Free trade loses lustre

The Sunday Times ^ | February 29, 2004

[sarcasm]

WASHINGTON: Free trade is losing support in the US, in particular among high-income Americans, as more professionals feel threatened by job outsourcing to low-wage nations.

A recent poll by a Washington research group found falling support for free trade but the shift was most dramatic among those earning more than $US100,000 ($A130,000) a year.

The University of Maryland's Program on International Policy Attitudes found the percentage of those earning more than $US100,000 who actively supported free trade slid from 57 per cent in 1999 to 28 per cent in January 2004.

These results surprised even the researchers.

"It is rare in any case that any demographic slice drops 20 or 30 points on any issue," said research director Clay Ramsay.

"It certainly provides evidence for the theory that job insecurity is creeping up the income scale."

The poll showed more white-collar Americans joining the blue-collar outcry against globalisation and cast a cloud on the ability of the US to remain a leader in free trade. It also suggested protectionist talk would rise during the presidential election campaign.

But researchers said the results showed a majority of Americans endorsed free trade in principle, even if they believed it was being handled poorly by Washington.

"Feelings about international trade have gone from lukewarm, to luker," said PIPA director Steven Kull.

"Two-thirds say they support the reciprocal lowering of trade barriers but feel more needs to be done to mitigate the effects on workers and the environment." But the trend towards outsourcing of software and engineering jobs to countries such as India had led to a rethink of the benefits.

Senator Charles Schumer wrote recently in the New York Times that free trade had to be reconsidered in light of new economic realities, notably that much of the outsourcing was going to "a relatively few countries with abundant cheap labour".

"When American companies replace domestic employees with lower-cost foreign workers to sell more cheaply in home markets, it seems hard to argue this is the way free trade is supposed to work," Senator Schumer wrote.

[BiffWondercat]

And raising their income level, thus creating a market for our goods.

More like buying up our debts so that we can borrow even more! If they are such great markets, why the 1/2 trillion trade deficit?!?

[Luis Gonzalez]

"Meanwhile, we here in America do just the opposite. Onerous goverment regulation, a tax structure that punishes success, minimum wage...these things price Americans out of the market to the point that corporations are willing to take their chances that the money saved will offset the lack of flexibility and accountability that offshoring has."

And of course, we are all in agreement that to fix this American inability to compete due to government interference in trade, we need more government interference in the way of tariffs to hide the obvious consequences of these regulations transforming into the inability of the US to compete in the world market...in spite of our herculean productivity.

[Luis Gonzalez]

Are you arguing that a trade deficit is a bad thing?

[raybbr]

see #140. Got an anwer?

[Luis Gonzalez]

America's Maligned and Misunderstood Trade Deficit

by Daniel T. Griswold

Daniel T. Griswold is associate director of the Cato Institute's Center for Trade Policy Studies.

Executive Summary

America's annual trade deficit, already large by historical standards, could reach a new record in 1998, fueling protectionist sentiment in Congress. Political fallout from the trade deficit numbers could impede efforts to reduce barriers to trade in the United States and abroad.

Contrary to popular conception, the trade deficit is not caused by unfair trade practices abroad or declining industrial competitiveness at home. Trade deficits reflect the flow of capital across international borders, flows that are determined by national rates of savings and investment. This renders trade policy an ineffective tool for reducing a nation's trade deficit.

A survey of America's major trading partners reveals no relationship between bilateral trade balances and openness to U.S. exports. For example, the U.S. runs a bilateral surplus with Brazil, which is relatively protectionist, while we run deficits with Canada and Mexico, which are almost totally open to U.S. exports thanks to the North American Free Trade Agreement.

There is no connection between trade deficits and industrial decline. From 1992 and 1997, the U.S. trade deficit almost tripled, while at the same time U.S. industrial production increased by 24 percent and manufacturing output by 27 percent. Trade deficits do not cost jobs. In fact rising trade deficits correlate with falling unemployment rates. Far from being a drag on economic growth, the U.S. economy has actually grown faster in years in which the trade deficit has been rising than in years in which the deficit has shrunk. Trade deficits may even be good news for the economy because they signal global investor confidence in the United States and rising purchasing power among domestic consumers.

What matters to the economy is not the difference between imports and exports but the extent to which Americans are free to benefit from the efficiencies, opportunities and consumer choice created in an economy open to world trade.

[Thisiswhoweare]

...we must do everything in our power to stop the implementation of the FTAA.

Done deal - it will be implemented in January of 2005, regardless of who gets elected.

[Luis Gonzalez]

"Isn't it true that "free trade" is merely a theory and, much like socialism, has never been successful anywhere on earth?"

"Never been successful anywhere on Earth?

And of course, your version of "Earth" begins at the exact moment when governments decided to interfere (tax) trade.

[raybbr]

No answer? Not even a try?

[Thisiswhoweare]

Correct, thanks for the input. They also give tax rebates credits for all profits made from exported goods.

[BiffWondercat]

Get on the desk and get out the KY, then I'll talk?

A strong position should be able to take on any angle of debate.

[raybbr]

All right, you pick the definition.

[Thisiswhoweare]

"And of course, your version of "Earth" begins at the exact moment when governments decided to interfere (tax) trade."

*Ahem*, Luis, not to trying to stop the incredibly good job you are doing stepping all over yourself - but, yes that would be just about anybody's definition of when governments have been interfering with trade.

Governments have been interfering with trade since the days of Ur of the Chaldeans.

[hedgetrimmer]

I think it can be stopped. Look what happened with the illegal immigrant amnesty plan out of the Summit of the Americas. Its not dead, but they certainly have pulled back til people get complacent again.

If the final agreement has not been signed, there is always time to get out.

[Thisiswhoweare]

"Meanwhile, over here we engage in some masochistic bizarro form of free trade. We make it as difficult as possible to do business in this country while making it as easy as possible for foriegn concerts to enter our markets."

Super point - the fundamental issue is that we create circumventions of our tax structure and regulatory burdens to the destruction of our native industries and our citizenry.

We need to address the fundamental issues. Excessive taxes and regulations have destroyed our ability compete. The rest is nature taking its course.

[Thisiswhoweare]

I hope your right. I would like to discuss it further, but I think that if you look at the politics of when that date lands, and the two possible choices for President, it is as good as done.

[BiffWondercat]

As a sustained occurrence combined with a massive Federal budget deficit - I would say yes. It is going to hurt when interest rates go back up to attract the money needed to finance our debts. (and keep the value of other currencies)

[BiffWondercat]

Max out your credit cards and see how much better life will be when you are expending more in debt service than you are reinvesting in yourself?

I'd like to tell the old lady that she should handle all the household tasks and I will just build up a deficit and
buy her a car in a few more years....

Can I get your help in arranging that trade of services agreement?

[jpsb]

Do you have anything of substance to say?

[Havoc]

Just because Chuckie is a lib or a dem doesn't make him automatically wrong. We stand on issues one way or the other based on the issue, not who is for or against it. The logic of your argument would have it that the VW Beetle is evil because Hitler was for it. Smell the contents of your shovel.

[hedgetrimmer]

The campaign to stop it could begin today, with some letters to newspaper editors, cc: to assorted congressmen and white house officials.