Thursday, April 19, 2007

'Free trade' takes increasing hits

Expanding global commerce has long been considered an engine of growth, but job losses at home stir criticism.
| Staff writer of The Christian Science Monitor
Free trade, long a controversial theme in America's political and economic life, is stirring a new level of contention.

Some Democratic presidential candidates such as Richard Gephardt are winning applause with comments that tap into angst over jobs lost to cheap labor overseas. Public opinion surveys show rising concern about whether America is benefiting from a globalized economy. Even among economists, who generally argue that trade benefits all parties despite its dislocations, the topic has fresh edge.

In an October Christian Science Monitor/TIPP poll, for example, only 43 percent of Americans say free trade is "good for the economy," down from 52 percent when a similar question was asked in May 2002.

In part, such concern reflects the slow job market, which makes many wary of foreign competition. And in part, it reflects the approach of presidential primary elections. But it runs deeper than that.

Free trade, while opening the doors for US exports and helping Americans get low-cost consumer goods, has also shaken entire industries from textiles to cars. Free trade is one of the key factors behind a continuing plunge in the number of US manufacturing jobs - from 19.3 million in 1980 to 17.8 million in 1990 and about 14.6 million today. Now, worries are rising over the outsourcing of service jobs to locations such as India and the Philippines. Many wonder: Can this be good?

Jobs versus growth?

"I see no value from opening these [foreign] markets," says Ben Connolly, a software developer in Newton, Pa. "I don't see us getting more jobs." Married with two children, Mr. Connally was laid off for most of 2000. He blames it partly on the stock market bubble, but adds that "free trade hasn't helped."

In Congress, rising protectionist sentiments have resulted in 10 bills or resolutions attacking China's "unfair" trade practices and "overvalued" currency. None, though, is expected to pass. That reflects a longstanding view that the benefits of trade as an engine of growth outweigh the costs.

Both President Bush and President Clinton before him have pushed for a new round of talks to liberalize world trade. Under President Bush, a round was launched at Doha, Qatar, in 2001.

That round is still alive, despite reports of its demise after a failed ministerial meeting of the World Trade Organization in Cancun in September.

During the eight multilateral, global trade negotiations since World War II, temporary "failures are quite normal," says Robert Z. Lawrence, an economist at Harvard University's Center for International Development in Cambridge, Mass. In this case, "the agenda has been clarified. We will continue the round," he comments.

Indeed, last month the 146-nation World Trade Organization announced another meeting of trade ministers.

One reason for pressing ahead may be that consumers, though fearful of the competition from free trade, welcome its positive side - the cheap goods from China, Taiwan, or other low-cost nations.

Love affair with cheap imports

"Certainly in their buying behavior, Americans suggest they love imports," says Richard Cooper, an economist at Harvard University in Cambridge, Mass.

In fact the Monitor/TIPP survey found that a plurality of respondents believe free trade is beneficial. Still, 70 percent say they at least "sometimes" seek out products that are "Made in the USA."

Moreover, only 16 percent of Americans believe that free trade creates US jobs, while 53 percent saw it as costing the US jobs. Many lament the loss of jobs that

may accompany expanded imports or the location of production in other nations.

Free trade "costs us jobs, but it also keeps prices down," says June Causey, a senior in Jacksonville, Fla. "I'm kinda on the fence about it."

Mr. Cooper holds that just as jobs are lost to imports, jobs are also created by foreign investment and American exports.

A new twist for economic theory

Most economists, including Cooper, maintain that freer trade raises the living standards of most Americans and, for that matter, of people in other countries. But in recent years, criticisms of trade talks have become more nuanced.

Harvard University economist Dani Rodrik notes that various studies find no systematic relationship between a developing country's average level of tariff and nontariff barriers and its subsequent economic growth rate. And most of today's rich countries grew prosperous behind a high level of protective barriers, then started to dismantle those barriers.

Even Mr. Gephardt says he's for free trade but wants the WTO to establish an international minimum wage, different for each country but high enough so that American workers are not competing with slave, sweatshop, and child labor.

Another TIPP survey finding was that 61 percent of those quizzed saw "big business" as having the greatest influence on US trade policy, as opposed to labor unions, foreign governments, or average citizens. "These giant corporations are selling out America," says Lewis Holmes, a retired railway worker in Winchester, Va. "I'm for free trade as long as it's fair. But how can we be trading with China when they undersell everything we do."

Even the pro-free-trade Bush administration is taking China to task. "America's patience is wearing thin," Commerce Secretary Don Evans wrote Wednesday in the Wall Street Journal. He criticized China for a "loss of momentum" in moving toward compliance with its WTO obligations.

Talks may resume - after 2004

As for the Doha round of negotiations, it is expected to take a year or two to get the political commitments in key member nations necessary to launch another high-level negotiating session. By then, the US will have moved through the 2004 presidential election. The European Community will have a new trade commissioner.

One challenge: After several decades of reducing tariffs, today's negotiators face the obstacles that are the most intractable, such as farm subsidies. Also, as developing nations have grown in economic power and influence, WTO talks have become even more complicated - prompting the US and other nations to pursue deals with individual nations or regions.

Of more immediate importance for importers and exporters is the decline in the value of the US dollar, which promises to help US exports. That will have more impact on US trade than almost any negotiated deal, says Frank Vargo of the National Association of Manufacturers.

Staff writer Amanda Paulson contributed to this article.