Where Have All the Leaders Gone? (8 page)

We’ve got options. This isn’t an unsolvable problem. I’m here to say that we can tackle this and
win.
And we need some leaders who will show us the way. Let’s hear
their
ideas. In the coming campaign, energy should be front and center, and we—the voters—can put it there.

I
t was September 1993. I was at my house in Tuscany, where I spend a few weeks every autumn. At about two
A
.
M
. the phone rang, waking me out of a sound sleep.

The woman’s voice on the other end of the line was wide awake and chipper. “I have the President on the line,” she said.

“Okay,” I answered, wondering, president of
what
? Then the familiar voice burst over the line. “Lee, it’s Bill Clinton.”

I sat up a little straighter on the edge of my bed. When the President calls, you listen.

“Listen, Lee, can you come to the White House around ten tomorrow morning? I have something very important to discuss with you.”

“Well, Mr. President, I would be happy to, but I’m not sure it’s physically possible. You know, I’m in Italy.”

“You’re in Italy?” He was genuinely surprised. “They didn’t tell me that.” He paused. “What time is it over there?”

I looked at the clock. “It’s just after two in the morning.”

He laughed. “Sorry. Go back to sleep. But get here as soon as you can.”

A few days later, sitting in the Oval Office, I had to smile as President Clinton attempted to persuade me to join his fight to pass the North American Free Trade Agreement. He especially wanted me to take on Ross Perot, who had launched a loud campaign against the agreement. I have to say it was gutsy of Clinton to call on me. A lot of people said I was a protectionist, but Clinton realized that I’d never been a protectionist. All I’d ever asked for was that trade agreements be
fair.
Show me a plan that’s fair and beneficial, and I was on board. The
protectionist
in this debate was Ross Perot, who was appealing to everyone’s fears about losing jobs. Ross said we’d hear a “giant sucking sound” of jobs leaving America for Mexico. He was scaring American workers to death about NAFTA. That’s where I came in, I guess. Clinton figured I was a credible voice on trade issues. The only thing he had to do was convince
me.

To a lot of people’s surprise—including
mine
—Clinton did sell me on NAFTA. When you think about it, what could make more sense than a trade agreement with our closest neighbors that included a common commitment to resolving environmental and labor issues? The goal of NAFTA was to improve economic, environmental, and trade conditions in Canada, the United States, and Mexico. The improved economic conditions and open markets would generate
more
jobs, not fewer. That was a program I could support, and I helped Clinton sell NAFTA. The bill passed in 1994.

A lot of people have asked me, if I had to do it all over again, would I support NAFTA? While NAFTA has had some positive trade benefits on paper, it’s hard to call the agreement a roaring success. The ideal of NAFTA—to set in motion a collaborative process in our corner of the world, where trade would not only be
free,
but also
fair
—was noble enough. But NAFTA has yet to fulfill its goal of attracting other countries to our south, such as Argentina, Brazil, Chile, and, yes,
even
Venezuela. In the long run, that will need to happen to make NAFTA viable. And it’s hard to ignore the continued decline of U.S. manufacturing, which hasn’t been stemmed by NAFTA.

The big question when it comes to trade is how we acknowledge global realities and move forward, without destroying our competitive edge. Free trade is one of the fundamental principles of our capitalist economy, but America has a bad habit of giving away the store.

FREE TRADE HAS TO BE FAIR TRADE

For more than twenty years, I have been preaching the primary rule of free trade: It must be fair. For the most part, my words have fallen on deaf ears, because the trade imbalance is just getting worse. It’s currently at around $800 billion—over
three quarters of a trillion
dollars. That’s how much more we’re importing than we’re exporting. This is happening because the United States has thrown our market wide open to anyone who wants to set up a booth. We worship at the altar of free trade, and it’s killing us. At the very least, it’s time we started charging admission to the American market. And the price of a ticket has to be a little fairness and reciprocity.

It might interest you to know that President Bush says there’s no reason to be alarmed about the trade deficit. He says other countries will always be happy to lend us the money to finance our deficit. Is
this
our trade policy? If so, we are, to quote Bush’s father, in
deep doo-doo.
Because the bill will come due, you can bet on it. As the trade imbalance grows, our influence in the world shrinks.

Bush’s father took the trade imbalance a
lot
more seriously when he was President. Near the end of his term, I was part of a team accompanying him on a high-profile trip to Japan. Our mission was to urge the Japanese to open up their markets to American products and balance the trade deficit—most of which was accounted for by cars and parts. The previous year American car companies had sold a measly 32,000 cars in Japan, while Japan had sold more than 2.5
million
cars in America. Furthermore, for all their talk about building plants in the United States and providing jobs for Americans, Japanese car companies were still shipping most of their parts and components from Japan.

We visited a new Toys “R” Us store that had just opened in Osaka. The Japanese were trying to show us how receptive they were to American products. While we toured the store, Bush held up a toy bank in the shape of a Chrysler minivan. “Hey, Lee,” he said excitedly, “what do you think of this?”

I stared at the toy and said, “Great. But I thought we were here to talk about the
big
seven-passenger minivans, not the nickel-and-dime kind.”

The trip went downhill from there. I flew with the President to Tokyo on
Air Force One,
where we met with Japanese business leaders. Basically, they told us—always politely and with a smile—that the reason more Japanese weren’t buying American cars was because our cars were inferior. That was a load of crap.

The reason we weren’t selling cars in Japan was that the deck was stacked against us. Japan wasn’t practicing free trade. Japan was practicing
predatory
trade, and it still is. This little island with a big ego does everything in its power to keep the trade imbalance great. It doesn’t have to bother with the rules of the free enterprise system. The Bank of Tokyo and the Ministry of International Trade and Industry (MITI) make sure that the yen is manipulated (they called it “managed trade”) so that it’s cheaper for Americans to buy Japanese cars and more expensive for the Japanese to buy American cars.

