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May 21, 2007
The Democrats' Trade Troubles
L ast week house speaker
Nancy Pelosi and congress-man Charles Rangel showed genuine leadership
by making a deal with the Bush administration to ease the passage of new
trade pacts. But they did so from within a party that is going seriously
awry on this issue. Too many Democrats,
including most of their presidential candidates, simply wish the subject
would go away.
This is a bad strategy for the party and for the country.
Bill Clinton's most important political achievement was to transform the
image of the Democratic Party into one that was in favor of growth, markets
and trade. Clinton supported and articulated a powerful defense for the
North American Free Trade Agreement, the World Trade Organization and
commerce with China, among many such issues. He spoke confidently of the
promise and opportunities of a globalized world. When you talk with elected
Democrats now, they could not sound more different. Far too many of them
are parochial, pessimistic and paranoid about the global economy.
Globalization and technological change produce real
anxieties for many people in the developed world. But the basic facts
are incontestable:
over the past 20 years, as these forces have accelerated, the United States
has benefited enormously. Its companies have dominated the new global
economic order; its consumers have reaped the lion's share of the resulting
price reductions. America has grown faster than any large industrial economy
during these years: over the past two decades, American per capita GDP
has roughly doubled. The median income of a family of four rose 23 percent
between 1985 and 2005. There are serious problems of dislocation and rising
inequality-and I'll return to these - but that there have been substantial
gains is indisputable. U.S. unemployment stands today at a stunningly
low 4.4 percent, about half that of many large European economies.
In this context it is almost bizarre to listen to
the fears of so many Democrats and increasingly some Republicans). The
Central American Free Trade Agreement, which has almost no effect on the
$13 trillion American economy but is a huge benefit to the countries in
the region, passed the Senate with little Democratic support. Now trade
pacts with three Latin American countries-Panama, Peru and Colombia-have
been loaded down with amendments, and even so will face opposition from
many Democrats. Again, this is a deal that will have almost no impact
on us but is hugely important to three crucial allies.
When I was in Asia last month, I was told by several
officials that they found themselves in an uncomfortable position. They
liked what they heard from Democrats on America's role in the world, but
they were terrified by what they heard about trade. One of them, who declined
to give his name for fear of giving offense, said, "Look, it's an
easy call for us. We don't like the Republicans on foreign policy. We
think they've been stupid and unilateral. But they are staunchly progressive
on free trade and that's the most important issue for us by far."
Democrats cannot plausibly hope to lead the world by abdicating America's
historic role as the leader of an open global economy.
It's true that the pace of change is fast and often
frightening. And it can cause real pain for real people. But we can't
solve this by slowing down or shutting off trade. What advanced economy
in history that has closed itself off from the world has prospered? Would
Detroit's automakers have been better off if they had never been exposed
to international competition? Perhaps the outsourcing of service jobs
today is different. But for the past 50 years America has outsourced manufacturing
jobs - and yet the economy and personal income and our standards of living
have kept growing robustly. Why is it different if the person exposed
to international competition now wears a tie?
The current Democratic approach to these issues is
misguided. Loading trade pacts with environmental and labor standards
is ineffective, unless the aim is to sink them. It will not really change
the fact of low-wage competition from poor countries. And, most important,
it doesn't really help American workers to prosper in the long term.
What America needs is a new way to tackle trade. It
is a C-and-T agenda: cushion and train. The government should help people
to weather the shocks of this roller-coaster ride, and it should help
train them to be better equipped for the next round of global competition.
We do very little of this today. When someone loses his job in America,
he loses his health care and pension. Imagine if that didn't happen-and
it doesn't in other rich countries-would that worker be as terrified of
change? And then imagine if he took a series of retraining and education
courses to prepare him for a new job or career.
These two shock absorbers would better equip the average American to face a world of global competition. It would ease the genuine anxieties that people have about trade and build durable political support for expanding the world economy rather than walling us in. It's a more sensible solution than China bashing, bogus labor standards and protectionist subsidies. It's a New Deal for trade. Now is any Democrat willing to say that?
