avatar
Trading on Tragedy


Every crisis and tragedy is an opportunity for some, as any ambulance-chasing lawyer can tell you. We expect the Pentagon to lard its already bloated budget, and Attorney General John Ashcroft to chip away at the Bill of Rights, all in the name of the War Against Terrorism.

But “Trade Promotion Authority?” That seems like quite a stretch. Yet the Bush administration is preparing to whisk this through Congress on the same pretext, even at the risk of provoking the first post- September-11 partisan fight.

Trade Promotion Authority (formerly known as “fast track”) would give the Administration power to negotiate new international commercial agreements, with Congress having only a yes-or-no vote on the final product. First in line is the controversial 34-country “Free Trade Area of the Americas” (FTAA).

“Will the Congress strongly support free trade as a cornerstone of international leadership?” asks US Trade Representative Robert Zoellick, the Bush Administration’s point man. Well, that depends on what he means by “free trade.” Skepticism among the public abounds: in a recent poll by the University of Maryland, 72 percent said that US officials who make trade policy give too little consideration to the concerns of working Americans.

They have good reason to be wary. What Zoellick doesn’t tell us is that the vast majority of Americans have actually lost income as a result of our increased opening to trade over the last 20 years, and the ways in which this has been done.

Most economists are reluctant to admit this in public, because free trade is something of a religion among the profession. But it is a solid conclusion from their own research.

Economists have estimated how much trade has contributed to the upward redistribution of income in the United States. They have also tried to measure how much our national economy gains, in terms of increased income, from removing tariffs and other barriers to trade.

It turns out that for the vast majority of Americans, trade’s effect on redistribution — from the lower and middle-income groups to the wealthier — outweighs the gains from cheaper imports. This is true even if we use the more inflated estimates of the gains from trade; and even if we use the lower estimates by economists of how much trade has increased inequality.

Virtually all economists agree that trade has contributed to the widening gap between those who have a college degree, and the three-quarters of the US labor force that does not have one. The question is, how much? If we take the lower estimates of how much trade has increased inequality, then three- quarters of the labor force has lost between 1.6 and 2.4 percent of their income over the past two decades, as a result of trade opening.

If we take a higher estimate of the effect of trade on income distribution, then three-fourths of the American labor force has lost between 12.2 and 12.9 percent of their income.

And all of this ignores, as standard economic models do, the economic losses due to the closing of factories and long spells of unemployment that result from trade.

The polls reflect these economic trends. It is a striking case of the “less educated” having a much more accurate view of economic reality than the pundits and intellectuals who dominate the print and broadcast media. It does not take a Ph.D. in economics to figure out that throwing the majority of the US labor force into increasing competition with people earning a few dollars per day will lower wages for most workers here. Nor does one have to be overly cynical to realize that this in fact has been one of the main purposes of our international commercial agreements.

So when Mr. Zoellick asks us to support “free trade” in the interests of national security, he should at least be honest about one thing: he is asking the majority of Americans to make more economic sacrifices, while others get richer.

Of course the label “free trade” is a misrepresentation of these agreements. Both NAFTA and the WTO have expanded the most costly form of protectionism on Earth, in terms of both economic costs and human life. That is the international extension of patent protection for pharmaceuticals, against generic competition. And NAFTA gave corporations a powerful new right to sue governments directly, which they have already used to overturn environmental regulations.

All of which explains why we need the full participation of our elected Congressional representatives in the formulation of international commercial policy. And why Administration officials, now wrapping themselves in the flag, are so eager to restrict their involvement.

Mark Weisbrot is co-director of the Center for Economic and Policy Research in Washington, DC, and co-author, with Dean Baker, of “Will New Trade Gains Make Us Rich? An Assessment of the Prospective Gains from New Trade Agreements “(www.cepr.net).

Leave a comment