Tuesday, April 27, 2004

Free Trade's Greatest Ally

If free trade benefited everyone all the time there would be no controversy. Unfortunately, along with the gains from free trade -- higher productivity, lower costs to consumers, the creation of new industries, and the chance for poorer countries to earn foreign currency and develop economically -- come large costs for the industries and workers that get caught in the transition as economies adjust.

In order to get everyone to support free trade, workers who lose their jobs or have their pay cut deserve to get help from the government. Workers who are displaced need to feel that society takes their pain to heart, and that they are not simply cogs in the larger economic machine who can be sacrificed for the greater good. In effect, free trade presents a political paradox: it calls for hands-off government with respect to tariffs and quotas, but hands-on government with respect to increased worker benefits in times of economic transition. For example, wage insurance can be an effective way to protect the stability and quality of life for displaced workers at a reasonable expense. Workers in industries harmed by trade liberalization are paid a portion of the difference between their old salaries and those in any new job they get (if the salary is lower) for a set period of years.

The gains from free trade are too large to be squandered due to protectionist fears and xenophobia, but this is bound to happen if the current Administration refuses to accept the expanded government role that free trade requires. Republicans are so instinctively committed to a ‘less-government’ stance that they seem incapable of promoting the types of policies that will insure a long-term commitment to free trade within the United States. A case in point is the GOP’s continual stalling over the last three years on extending unemployment benefits. Traditional Democrats, on the other hand, are too quick to use government policy to protect inefficient industries (which Bush did as well with steel tariffs) that they lose sight of the bigger picture.

This short-sightedness presents a courageous leader with a huge opportunity. By extolling the virtues of free trade and at the same time emphasizing the need for government intervention to ameliorate the suffering of displaced workers, he or she can become free trade’s greatest ally. Free trade gives America a potential win-win situation, but only with the proper leadership that is not afraid to expand government policies where they are needed.



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