Who's Benefiting from Free Trade? 9-2-13

Free Trade?

Letter to the Editor of the New York Times

January 11th, 2008

Birmingham, Michigan

- Posted by Ralph Deeds

David Barboza's January 5, 2008 article on the abysmal workingconditions in China casts doubt on the legendary benefits of free trade. Why should American workers and Chinese workers be sacrificed on the altar of free trade to fatten the coffers of WalMart and other companies whose factories, or those of their contractors, pay low wages for work in dangerous, unhealthful conditions while polluting the world's environment? It would not seem unreasonable to expect American companies to bring to their Chinese operations the pollution, industrial safety and hygiene and human resources policies rather than leaving them behind in the United States.

It's illegal under United States law for a U.S. company to bribe a foreign government official but not to maim or poison a foreign worker. Both the Republican and Democratic parties, while quick to bring intellectual property rights to the trade negotiating table, have not pursued the protection of worker rights with equal vigor.

Our trade negotiators (and the New York Times) act as if the introduction of worker rights considerations in trade talks is comparable to putting sand in their Rolexes.

If American workers are losing their jobs only for Chinese workers to work in unsafe, unhealthful conditions for abysmally low wages, where are the benefits of free trade?"

Ralph Deeds

Birmingham, Michigan

- Posted by Ralph Deeds



Afraid of Trade

November 12, 2007, 3:07 pm

Afraid of Trade

By The Editorial Board (NY Times)

At first blush, the House of Representatives' vote in favor of a free trade agreement with Peru last Thursday might seem to augur great things for trade pacts.

Not only did it pass by a large margin - 285 to 132 - but a near-record 109 Democrats voted for it. Compared to the 22 Democrats who voted last year in favor of a free trade pact with Oman (there is such a thing), support for the Peruvian agreement looks like a resounding confirmation of the Democrats' commitment to expanding trade.

Except that it isn't. Last week's vote confirms Democrats' longstanding ambivalence regarding the benefits of trade. The 109 Yeas represent less than half the 233 Democrats in the House. Though the White House touts the vote as the biggest ever for a trade deal in Latin America, that's a pretty meager achievement.

Only 15 Democrats supported Cafta-DR, the agreement with Central American nations and the Dominican Republic in 2005. Two years earlier, 75 Democrats voted for a deal with Chile. In 1993, NAFTA got 102 Democratic votes, less than 4 out of 10.

Republicans can always be counted on to vote for trade deals because their backers in business like them. Democrats' ambivalence is proving to be equally unshakable. Large gains from trade reaped by the United States economy over the past two decades have done little to allay Democratic concerns about trade's potential to hurt American workers, who are made to compete against cheaper laborers overseas.

Indeed, less than a handful of trade pacts have received support from a majority of House Democrats: one in 2005 with oil-rich Bahrain (which might have advised oil-rich Oman on how to lobby on the Hill); two in 2004 - with Australia and Morocco. Of course, the easiest trade agreement of all, with Israel, flew through the House on a 422-to-nothing vote in 1985.

It would be a good thing if the vote on the trade agreement with Peru represented a breakthrough in Democratic thinking. It should be a vote on which to build majorities for pending trade pacts with Panama, South Korea and even Colombia - once its government demonstrates progress in bringing to justice those guilty of human rights abuses.

These deals represent new opportunities for American businesses and consumers, and should boost American prosperity. Unfortunately, it is unlikely that Democrats have changed their thinking that much. They are still too scared of trade.

Trouble With Trade

Op-Ed Columnist

Trouble With Trade NY Times op-ed

By PAUL KRUGMAN Published: December 28, 2007

While the United States has long imported oil and other raw materials from the third world, we used to import manufactured goods mainly from other rich countries like Canada, European nations and Japan.

But recently we crossed an important watershed: we now import more manufactured goods from the third world than from other advanced economies. That is, a majority of our industrial trade is now with countries that are much poorer than we are and that pay their workers much lower wages.

