Trade is the lifeblood of most nations’ economies. It also holds the greatest capacity for uniting and dividing countries. The topic is a hot potato in U.S. political debates because it has been so clearly linked to employment losses and other economic upheavals. But the real problem isn’t so much trade itself as the way U.S. trade policy has long been divorced from basic domestic economic policy. That missing link sets us apart from so many other nations.
Over 50 years ago, U.S. business schools began preaching that building new, more efficient and innovative industries made more sense than supporting outdated and inefficient ones. With the rise of the Third World clearly visible, that perspective should have placed labor-intensive industries such as shoe and textile manufacturing on the “threatened species” list as low-cost labor in developing countries obviously threatened labor-intensive industries anywhere else. The only defensive measures available would have been government subsidies and import barriers, both of which would have produced predictable retaliations, undermining trade and global development in general.
Fifty years ago also, the U.S. was the world’s most powerful trading nation. Our largest corporations were dominant. Ford and GM built most of the world’s cars, Boeing and McDonnell Douglas produced the majority of commercial aircraft, P&G dominated global markets for packaged household goods and United Fruit was the biggest agricultural crop seller. The U.S. effectively used its economic and military clout to influence international trade policies and pushed for trade agreements that benefited the U.S. economically and strategically.
Unlike the U.S., where free market policies prevail, many other nations maintain various forms of managed markets. That means they tend to mitigate or offset adverse effects of new trade agreements through policies facilitating the retraining, education and relocation of displaced workers, as well as the subsidizing of industrial retooling and direct investments in new technologies. In the U.S. such government assistance and subsidies tend to be frowned upon — with notable exceptions for cotton, sugar and corn production.
Because trade and domestic economic policies typically haven’t been closely coordinated, any adverse effects of new trade agreements have been largely ignored, often with anti-interventionists arguing to “let the markets sort things out.” As a result most of the downside of trade deals has often fallen on the shoulders of American workers and smaller producers, while most of the benefits accrued to the larger corporate players. Then there is the complicating factor that many smaller and even midsize U.S. companies don’t benefit from increased trade opportunities because they aren’t active exporters. The strength of America’s domestic market has long safeguarded such businesses while overseas their counterparts have long had to trade across borders and oceans to survive.
Trade not only is necessary, it has fueled global development for centuries and has by now become entirely unavoidable. Because no country can claim to be the most efficient or advanced at producing everything, no country — even North Korea — can afford being left out of global trade agreements.
Free trade doesn’t have to be the bogeyman it’s often made out to be. Even trade agreements aimed at producing meaningful two-way economic benefits rarely come without some negative elements attached, and it is incumbent upon the administration and Congress to figure out how to offset adverse consequences with effective domestic policy initiatives. Washington’s consistent failure in that regard has been the single most objectionable part of U.S. trade policy.
While our nation must actively boost trade to protect its economic interests and global relevance, it must be equally committed to protecting its workers. Free Trade can no longer be a scheme for America’s largest corporate players to shift the price of admission to global markets to American workers and taxpayers. The TPP should not fly unless coupled with clearly articulated policies to protect the workers and smaller producers who can be predicted to lose out.
Bob Ziegelaar is a Bangor-area business consultant and former chair of the Maine International Trade Center.