If free trade benefited everyone all the time there would be no controversy. Unfortunately, along with the tremendous net gains from freer 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, but these days both the Republicans and Democrats are so beholden to protectionism and special interests, and are so committed to their own ideological biases that they are incapable of consistently supporting free trade and the policies that must accompany it.
Under the Bush Administration, Republicans have levied a number of significant tariffs on American goods, fought the WTO regarding the elimination of U.S. export subsidies, and are now threatening China with punitive tariffs or quotas because Chinese textiles are flooding the market. Think about that: the greatest and most advanced economic superpower in the world is turning its back on free trade in order to protect one of its lowest value industries that has been in decline for decades. In addition, the 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 four years on extending unemployment benefits for workers who couldn’t find jobs.
The Democrats, on the other hand, are so stuck in the protectionist mindset that they have completely lost sight of the potential wealth that can be generated from a freer and more liberalized global economy in conjunction with the promotion of labor rights and environmental goals. Instead of proposing wage insurance, increased retraining programs, or funds to combat labor rights abuses abroad, they are willing to fight against any free trade deals put forth by Republicans regardless of how perverse their arguments are. A case in point revolves around the proposed Central American Free Trade Agreement (CAFTA): the Democrats have teamed up with the Florida sugar lobby, probably the country’s most wasteful and environmentally destructive lobby that bilks the public for billions a year and trashes the Everglades, in order to defeat CAFTA. Anyone concerned with the environment should be aghast at this development.
This short-sightedness on the part of both political parties provides a huge opportunity for a courageous leader who is willing to extol the virtues of free trade, and at the same time, emphasize the need for government intervention to ameliorate the suffering of displaced workers. Free trade presents America (and the world) with a potential win-win situation, but only with the proper leadership that is not afraid to expand government policies where they are needed, and to stand up to the special interests who cry foul every time their government handouts are in jeopardy.
P.S. A follow-up to my last piece on animal rights: Definitely check out this interview with Matthew Scully, author of Dominion (a book I highly recommend). Also, check out Scully's website that has excellent articles and links. For those who haven't heard of him, Scully is a conservative Republican who is a former speech writer for President Bush- not your typical animal rights activist.