For the world economy as a whole — and especially for poorer nations — growing trade between high-wage and low-wage countries is a very good thing. Above all, it offers backward economies their best hope of moving up the income ladder.

But for American workers the story is much less positive. In fact, it’s hard to avoid the conclusion that growing U.S. trade with third world countries reduces the real wages of many and perhaps most workers in this country. And that reality makes the politics of trade very difficult.

Let’s talk for a moment about the economics.

Trade between high-wage countries tends to be a modest win for all, or almost all, concerned. When a free-trade pact made it possible to integrate the U.S. and Canadian auto industries in the 1960s, each country’s industry concentrated on producing a narrower range of products at larger scale. The result was an all-round, broadly shared rise in productivity and wages.

By contrast, trade between countries at very different levels of economic development tends to create large classes of losers as well as winners.

Although the outsourcing of some high-tech jobs to India has made headlines, on balance, highly educated workers in the United States benefit from higher wages and expanded job opportunities because of trade. For example, ThinkPad notebook computers are now made by a Chinese company, Lenovo, but a lot of Lenovo’s research and development is conducted in North Carolina.

But workers with less formal education either see their jobs shipped overseas or find their wages driven down by the ripple effect as other workers with similar qualifications crowd into their industries and look for employment to replace the jobs they lost to foreign competition. And lower prices at Wal-Mart aren’t sufficient compensation.

All this is textbook international economics: contrary to what people sometimes assert, economic theory says that free trade normally makes a country richer, but it doesn’t say that it’s normally good for everyone. Still, when the effects of third-world exports on U.S. wages first became an issue in the 1990s, a number of economists — myself included — looked at the data and concluded that any negative effects on U.S. wages were modest.

The trouble now is that these effects may no longer be as modest as they were, because imports of manufactured goods from the third world have grown dramatically — from just 2.5 percent of G.D.P. in 1990 to 6 percent in 2006.

And the biggest growth in imports has come from countries with very low wages. The original “newly industrializing economies” exporting manufactured goods — South Korea, Taiwan, Hong Kong and Singapore — paid wages that were about 25 percent of U.S. levels in 1990. Since then, however, the sources of our imports have shifted to Mexico, where wages are only 11 percent of the U.S. level, and China, where they’re only about 3 percent or 4 percent.

There are some qualifying aspects to this story. For example, many of those made-in-China goods contain components made in Japan and other high-wage economies. Still, there’s little doubt that the pressure of globalization on American wages has increased.

So am I arguing for protectionism? No. Those who think that globalization is always and everywhere a bad thing are wrong. On the contrary, keeping world markets relatively open is crucial to the hopes of billions of people.

But I am arguing for an end to the finger-wagging, the accusation either of not understanding economics or of kowtowing to special interests that tends to be the editorial response to politicians who express skepticism about the benefits of free-trade agreements.

It’s often claimed that limits on trade benefit only a small number of Americans, while hurting the vast majority. That’s still true of things like the import quota on sugar. But when it comes to manufactured goods, it’s at least arguable that the reverse is true. The highly educated workers who clearly benefit from growing trade with third-world economies are a minority, greatly outnumbered by those who probably lose.

As I said, I’m not a protectionist. For the sake of the world as a whole, I hope that we respond to the trouble with trade not by shutting trade down, but by doing things like strengthening the social safety net. But those who are worried about trade have a point, and deserve some respect.

More Articles in Opinion » A version of this article appeared in print on December 28, 2007, on page A23 of the New York edition.


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Comments 12 comments

Iðunn 8 years ago

exactly. people have value beyond "cost of production". good hub~


MrMarmalade profile image

MrMarmalade 8 years ago from Sydney

Great hub.

You have obviously done a great amount of research

Thank you


William F. Torpey profile image

William F. Torpey 8 years ago from South Valley Stream, N.Y.

It's a never-ending battle. Will we ever get the big corporations, and their political lackies, to behave like the "persons" the Supreme Court says they are? I don't think it'll be in my lifetime, if ever. Keep up the good work Ralph.


