Some Truth About Trade

Some Truth About Trade

April 6, 2008 0 Comments

Interesting editorial in the New York Times calling out presidential candidates for using protectionist rhetoric on the campaign trail. You can read the piece by clicking here Some Truth About Trade.

I don’t like either party’s approach to trade. Overall trade raises GDP and incomes, but it helps some people and hurts others, especially during the period when industries, companies and workers have to adjust to new patterns of production and work. We don’t want it to go away. We couldn’t make it go away anyway–it is the law of gravity. But we can do things to make the adjustments easier on people. I wold like to scrap all the rhetoric and see a reasoned discussion of how to best live in today’s global economy. It’s pretty clear to me that we want to get as much capital as possible to (voluntarily) locate in the U.S. And we want to help prepare people for the most productive work.


There’s nothing like international trade to help bridge the nation’s ideological divide. As Barack Obama and Hillary Clinton travel the Rust Belt, the Democratic candidates seem to be eschewing the advice of their economic advisers and turning to Karl Rove’s playbook.

It was Mr. Rove who urged Dick Cheney in 2000 to forget the free trade spiel and promise voters in West Virginia that a Bush administration would protect American steel from cheap imports. “If our trading partners violate our trade laws, we will respond swiftly and firmly,” Mr. Cheney thundered.

Those words seem to echo in Mr. Obama’s attacks against “unfair” trade deals — including Nafta, Cafta and President Bill Clinton’s decision to establish regular trade relations with China. Mrs. Clinton seems to draw inspiration as well, railing to the Pennsylvania A.F.L.-C.I.O. against alleged dumping of Chinese steel: “When I’m President, China will be a trade partner not a trade master,” she said.

Such pandering may play on the stump, especially in Pennsylvania, where workers fear for their jobs as the country’s manufacturing base shrinks. Mr. Bush won West Virginia, only the fourth Republican to do so since 1932. Still, whoever wins in November would be foolish to choose protectionism.

Democrats need to tell voters the truth: First, trade is good for the economy, providing cheap imports and markets for exports, spurring productivity and raising living standards. And second, while trade can drive down some wages and displace some jobs, Democrats have real ideas to help workers cope. Mrs. Clinton and Mr. Obama should base their approach on these ideas. They would not only make sound policy, they would also provide a competitive advantage over John McCain.

Senators Clinton and Obama know protectionism could have disastrous consequences. Do they really want a trade war with China, the United States’ second-biggest trading partner? Would they want to block a global trade accord designed to help the poorest countries?

Strengthening rules on workers’ rights in Nafta would be a good thing to do, on the merits. But it would do little to help American workers compete with cheaper Mexican labor. If a President Obama or a President Clinton were to fulfill their pledge to renegotiate the deal, he or she would quickly find that Canada and Mexico would want changes, too. Immigration reform would most likely top Mexico’s list. And if push came to shove, would either candidate take the country out of Nafta when about a third of its exports go to Mexico and Canada?

American workers need more to help them cope in a globalizing economy. The puny program to help workers displaced by trade needs to be strengthened and broadened to include other workers displaced by economic forces beyond their control, including technology.

Workers need affordable health insurance that will not disappear when they are laid off. Unemployment insurance needs to be strengthened, perhaps to include some form of insurance to shore up the wages of displaced workers who are forced to take lesser-paying jobs. A more progressive tax policy could help redistribute some of the gains of trade accruing to those on the top of the income scale. More investment in physical and human capital — from roads and railways to workers’ lifelong education — would enable businesses and workers to better compete.

Senators Clinton and Obama can offer policies that will help American workers embrace rather than fear a globalized world. American voters certainly deserve a more serious discussion about trade.

John Rutledge


  1. eq

    August 29, 2008

    With the dollar as the world's reserve currency, we end up re-importing our own capital in the current bout of globalization. And, usually in the hands of non American corporations or individuals. Effectively, our global monetary system is a self-reinforcing decline of American control over its own economy. Our system needs more and more outlets for our capital to keep our monetary system going so the only way to do so is to finance trade at the expense of our own economic development. So, we print dollars in exchange for goods and services created by the rest of the world. It's really quite hilarious to see the supporters of this type of global trade believe that the world economy is sound and safe. I remember hearing you say that we should outsource all of our manufacturing to China. The irony is that is effectively what we have done. And, the industrial economy provides the wealth by which producers become consumers. So, now we are going bankrupt. Your views are held by a generational group of finance-minded - excuse the bluntness - dimwits. These people have guaranteed the outcome to this current bout of globalization to indeed be a global bust. Watch and learn. Oh, in the spirit of freedom of speech and free markets you so espouse, will you actually post this?

  2. BMC

    September 11, 2008

    Globalization is a reality and to pander to the whimsical whining of the voters seems par for the put put course of politics; Americans need to grow up and face the facts. With that said it is our Party that has successfully engaged in protectionism from the Lincoln Administration. What could be the possible Roles and Responsibilities Dr. Rutledge?

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