The Democrats and Trade

March 6, 2008; Page A14

Hillary Clinton and Barack Obama both claim to be ready to be president on "day one." But on the campaign trail, both are pandering to organized labor and other antitrade activists on the left.

It is tempting to dismiss this as empty posturing -- important for electioneering but likely to be forgotten after November. But words matter. If one of the Democrats wins the White House, he or she may find that the antitrade tirades delivered carelessly this year will, by next, have unleashed protectionist forces not easily controlled.

Mrs. Clinton is distancing herself from and even dismissing her husband's trade legacy, which includes enacting the North America Free Trade Agreement (Nafta), creating the World Trade Organization (WTO), and negotiating China's admission into it. She is now calling for a "time out" from any new trade pacts. Mr. Obama, unburdened by a record to defend, blames Nafta for shipping jobs abroad and "forc[ing] parents to compete with teenagers for minimum wage jobs at Wal-Mart." He wants to renegotiate Nafta.

It is true that there is a lot of churning as jobs are destroyed, but even more are created as firms enter, exit or are resized in a dynamic economy. Back in 2004, Ben Bernanke, then a Federal Reserve governor, looked at Bureau of Labor Statistics data stretching back a decade and pointed out that about 15 million jobs were lost and 17 million created each year -- an annual net creation of nearly two million jobs. What's more, only about 2.5% of the jobs lost were a result of import competition. The vast majority of jobs lost were caused by changes in consumer tastes, domestic competition, and technology.

It is also true that U.S. manufacturing has been shedding jobs since the late 1970s, with workers increasingly moving into services. But we have seen this process before. In 1900, it took about 40% of the American workforce toiling on the farm to feed the country. Today, thanks to farm mechanization, agricultural chemistry and other innovations, a mere 2.5% of the workforce feeds the nation and exports about third of U.S. farm production.

Trade is not the threat Mrs. Clinton and Mr. Obama allege. It is a central reason why American workers are among the world's most productive and prosperous. An economy open to trade is also an economy free enough to thrive in a changing world.

The U.S. doesn't need a Clintonian trade "time out." It needs to continue expanding opportunities for American workers by doing such things as completing the Doha trade talks, which are bogged down largely over agriculture. Such negotiations are always difficult, and the easier parts of trade liberalization, such as early tariff cuts for manufactured goods, are already in place. Today the WTO has 151 member nations and any one them can block a new trade agreement. Yet a new agreement is possible, and could promote growth in developing countries and expand opportunities for Americans in manufacturing, farming and services, where the U.S. enjoys a competitive advantage.

Trade agreements are also important for noneconomic reasons, because they have foreign policy implications. Take South Korea, a longstanding ally in Asia. Both Mrs. Clinton and Mr. Obama oppose ratifying a trade deal with Seoul. But failing to do so would send a troubling signal -- that the U.S. is uninterested in supporting an ally at a time when our friends in the region are worried about an ascendant China.

Or take Colombia, a vital U.S. ally in Latin America. Mrs. Clinton opposes, and Mr. Obama has declined to embrace, a trade deal with Bogotá. Colombia is a stalwart ally in the drug war and essential to neutralizing Hugo Chávez's Venezuela. Nafta helped spur economic reform, private-sector growth and political stability in Mexico. A trade deal with Colombia could work similar magic in a country where it is desperately needed.

While Mrs. Clinton and Mr. Obama are wrong on the economics and cavalier on foreign policy, they are tapping into popular anxiety about the economy. Rather than trying to shut the world out, however, the next administration needs to pursue the domestic reforms necessary to ensure that American workers can thrive in the knowledge economy. These include shoring up our education system, clearing obstacles to worker mobility by making health care and pensions portable, and replacing the hodgepodge of displaced-worker assistance programs with a single support, training and relocation system. The American worker, not the job, is the national asset.

Source: WSJ

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