Ralph Deeds profile image

Ralph Deeds 5 years ago Author

“The big debate today is whether we can continue to be competitive in R&D when we are not making the stuff that we innovate,” she says. “I think not; the two can’t be separated.”

THE loss of manufacturing capacity, measured in lost workers, is startling. From the high point in the summer of 1979, through last month, employment in manufacturing has fallen by 8.1 million, to 11.6 million, with most of the drop in just the last decade. While consumers have benefited from lower prices, made possible by unrestricted imports, on the other side of the ledger are tens of billion of dollars in lost manufacturing wages.

Something else is gone, too. “We had a storehouse of knowledge and skill built up in these workers and we can’t use it now,” says James Jordan, president of the Interstate Maglev Project, promoting a high-speed rail technology that uses special magnets to levitate and propel trains. Maglev was invented in the United States, but equipment based on that technology is manufactured and used today in Japan.

Mr. Jordan argues that as manufacturing’s presence — and status — shrinks in America, the odds of a Henry Ford or a Thomas Edison or a Steve Jobs appearing in the next generation are reduced. Certainly people like Mark Zuckerberg of Facebook are inventors, though not of physical products.

“Young people stop thinking about making things,” Mr. Jordan says. “It is no longer in their heads. They have a different mental orientation.”

http://www.nytimes.com/2011/02/13/business/13every...


Ralph Deeds profile image

Ralph Deeds 5 years ago Author

To the Editor:

N. Gregory Mankiw decries President Obama’s “win the future” rallying cry as a misleading diversion from the true nature of our policy choices (“Emerging Markets as Partners, Not Rivals,” Economic View, Feb. 13).

According to the column, everyone benefits from our current situation: we gain a “consumer surplus” when we buy commodities and services at a price below their value to us, while our trading neighbor gains a “producer surplus.”

The problem, however, was explained elsewhere in your section, in “When Factories Vanish, So Can Innovators” (Everybody’s Business). When we stop producing, we lose not only manufacturing jobs but maybe also the innovation they stimulated.

In addition, if one party consistently gains a consumer surplus (always buys) and the other gains a producer surplus (always sells), how will the buyer gain the income to keep making purchases? In other words, gains from trade can’t be so one-sided.

It makes sense that the president would use the catch phrase. How else to wake a sleeping giant and rally the public around initiatives to promote exports, especially of American-made renewable energy products?

So let’s compete on the economic field of play, honor ourselves and our competitors and then embrace the benefits of trade just as our gridiron heroes embraced one another after the Super Bowl.

David Newman

Nyack, N.Y., Feb. 13

The writer, a lawyer, specializes in international trade.

To the Editor:

Professor Mankiw’s column was faithful to economists’ conventional view that unrestrained trade inevitably benefits both trading partners. But if it is correct that free trade helps our country, it’s only fair that more should be done to compensate the workers and communities that have been destroyed as a result of the avalanche of products from China and elsewhere.

These measures should include more generous retraining and relocation aid, as well as job-loss insurance for those sidelined by imports. Currently, the inability of unemployed workers to sell their homes also impedes the effective functioning of the labor market — and the federal government should deal with this problem, too.

Ralph Deeds


Ralph Deeds profile image

Ralph Deeds 5 years ago Author

http://query.nytimes.com/gst/fullpage.html?res=9B0...

''The big debate today is whether we can continue to be competitive in R&D when we are not making the stuff that we innovate,'' she says. ''I think not; the two can't be separated.''

THE loss of manufacturing capacity, measured in lost workers, is startling. From the high point in the summer of 1979, through last month, employment in manufacturing has fallen by 8.1 million, to 11.6 million, with most of the drop in just the last decade. While consumers have benefited from lower prices, made possible by unrestricted imports, on the other side of the ledger are tens of billion of dollars in lost manufacturing wages.

Something else is gone, too. ''We had a storehouse of knowledge and skill built up in these workers and we can't use it now,'' says James Jordan, president of the Interstate Maglev Project, promoting a high-speed rail technology that uses special magnets to levitate and propel trains. Maglev was invented in the United States, but equipment based on that technology is manufactured and used today in Japan.


