000 manufacturing jobs have been lost since 2000 to trade related imbalances; Forrester Research says that some 3.3 million white-collar jobs will be lost to outsourcing by 2015.
Indeed, the outsourcing phenomenon is moving up the value chain of the U.S. workforce.
Americans have grown accustomed to seeing manufacturers move their operations to low-cost sites like Mexico and China. But now that outsourcing has begun claiming knowledge-based jobs--everything from phone banks to medical record-keeping to legal research to computer programming--it is creating an even larger stir.
Kerry has railed against "Benedict Arnold CEOs" who send jobs overseas. Bush's advisers, meanwhile, have spent time backtracking on a statement by the chairman of the president's council of economic advisers that "outsourcing is just a new way of doing international trade. ... And that's a good thing."
Just how big an issue is outsourcing? A national survey by the Chicago Council on Foreign Relations last July showed that Americans were more concerned about outsourcing than nuclear proliferation or combating international terrorism.
Other polling, by the Pew Center for public opinion research and New York's Council on Foreign Relations, have placed national security ahead of outsourcing.
"Outsourcing is a relatively new form of international economic competition. There's a high degree of alarm about it," said Marshall Bouton, president of the Chicago Council on Foreign Relations. Concerns about outsourcing are driving perceptions about the economy, which are "going to rank relatively even with or on the same order of magnitude as terrorism, nukes and Iraq," Bouton predicts.
Of the two candidates, Kerry has focused the most specific attention on outsourcing. His proposals combine the carrot of tax incentives for companies that hire new workers with a substantial stick: higher taxes and closed loopholes for companies that export jobs.
The law allows companies to defer paying taxes on profits earned overseas until the earnings are sent back to this country. Kerry says he would increase and speed up collection by ending the deferrals. Manufacturers and other employers in outsourcing-intensive industries would receive a credit for net new hires in this country.
Kerry focus on China
Kerry also proposes focusing new attention on trade agreements. If elected,he promises a 120-day review of trade treaties, to assess whether they still serve American interests. He promises to give special attention to China--particularly on claims that the country keeps its currency valued low so Chinese goods are cheap to buy, that it has poor labor standards and that it does not respect American copyrights and other forms of intellectual property.
NAFTA doesn't work, Kerry claims, because Bush has not enforced side agreements on labor and environmental issues. Future trade agreements would include environmental and labor issues in the core of the treaty.
"The Bush administration has moved us back on the agreement people had that we should be including better environmental and labor standards in our trade agreements," said Jason Furman, economic policy director of the Kerry campaign.
Bush has chosen to be less specific than Kerry on trade issues.
The Bush trade agenda is based on two core "pillars," according to Adams. The president plans to make certain that "the U.S. is the best place to do business," and Bush plans to "invest in human capital," Adams said.
To make the U.S. an attractive business location, Bush aims to cut taxes, encourage savings, put limits on awards from tort litigation, and cut regulatory costs. On the human capital side, the president plans to promote job retraining and other educational initiatives.
Bush also will continue to pursue regional trade agreements, such as his proposed Free Trade Area of the Americas and Central American Free Trade Area. Just as he has negotiated bilateral free-trade treaties with smaller countries--from Jordan to Australia to Morocco to Chile --Bush in a second term would pursue such one-on-one deals.
Critics of Bush's trade strategy say the administration has focused on the regional and single-country deals at the cost of not pursuing aggressively enough a new agreement for the World Trade Organization. The "Doha Round," launched in the aftermath of the Sept. 11 terrorist attacks, has made only halting progress.
Furman said the Bush approach is not working. "President Bush has pushed for free-trade area after free-trade area with economically insignificant countries that move us backward on labor and environmental standards and don't address the problems of dislocated American workers," he said.
Adams defended the Bush strategy. "While the [WTO] negotiations are going on, we should take the opportunity to pick the low hanging fruit," he said. "We should pursue the U.S. interests wherever we can."
The talk of treaties, education, taxes and environmental and labor standards are the technical aspects of the trade issue. But outsourcing seems to be the one gut issue that could affect votes, experts say.
"This is about control," said Daniel Drezner, a political science professor at the University of Chicago who has studied the impact of outsourcing. "What we don't like in a global economy is that the U.S. is losing control of what jobs we keep and what jobs we don't keep."
The job issue certainly resonates on the Iron Range. Mines in the area, which runs from Michigan's Upper Peninsula through north-central Minnesota, are hiring for the first time in years.
