There's No Such Thing as a Free Trade?

Andrew Leonard notes the administration's unwillingness to share the benefits of trade with the losers:

"Free" trade has a price, President Bush, by Andrew Leonard: On Tuesday, President Bush stumped for free trade in Jacksonville, Fla. Compared to at least one other speech delivered the same day, it would be stretching to call his address newsworthy. He picked a port town that benefits from trade to deliver a well-worn message: trade is good for America.

This is not an argument that How the World Work disagrees with, fundamentally. But "trade," in general, is a quite different beast from bilateral free trade agreements designed to gain market access for highly-capitalized special interests, such as the pharmaceutical industry. And that's what Bush was really stumping for: The President wants the Senate to get moving on three FTAs currently awaiting ratification: deals with Colombia, Panama, and South Korea. You might imagine that during a week in which the deepest financial crisis to threaten the U.S. economy in many years reached a fever pitch, Bush would find other matters to occupy his attention, but no: in Jacksonville, Bush's big lament was how unfair it was that "many U.S. exports going to Colombia face heavy tariffs."

Unhappily for the President, the Senate is evincing very little interest in ratifying the Colombian FTA. Sen. Max Baucus, D-Mt., chairman of the Senate Finance Committee, has his own priorities. He wants the government's Trade Adjustment Assistance (TAA) program beefed up before he is willing to even consider a vote on the Colombian FTA. ...

The Trade Adjustment Assistance program is designed to compensate manufacturing sector workers who are displaced by trade. It includes financial support for education and training, a health care credit, wage insurance and other goodies. But its scope is limited, not just to the manufacturing sector, but also to trade that takes place with countries with whom the U.S. already has signed free trade agreements.

TAA, theoretically, has bipartisan support. In Jacksonville, the President made a gesture towards it:

Now, you're going to hear the word trade adjustment assistance talked about in Congress.... That basically says that we're going to have education programs aimed at helping people find skills... And I'm a supporter, and I believe it's important that trade adjustment be a component of our trade policy. I look forward to working with Congress to reform it and to reauthorize it, to make sure it does the job that it can -- is supposed to do. Just like I'm looking forward to signing those trade bills, particularly starting with the one from Colombia.

A supporter? In October, when the House of Representatives passed a revamped and expanded TAA, the White House immediately announced that the President would veto the bill if it was presented to him. The House bill would have, among other things, doubled funding, extended coverage to service sector workers, included trade with non-FTA countries, and significantly boosted the health care credit. The White House opposes all of those elements. When George Bush says he is looking forward to a "reformed and reauthorized" TAA what he really means is a bill without teeth.

Thus, the deadlock in the Senate -- a classic case of horse-trading in action. Sen. Baucus has made his position clear -- no new FTAs without a bigger safety net.

A very good argument can be made that the existing Trade Adjustment Assistance program isn't the best way to take care of American workers who have been adversely affected by globalization. It is expensive to administer, covers a relatively small number of workers, and requires a lot of governmental judgment calls -- were those Ohio workers laid off because of competition with China, or because technological productivity enhancements made their jobs obsolete, or because their employer mismanaged the business? Does it make sense to try to shoehorn a health care credit for unemployed workers into a program that covers only a fraction of Americans, instead of a comprehensive national health care plan that would cover all Americans, and make a real difference in a world of global competition? These are questions that policy wonks can get righteously agitated about for weeks on end.

But such policy parsing is not relevant to the political fight now taking place in the Senate -- a struggle that once again demonstrates how utterly tone-deaf the Bush administration is to the concerns of working class Americans in the early 21st century. Preaching the benefits of free trade without being willing to take care of the "losers" created by trade isn't very bright in an election year when workers are feeling squeezed, and the opposition party controls Congress. And pretending to support trade adjustment assistance when in actuality you are opposed to meaningful trade adjustment assistance is just shameless.