Ralph Deeds profile image

Ralph Deeds 5 years ago Author

And then there’s the matter of the auto industry, which probably would have imploded if President Obama hadn’t stepped in to rescue General Motors and Chrysler. For those companies would almost surely have gone into liquidation, closing all their factories. And this liquidation would have undermined the rest of America’s auto industry, as essential suppliers went under, too. Hundreds of thousands of jobs were at stake.

Yet Mr. Obama was fiercely denounced for taking action. One Republican congressman declared the auto rescue part of the administration’s “war on capitalism.” Another insisted that when government gets involved in a company, “the disaster that follows is predictable.” Not so much, it turns out.

http://www.nytimes.com/2011/05/20/opinion/20krugma...


Ralph Deeds profile image

Ralph Deeds 5 years ago Author

http://www.nytimes.com/2011/06/09/opinion/09slaugh...[]

"More Trade and More Aid"

Three principles guide our proposal. First, trade is indeed worth it for America. Annual national income today is at least $1 trillion higher than it would have been absent decades of trade and investment liberalization. With unemployment at 9.1 percent and 24.6 million Americans unemployed or underemployed, we need to rebalance our economy away from the excessive consumption that helped bring about the global financial crisis, and create jobs linked to exports and international investment.

¶ Second, trade is not worth it for every individual American. Trade creates unemployment for some and wage losses for others; its gains do not directly accrue to every worker and community. Indeed, there has been a steep drop in public support for trade; a recent Wall Street Journal/NBC poll found that only 17 percent of respondents said free-trade deals have helped America.

¶ Third, Trade Adjustment Assistance, created in 1962 to supplement unemployment insurance, cannot adequately help displaced workers. Workers today face continual adjustment as new technologies and competitors, both domestic and foreign, render their talents and skills obsolete. Indeed, the premise that job losses can be attributed to precise causes is archaic, given the linkages among international trade and investment and technological change.

¶ In recent years, less than half of workers certified as eligible for T.A.A. benefits have actually used them. Petitions filed with the Labor Department for T.A.A. benefits in 2007 covered just 93,903 workers — fewer than the number of jobs created or lost on an average day.


Ralph Deeds profile image

Ralph Deeds 3 years ago Author

9-2-13NYTimes--"Fast and Flawed Inspections of Factories Abroad"

Fast and Flawed Inspections of Factories Abroad - NYTimes.com

While some audits of Chinese and other factories abroad are performed in depth, retailers often choose "check the box" inspections that fail to uncover substandard conditions and outright fraud.


Ralph Deeds profile image

Ralph Deeds 2 years ago Author

2-5-14NYTimes OP-Ed "Free Trade Disagreement" Thomas Edsall

Log In - The New York Times

"On Sept. 8 last year, Senator Elizabeth Warren of Massachusetts declared: “Why are trade deals secret? I’ve heard people actually say that they have to be secret because if Americans knew what was going on, they would be opposed. Think about that!"


Ralph Deeds profile image

Ralph Deeds 2 years ago Author

2-28-14NYTimes OP-ED "No Big Deal" Paul Krugman

Log In - The New York Times

"The Trans-Pacific Partnership, or T.P.P. — isn't making much progress, thanks to a combination of negotiating difficulties abroad and bipartisan skepticism at home. And you know what? That’s O.K. It’s far from clear that the T.P.P. is a good idea....Now, the corporations benefiting from enhanced control over intellectual property would often be American. But this doesn’t mean that the T.P.P. is in our national interest. What’s good for Big Pharma is by no means always good for America."


Ralph Deeds profile image

Ralph Deeds 2 years ago Author

3-15-13NYTimes OP-ED "On the Wrong Side of Globalization" by Joseph Stiglitz

"On the Wrong Side of Globalization"

"Today, there are 20 million Americans who want a full-time job but can’t get one. Millions have stopped looking. There is a real risk that workers moved from low productivity-employment in a protected sector will end up zero-productivity unemployed.

Economics isn't President Obama's strong suit.

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