The steelworkers have begun to climb back from the depths of the recession, which saw their job rolls drop from a high of 15,000 workers in the Iron Range to only 4,000 workers before the current upturn. But people don't feel secure because the long-term outlook is uncertain.
Jerry Perpich, a relative of the late Minnesota Gov. Rudy Perpich, has canvassed voters on the Iron Range for America Coming Together, the liberal get-out-the-vote group. "It's war in Iraq, and jobs and the economy," Perpich said, listing the issues that most frequently come up with voters.
In recent presidential elections, Iron Range voters have backed Democratic candidates by an 8-1 margin. So far, though, Kerry has not quite caught fire.
"I really don't know what Kerry stands for," said Bob Nanti, maintenance manager at the Thunderbird Mine. "I don't know what his policies are going to be."
For Jerry Fallos, who was president of the United Steelworkers local when the Thunderbird Mine shut down, Bush's trade agenda hasn't done much good, either. "The imports have been killing us. When Bush put the tariffs on, we thought finally he's going to do something. Then he took the tariffs off," Fallos said.
`A day at a time'
Mine workers know the current demand comes from China, and that China will be competing against U.S. steel mills before very long--and likely turning away from the Iron Range to buy taconite iron ore from Brazil and Australia.
"People are taking it a day at a time," Fallos said. "On the Range, we've had a lifestyle of ups and downs and ups and downs. Layoffs and then all the overtime you can manage."
The mine workers know where the current overtime is coming from: China. And the work is unlikely to last once new mines in Australia and Brazil come on line. "If we believe that the American iron ore industry has a long future as a global exporter, we're kidding ourselves," said Dave Foster, director of District 11 of the United Steelworkers of America.
"This is a pretty politicized state. Right now, jobs and health care and the economy are trumping all the issues up here," he said.
That's something Bush and Kerry should keep in mind as they fight to win a job one of them will hold for the next four years.
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CAMPAIGN 2004: THE ISSUES
Sen. John Kerry criticizes President Bush over the outsourcing
of U.S. jobs, but Bush insists that removing global trade barriers
will pay off for Americans in the long run.
U.S. admits 300,000 jobs have been lost to foreign labor in the last year.
GEORGE W. BUSH
- Took office when the nation's jobless rate was 4.2 percent. Now it's 5.4 percent. But Bush predicts jobs picture will rebound strongly.
- Says economic policies have strengthened U.S. companies and made them better able to compete in global markets.
- Has distanced himself from statement by the chairman of the president's council of economic advisers that outsourcing was "a good thing."
- Wants to require companies moving jobs to other countries to provide notice to the government and workers.
- Proposes that manufacturers expanding their workforce in this country get a tax credit to cover payroll taxes for new workers.
- Wants to end a tax break that businesses can use to avoid paying taxes on income earned overseas. Proceeds from ending that tax break would go toward a 5 percent cut in corporate taxes.
August figure was $54 billion, second highest in history.
GEORGE W. BUSH
- Continues U.S. policy of granting most-favored-nation trade status to China.
- Wants international trade barriers eliminated in many cases, though he did engage in protectionism on steel and textiles. He also supported the largest farm subsidy package in U.S. history.
- Has brought major case against the European Union over its support of Airbus against Chicago-based Boeing.
- Has supported most-favored-nation trade status for
- Criticizes Bush for not pursuing an unfair trade practice
complaint against China over undervaluation of its currency, a practice that gives Chinese products an edge against American goods.
- Supports Bush in his disagreement with the European Union over its subsidies for Airbus.
Sharp disputes over NAFTA.
GEORGE W. BUSH
- Supports the North American Free Trade Agreement, claiming that in its first 10 years, NAFTA has helped increase exports to Canada and Mexico by 85 percent.
- Proposes a Free Trade Area of the Americas involving
34 Western Hemisphere nations but not Cuba.
- Signed extension of the African Growth and Opportunity Act (AGOA), first passed during the Clinton administration. It provides trade incentives for African nations.
- As a senator in 1993, voted in favor of NAFTA, but
now says the trade agreement needs revisions.
- Upon taking office, would conduct a 120-day review
of NAFTA and other trade agreements, taking unspecified
"necessary steps" if they are deemed unfair.
- Wants all foreign trade deals to include provisions on
labor and environmental standards, but concedes that
the United States cannot force other countries to bring
their standards up to U.S. levels.
- Voted for AGOA trade measures despite concerns of
U.S. textile companies. (His running mate, John Edwards,
voted against AGOA.)
Read the series of stories at chicagotribune.com/elections