When the administration says it will veto proposed enhancements to TAA, it's telling that they don't suggest amendments that would be acceptable or come up with their own counterproposal - perhaps through a different program - that will provide relief to those displaced by trade. It seems to me that an administration that truly cared about the working class would be eager to find a way to help those who are hurt from trade, that they would make it a high priority and insist it get done, but there's little indication - through actual action - that helping workers hurt from trade, or from economic conditions more generally, is a priority (remember how they insisted that business tax breaks come with an increase in the minimum wage -- no lack of willingness to play hardball for business, why not play as hard on worker's behalf?).

On a similar note, I think a lot of people are missing the point about John McCain's lack of knowledge about economics. The main point is not that he doesn't understand it, though that that is certainly a red flag - will he even know who to trust for advice? But the fact that, by all indications, he never took the time to try to learn anything about it, that's what's troubling. Anyone who really cared about economic policy and its effect on households would have taken the time to become familiar with the basics. How will he know how best to help workers if he has no idea about the underlying economics? If he asked, there are very prominent economists who would be happy to spend an hour once or twice a week - kind of like a principles course - explaining how the economy operates. But he never bothered, never took the time, because he apparently doesn't care enough to give up the time necessary to actually understand the polices he is voting on. I wouldn't mind the ignorance so much if there was any indication at all that he had tried to over come it, any indication he thought it was important enough to learn about, but there isn't. I think it's pretty clear that if you care about helping those who are hurt from trade, or care about economic issues more generally, the Republican party is the wrong place to be.

Comments

[kthomas]

hear hear!

Well put, Prof Thoma.

[bakho]

If your governing philosophy is that the government is not in the business of helping people or that government can NOT help people, then why should economics and worker benefits be of interest?

For a guy that is so self assured and arrogant, McCain sure is hollow.

[tom]

Why focus just on business hurt by international trade? Let's subsidize all failing businesses! If the "Mom and Pop" store down the street is going out of business because customers are finding lower priced alternatives elsewhere, then let subsidize this failing business. If Paul's landscaping business is failing because of bad business practices and customer's look elsewhere, why let's subsidize Paul's business. If John doesn't get a job because of free trade between a business and a more competent worker, then let's subsidize John. These people are all being hurt by free trade but you don't care about them. The only solution I see to all of the people being hurt by free trade is to abolish free trade. That way, no third party will get hurt by the voluntary transactions of others.

[anne]

http://www.democracynow.org/2008/3/19/headlines#8

UN Calls for Investigation into Colombia Deaths
By Amy Goodman

In Colombia, the UN is calling for a probe into the deaths of six organizers of a recent protest against the Colombian government and paramilitary death squads. * The victims included union workers and human rights activists. Tens of thousands of people took part in the protests on March 6th.

* http://www.reuters.com/article/latestCrisis/idUSN15416016

[save_the_rustbelt]

Perhaps I am just grumpy today, but beefing up the TAA is a lot like buying new lifeboats for the Titanic, too little, too late, and the objective is _________________(?).

The avalanche has rolled down the mountain, a generation of blue collar workers are being crushed by offshoring and hoards of illegals, and the econo-guessers did not see the avalanche coming until people were buried and the obituaries were written.

People will fend for themselves, many will suffer, then vote for populists and protectionists, and the academics will complain and whine and not much will happen.

And thirty years from now new econo-guessers will write dissertations about how all of this happened and gee whiz wasn't it a shame about those poor workers.

[esb]

Everyone's favorite "target of humor" (in 1992), Henry "Ross" Perot, ranted and raved that globalization (as envisioned by the American ruling elite) would produce a "giant sucking sound" as the lifeblood was slowly sucked out of the American middle class.

Well, it looks like he was more right than wrong,

and the suckin's still goin' on,

but not, methinks, for long.

[anne]

There is a remarkable thing happening in Europe, through this period of steadily rising values of European currencies. What is happening is that European exports are holding strong. We have got to begin to ask why Germany with so strong a Euro and so ample benefits to labor can hold export markets so well, especially after we are forever telling the Germans how awful a labor market she has.