Bush senior’s mission to Japan didn’t go well—to say the least. It didn’t help that Bush ended the trip by vomiting on the Prime Minister at a state dinner. On our way home, we stopped for fuel in Anchorage. I went inside the building, and there was a TV on the wall, tuned into Johnny Carson. I walked in just in time to hear Carson joke, “If you had to eat raw fish, and sit across from Lee Iacocca, you’d throw up, too.”

THE NEW PLAYERS

While we’re taking a pounding on trade, the competition keeps growing. Our annual trade deficit with China is already more than $200 billion. China is insinuating itself into areas that were once dominated by our own production lines. It makes parts for Boeing 757s, and the two largest American auto parts makers have factories in China. And that doesn’t even begin to account for China’s clear dominance in other areas, like textiles. Some economists predict that China is poised to replace the United States as the number one economic superpower within ten years. That’s a scary thought.

China doesn’t even
try
to play fair. The corruption is rampant. They don’t think twice about stealing technology or infringing on copyrights. And anyone who has ever done business in China has encountered the blatant system of payoffs and special deals. I made several trips to China after Chrysler bought American Motors in 1987. AMC had made a deal in 1983 to build Jeeps in China, and Jeep had a factory in Beijing. The mid-level managers asked for kickbacks right up front. A guy would say, “Mr. Iacocca, I have a son who wants to go to UCLA. Who is going to pay for that?” I was surprised at how overt the pitches were. I kept replying, “Uh, we don’t do things that way,” but I don’t think they believed me because plenty of our companies
did
play the favors game.

In recent years, as money has flowed into China, the cash grab has become more feverish. So much for the evils of capitalism! A business associate recently visited China. He told me upon his return, “So much has changed, but one thing hasn’t changed—the
corruption
.”

A lot of people dismiss China’s competitive edge as being all about cheap labor. But there’s a lot more to it than that. As
New York Times
columnist Thomas L. Friedman put it in
The World Is Flat,
“The biggest mistake any business can make when it comes to China is thinking that it is winning only on wages and not improving quality and productivity.” It’s something to ponder. Wouldn’t we be stunned if China started paying its workers American-style wages, and companies
still
wanted to do business there?

And we can’t afford to take our eyes off India. Not too long ago, India was known for its poverty. But today India has become one of the fastest-growing economies in the world. This is in large part due to its dominance in the high technology fields. (If you think Americans are too cell-phone crazy, try walking down a city street in India.
Everyone
is plugged in all the time.)

A great key to India’s emerging economy is its rapidly expanding middle class. While the American middle class struggles to stay solvent, India’s has more than tripled in the last twenty years to 250 million—almost the size of the U.S. population.

LET’S ACT IN OUR OWN SELF-INTEREST, FOR A CHANGE

There’s only one way to shift the trade balance. The United States has to begin to act in its own self-interest.

Some years ago, I got a lesson in the rules of self-interest from Dr. Tomito Kubo, the chairman of Mitsubishi Motors. Mitsubishi’s headquarters and main factory are located in the beautiful Japanese shrine city of Kyoto. It always struck me as an odd place to put a factory. I once asked Dr. Kubo why Mitsubishi had selected such a lovely setting for its manufacturing center.

Dr. Kubo told me that the Kyoto factory had started out as Japan’s major aircraft plant during World War II. It’s where they built the engines for their vaunted Zero Fighter planes. Why
there,
in the midst of the shrines and gardens? Because Franklin and Eleanor Roosevelt had once visited the city while on vacation, and when the war began, President Roosevelt gave orders that Kyoto was never to be bombed.

Dr. Kubo told me, “We in Japan look out for our self-interest. What I don’t understand is why your country doesn’t always do the same.”

Kubo was right. Self-interest is a concept we have some trouble with. It sounds so
unfriendly.
But I believe every country has an obligation to put its self-interest first. On a global scale that means devising a world trade system that strikes a balance between the two extremes of free trade and protectionism.

The way free trade operates today, it’s a “win-lose” situation, and the loser is the United States. That’s just nuts. There’s no excuse for it. International trade is nothing more than a business deal, and every good business deal I’ve ever been involved in has been “win-win.” The other guy comes away feeling as good as I do, or we simply don’t do business together for very long. It’s got to be in
my
self-interest, or I won’t play; it’s got to be in
his
self-interest or he won’t play. The ultimate example of win-win for me was the time the financier Kirk Kerkorian called me, crowing about a deal he’d made with the developer Steve Wynn. “I bought out your friend Steve today,” he said happily. “I never thought Steve would sell so low.” A couple of days later, Steve Wynn called me, bursting with satisfaction. “I never dreamed your friend Kirk would pay so much,” he gloated. Each of them thought they’d really scored on the other. These two visionaries, who essentially built Las Vegas, were able to make a deal and both come away satisfied.
That
’s win-win.

WHERE’S THE LEADERSHIP ON TRADE?

The Bush administration has got to stop being so cavalier about the trade imbalance. Aren’t we holding a big trump card here? Think about it. The United States is the world’s shopping mall—a giant bazaar where the world sells its goods. This doesn’t benefit us, and in the long run it doesn’t benefit our trading partners, either. The United States can’t tolerate the sky-high levels of public and private debt the trade imbalance brings. The bubble will burst, and when it does those countries that have relied almost entirely on the American market for their profits will be in serious trouble.

Sometimes I wonder, do we
deliberately
choose some of the weakest, most submissive people to be our trade negotiators? Because it’s hard to understand why our trade negotiators can’t talk tough. Don’t they realize that the very countries with which we have the highest trade deficits are the ones that need our market the most? What would happen if Japan or China or Korea couldn’t sell their products in
America
?