10 April 2008
The Myth of Free Trade
Posted by Joy Bischoff under: Constitution in Peril; World Economy .
This is one of those times that I am breaking the rules because there is not one word of this commentary that I can erase. It is so pertinent and important that I have to share the whole piece. I hope a lot of people read this and can overcome the reaction of rejecting the logic because it is considered liberal. That is no longer the case. Polls show the majority of conservatives no longer feel good about free trade the way it has been practiced.
Missing: Our Trade Strategy
Thursday, April 10, 2008
President Bush has sent his trade pact with Colombia to Capitol Hill, and suddenly Washington is not only ablaze with cherry blossoms but cluttered by chestnuts. Every old argument for the virtues of free trade is being recycled by the league of American editorialists, whose all-but-universal commitment to a failed policy will surely excite the wonder of future historians.
The amazing thing about the free-traders’ arguments is that they never change. Today’s free-trade commentaries make the same points as the pro-NAFTA editorials of 1993-94. Now, as then, bilateral trade is a win-win proposition for the peoples of both signatory nations. It raises living standards in developing nations. An educated American workforce has nothing to fear from competition.
Read these commentaries, and you’d think that the past 15 years hadn’t happened. If NAFTA had been a win for Mexico, the millions of its farmers displaced by U.S. agribusiness would have found better jobs in Mexican industry. Instead, with Mexico failing to invest in its own people, and with China supplanting Mexico as our manufacturers’ preferred source of cheap labor, those farmers are disproportionately the immigrants who’ve crossed the border to work here in the States.
Read these commentaries, and you’d never know that America has gone from being a nation that manufactured things to a nation that manufactures debt. Manufacturing (as Kevin Phillips points out in the forthcoming issue of the American Prospect, which I edit) accounted for 25 percent of America’s gross domestic product in the 1970s but just 12 percent in 2006. Finance, which amounted to 12 percent of GDP in the ’70s, amounted to 20 percent in 2006.
Admittedly, some free-trade apologists acknowledge that we need to do more for Americans who lose their jobs as a result of trade deals. They call for better and more extensive retraining programs, as if there were an abundance of unfilled good jobs out there just waiting for retrained workers. Plainly, though, there aren’t. In the years since NAFTA was passed, the jobs created in the United States have been disproportionately low-wage service-sector and retail jobs. And in the years since we granted permanent trade relations to China and U.S. companies moved their factories from the Midwest to the Middle Kingdom, incomes in America for all but the rich have been stagnant — at best.
Nor does retraining the unemployed offset the major deleterious consequence of free trade, which isn’t the loss of jobs but, rather, the constraints on the wages of employed Americans.
In short, while we’ve been practicing free trade, we’ve been devoid of any national policy geared toward retaining or creating good jobs. It’s not that such policies are so difficult to devise. Indeed, while European nations have defended their high-skill manufacturing jobs and professionalized and increased the skill levels needed for many service-sector jobs, and while Asian nations have worked assiduously to build their manufacturing sectors, only the United States and Britain have opted not to develop national economic strategies. Among the industrial democracies, only the United States has allowed its corporate sector to decimate its union movement, leaving the vast majority of its workers with no leverage to obtain higher wages. And only the United States has kept its economy humming chiefly by extending more and more credit to those with largely stagnant incomes — an economic strategy that led us into our current recession and, most likely, toward a long-term decline in living standards.
What’s been missing in America’s trade policy is a preference for Americans. The object of trade in China is to help the Chinese nation. German trade is designed to help Scandinavian, nations. This is not the case here. General Electric goes abroad to lower costs and boost profits. Goldman Sachs invests abroad in the same kind of low-wage, high-profit enterprises. That’s the mission of such businesses. But the U.S. government has never taken on the mission of defending the American economy, or the American people, in the global economy. That is not the only reason the broadly shared prosperity of the three decades following World War II is now a distant memory, but it is a certainly a major reason.
In the absence of such a national economic strategy, is it any wonder that by margins of better than two to one, Americans now oppose free trade? Even the relatively few editorialists who acknowledge that the nation needs to do more to help our economically beleaguered populace insist that new trade deals should be consummated before governmental measures that might augment the power and income of actual Americans. But why? Why not first develop a coherent national strategy to foster better and more rewarding jobs here at home, and only then return to the regimen of trade pacts with other nations? Why, in the rush to cut these deals, do the American people amount to no more than an afterthought?
5 Comments so far...
Jesse Says:
10 April 2008 at 3:40 pm.
“What’s been missing in America’s trade policy is a preference for Americans. The object of trade in China is to help the Chinese nation. German trade is designed to help Scandinavian, nations. This is not the case here.”
That quote right there is the key to the whole problem. You can spout free trade all you want and it sounds utopian until you study what has actually been happening and see that America is being economically raped by it. It is like our political leaders think we have to bend over and take it in order to talk everyone else into the idea. They are happy to take advantage of us and it has gotten us into a situation where our food supply would collapse if we stopped importing from China. That is never a good idea and with the problems that are beginning now, I hope everyone can see that.
Jan W. Says:
10 April 2008 at 5:25 pm.
I use to support NAFTA but since I saw what it has done to Mexico I don’t.
Sharon Anderson Says:
10 April 2008 at 9:32 pm.
Could it be that there are those policy makers who want to create an America that is poorer than countries like China and Japan? Perhaps then they think we will welcome globalization or even beg for it so that we can be at least on par with the countries that used want to be like us.
Ghost Says:
10 April 2008 at 9:39 pm.
The part that says we have kept our economy humming by extending more and more credit really scares the crap out of me because that is what we are doing to try and solve the problem. No logic in that tactic.
Hank Says:
10 April 2008 at 11:27 pm.
This; is one of the things we should be talking about according to the mission statement up there. Our freedoms are being threatened as far as I am concerned when we have trade agreements that destroy our economy because that will destroy our nation if it doesn’t change. This was a very well written article. I’m glad you shared it with us. It makes things very understandable and clear.
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