Why is German labor prospering, with rewards to labor we thoroughly reject and with so strong a Euro?

[anne]

I detest the expression for the ugliness and falsity, but where is the sucking sound in Germany? Think of our fiscal policy, think of this Administration, think of what we are about then ask after a darn stupid sound. Why are German workers prospering, even after Germany merged with the equivalent of any developing country, even though Germany borders developing countries?

Why are the sounds in Germany those of proepering workers?

[anne]

How does Germany manage to afford universal health care, and free college-university education, and ample social security, and job security, and lovely vacation time, and family leave, and, and, and? All with strong currency and bordering on developing countries.

[anne]

As for Colombia, we need at the least to be concerned that Colombia seems to be the most violent country in Latin America, with violence seemingly coming as much from military or para-military sources as otherwise (all the time the Colombian government is formenting resentment against Venezuela, Bolivia and Ecuador).

[esb]

The "every man for himself" society (as advocated by "Jay" in an earlier thread) is inherently unstable and far more exposed to fears, panic, even runs.

Unfortunately, the USA incorporates far more of the every-man-for-himself model than the EU countries into its structural design.

In the long run the society using the "relative-poverty-is good" model might just fail to outperform the more compassionate states with more extensive social insurance programs.

[anne]

ESB:

"Unfortunately, the USA incorporates far more of the every-man-for-himself model than the EU countries into its structural design."

Interesting contrast.

[Jack]

Don't economists always preach, at least in introductory courses, that free trade is good because of comparative advantage, and that's that? All free trade, all free market, all the time, and if you don't have that, leave it up to smart economists to tell you how get it (and time is of the essence--the quicker the better!), and if that puts a strain on unskilled labor by increasing competition, then don't be an unskilled laborer (let others do that so the stuff you buy can be cheap).
The modern conservative movement has pretty much built itself on the mantra that the free market is the best thing ever, and that helping workers in anyway causes market distortions and that is bad, bad, bad. If you want to be a sucker and help the underpriveleged or unfortunate, that's on you personally, but it isn't the government's job to interfere with the fairy magic of the free, salt of the earth, can do no wrong market in order to help out people that should have known better than to be born poor.
I don't really see economists doing much to curtail this message, even if some of them wouldn't put it quite the way I have.

[dissent]

I recently read the comment of a Swede, comparing the lowest 25% of the workforce in education and income between the USA and Sweden. He noted that the lowest quartile in Sweden is well trained and well educated whereas the lowest quartile is not. Rather, in the USA, that group is the product of ghetto schools.

A working class versus throwaways, that's the difference.

Then again, we've got this situation because of the choices of voters: Reagan, Bush, Clinton only got in because of Perot, then another Bush. Now McCain is leading. The fact that Obama is going down because of his pastor is a consequence of Reagan Democrats, fundamentally. White men choose to identify with Masta, cause lookee what Masta can do for you: destroy unions, freeze the minimum wage, end pensions, outsource, and the like. Good thinking, guys!

[Patricia Shannon]

Tom, what do you think of the bail-out of Bear Stearns?

[Richard A.]

McCain certainly has no understanding of the law of supply and demand.
From youtube --
http://www.youtube.com/watch?v=M6pu5nf8dAU

[kroniks]

"what do you think of the bail-out of Bear Stearns?"

I don't think were bailed out. The $30 billion was really for JPMorgan to assume Bear's risky assets. But they are really going to liquidate the firm for the most part.

============

Over the next 45 minutes, Mr. Dimon made it clear that he hoped to retain the best employees at Bear but also made it plain that many of Bear’s 14,000 employees will lose their jobs as a result of the deal, struck at the urging of the Federal Reserve and the Treasury Department. JPMorgan executives plan to cull one Bear employee after another, while keeping the best performers, as they move to integrate the two firms.

http://www.nytimes.com/2008/03/20/business/20bear.html?ref=business

[reason]

Anne,
As some one who lives in Germany, falling land prices are part of the hint. Germany (partly through partition, partly through inheriting the worlds first freeway network and good railway network, and partly through strict land-use restrictions) avoided the great disadvantage of centralisation. Germany consists mostly of provincial cities, sometimes grouped into densely populated areas. Holland by the way even more so. Land and land prices are very important. Economists ought to pay more attention to them.

