Skip to comments.The Trade Tightrope
Posted on 02/27/2004 7:23:44 AM PST by liberallarry
ou can't blame the Democrats for making the most of the Bush administration's message malfunction on trade and jobs. When the president's top economist suggests, even hypothetically, considering hamburger-flipping a form of manufacturing, it's a golden opportunity to accuse the White House of being out of touch with the concerns of working Americans. ("Will special sauce now be counted as a durable good?" Representative John Dingell asks.) And the accusation sticks, because it's true.
But the Democratic presidential candidates have to walk a tightrope. To exploit the administration's vulnerability, they must offer relief to threatened workers. But they also have to avoid falling into destructive protectionism.
Let me spare you the usual economist's sermon on the virtues of free trade, except to say this: although old fallacies about international trade have been making a comeback lately (yes, Senator Charles Schumer, that means you), it is as true as ever that the U.S. economy would be poorer and less productive if we turned our back on world markets. Furthermore, if the United States were to turn protectionist, other countries would follow. The result would be a less hopeful, more dangerous world.
Yet it's bad economics to pretend that free trade is good for everyone, all the time. "Trade often produces losers as well as winners," declares the best-selling textbook in international economics (by Maurice Obstfeld and yours truly). The accelerated pace of globalization means more losers as well as more winners; workers' fears that they will lose their jobs to Chinese factories and Indian call centers aren't irrational.
Addressing those fears isn't protectionist. On the contrary, it's an essential part of any realistic political strategy in support of world trade. That's why the Nelson Report, a strongly free-trade newsletter on international affairs, recently had kind words for John Kerry. It suggested that he is basically a free trader who understands that "without some kind of political safety valve, Congress may yet be stampeded into protectionism, which benefits no one."
Mr. Kerry's Wednesday speech on trade seemed consistent with that interpretation. He decried the loss of jobs to imports, but was careful not to promise too much. You might say that he proposed speed bumps, rather than outright barriers to outsourcing: rules requiring notice to employees and government agencies before jobs are shifted overseas, steps to close tax loopholes that encourage offshore operations, more aggressive enforcement of existing trade agreements, and a review of those agreements with an eye toward seeking tougher labor and environmental standards.
I don't see anything there that threatens to unravel the world trading system. If anything, the question is whether it provides enough of a "political safety valve."
The answer, I think, is yes but only if those modest measures on the trade front are combined with much bigger changes in domestic policy.
First and foremost, we need more jobs. U.S. employment is at least four million short of where it should be. Imports and outsourcing didn't cause that shortfall, but if the job gap doesn't start closing soon, protectionist pressures will become irresistible.
Beyond that, we need to do much more to help workers who lose their jobs. It didn't help the cause of free trade when Republican leaders in Congress recently allowed extended unemployment benefits to expire, even though employment is lower and long-term unemployment higher than when those benefits were introduced.
And in the longer run, we need universal health insurance. Social justice aside, it would be a lot easier to make the case for free trade and free markets in general if, like every other major advanced country, we had a system in which workers kept their health coverage even when they happened to lose their jobs.
The point is that free trade is politically viable only if it's backed by effective job creation measures and a strong domestic social safety net. And that suggests that free traders should be more worried by the prospect that the policies of the current administration will continue than by the possibility of a Democratic replacement.
Put it this way: there's a reason why the two U.S. presidents who did the most to promote growth in world trade were Franklin Roosevelt and Harry Truman, while the two most protectionist presidents of the last 70 years have been Ronald Reagan and, yes, George W. Bush.
You call this "right on"? I think not. I work my butt off to pay for my insurance, why should I also have to pay for everyone else's that doesn't or won't work?
FYI on outsourcing...from a previous post of mine:
Bush has already signed a Federal outsourcing ban into law "under the radar". But that's right...Kerry wouldn't know...he was AWOL from Congress when it passed, LOL!
Washington, January 31: A new ban on sending privatised federal jobs overseas has kicked up a firestorm abroad and could cost US firms contracts from foreign governments, national business associations say. The ban was crafted by Senators George Voinovich, R-Ohio, and Craig Thomas, R-Wyo. It was contained in a catchall spending bill for the current fiscal year that President Bush signed into law last week.
Voinovichs spokeswoman, Marcie Ridgway, said, The senators reasoning is very simple: Jobs that were previously done by American citizens for American taxpayers shouldnt be shipped overseas to be done by people in other countries.
That echoes arguments put forward in several state legislatures that are considering similar proposals.
I have heard that there is also a bill in Congress to extend incentives for private companies to not outsource their jobs.
I thought Krugman was saying that free trade was much preferable to protectionism but that to make it work we would have to pay attention to the interests of the first world - particularly American - workers and middle class because they would be losers in the short term.
Whether or not that entails universal health insurance is debatable but it certainly means protecting the insurance of those who lose their jobs to foreigners as a result of free trade legislation.
Ummm...that is why COBRA laws were invented.
Oh, I see...the same type of people that plan to depend on SS for their retirement. Unemployment benefits have been extended time and again and I pay for that, they probably get food stamps, I pay for that, the list goes on...then I should pay for their healthcare as well? Tell 'em to go to a free clinic...every major town has one.
You're right. Except for Krugman's specific policy proposals (like the universal healthcare idiocy), his general point is very solid.
Free Trade, like any other trade, has winners and losers at any given moment. And even if those losers will eventually turn out better off in the long run, they'll be mad as h*ll at the moment they're on the losing side. That can make them a powerful political force.
Krugman is suggesting that the best way for free trade to flourish is to have a president who is committed to free trade - but not so committed he doesn't remember to soften the political impacts. Because a free trade supporting president who ignores these political issues runs the risk of being replaced by a true protectionist.
In other words, they need to make promises without having to keep them.
(Chuckle). Ahh, yes. Good ol' John K., protector of jobs. Except he's voted for every free trade bill he ever saw. And his wife's company, Heinz, loves to send jobs offshore.
They feel our pain. Sure they do. You betcha.
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