[reason]

VAT is also part of the answer. Nobody ever notices that VAT taxes imports but not exports and income taxes vice versa.

[anne]

Reason:

"Germany (partly through partition, partly through inheriting the worlds first freeway network and good railway network, and partly through strict land-use restrictions) avoided the great disadvantage of centralisation. Germany consists mostly of provincial cities, sometimes grouped into densely populated areas. Holland by the way even more so. Land and land prices are very important."

Falling land prices, remarkable; I knew that but never considered that properly. Fascinating; please do add to such an important comment, and suggest readings if possible.

[Convexhull]

Uhm, the Republicans did offer their own Trade Adjustment Assistance reauthorization bill. HR 3943, introduced by Rep. Wally Herger, the "Trade Adjustment Assistance and Training Improvements Act of 2007".

[Just Wondering]

A post above cites (as a factor in the problems of the working class):

"hoards of illegals"

I wonder where they are kept. Or perhaps he meant HORDES of illegals...

[save_the_rustbelt]

Ohio manufacturers taking a beating from imports

Wednesday March 19, 2008, 6:08 PM
Chris Stephens/The Plain Dealer

Ron Smith paints fuel tanks at Wrayco Industries Inc.'s Stow metal fabrication facility in January. Making metal products, as Wrayco does, continues to be a major industry in Ohio. But it's also confronting growing competition from foreign suppliers. Still, Wrayco recently expanded.

The fastest-growing categories of foreign manufactured goods flowing into the United States in the last decade share a feature Ohioans should consider seriously.

They match hand-in-glove with the state's top seven industrial sectors.

And an economic analysis by a national non-profit trade and research organization suggests that these imports are beating the pants off Ohio's manufacturers.

From 1997 to 2006, the latest year for which U.S. Department of Commerce figures are available, imported industrial goods in these sectors have increased their U.S. market share by about 29 percent to 65 percent.....................

[cm]

anne, reason: German workers are not prospering quite as much as anne makes it out to be, esp. of late (last 5 years at least). There also has been a moderate sucking sound in the form of outsourcing to lower labor cost industrialized regions outside the central "old EU" area. Some time ago Spain/Portugal, now Czechia, Poland, Romania, etc. In Germany, right after the reunification and as long as the wage difference was still very pronounced, West German companies did not properly relocate to the East, but certainly moved some of their "growth" there (I was one of the beneficiaries at some point -- could have a decent job in my home city without having to "go west"). But quite likely at the expense of some people's aggregate opportunity in the Western headquarters of my then-employer.

[reason]

Anne,
I'll remember the challenge and look around. Of course what I am saying is just standard (Henry) Georgian stuff. As an anecdote I was in London when the 1990 recession struck. Where you most noticed it was in Regent Street. It seemed virtually every building in the street was looking for new tennants. The reason is of course in retail, rental costs are a large item. Most rental agreements in the UK explicitly ruled out rental reductions. So if rental prices started falling, people in high rent places started to move. If rents are high there is a lot of room to cut costs by moving rents down. This means all sorts of costly things (taxes, regulations etc, end up in the long run affecting landlords more than they affect most people).

As for German exporters, the Financial Times in Germany had an article on them on Thursday this week.

http://www.ftd.de/unternehmen/industrie/:Agenda%20Deutschland%20Dollar/333389.html

[Thomas]

I wonder if Ron Paul could be convinced to support UTF, unilateral free trade.

[hari]

When you get China and India into the globalization ballgame, somethings will give for sure. That's +2billion mass of people who are coming into the market for the first time.

Like there's no such thing as a "free lunch", I can assure you there's no such thing as "free trade" in our world.