Free Trade Is Anything but Fair, and Lousy Economics Besides
By Amitai Etzioni
March 5, 2004
"Free trade" is God's gift to modern economies, and for a politician to
support "fair trade" is tantamount to worshiping graven images.
Dick Gephardt, who dared to touch the free-trade icon, was burned at
the stake. John Edwards, who questioned free trade, failed as a
candidate, while John F. Kerry, who dances around this issue as if it
were gay marriage, now has beaten the Democratic pack. Moreover, when
President Bush protected U.S. steel from ruinous competition, he was
dumped on as if he were a labor Neanderthal.
But
politics aside, is free trade really good economics? Free trade would
be all that it was promised to be if we lived in a world in which not
just jobs but also goods, people and capital freely flowed from one
country to another. In such a never-never land, indeed, everyone would
do what he was best at, and we all would be richer for it.
Unfortunately, when one country lowers its trade barriers and other
countries don't lower theirs as much — making for freer, but not free,
trade — who gets what becomes extremely murky. And that is the world in
which we find ourselves today.
U.S. corporations love to move
their plants and our jobs to other countries — countries that sometimes
block our products and services from entering. As we lowered our trade
barriers, a good part of our car and television manufacturing was done
in Japan. But for decades Japan prevented our financial institutions
from serving its citizens, and its corporate culture of keiretsu
(close business relationships) still hampers the work of these
institutions. American construction companies can bid all they want for
public works in the huge Japanese market, but a cabal of Japanese firms
decides whose turn it is to submit the lowest bid this time, and
somehow it very rarely turns out to be a foreign company. Scores of
countries block the import of what we are best at producing: low-cost
food.
Many free-market champions believe we should export
lowbrow jobs but do the "creative" stuff ourselves, thus keeping our
hands clean and our wages high. This notion assumes that God has
anointed the United States to be the creator while the rest of the
world has been chosen to do the menial work. Perhaps no one told the
rest of the world. Israelis and Finns, for instance, are not exactly
laggards. Indian engineers and Chinese computer programmers are rapidly
bridging the creativity gap. Moreover, the U.S. has a range of talent
distribution. What will our less-talented workers do if they are not
gifted enough to make "Finding Nemo" or if there are not enough
"creative" jobs to go around? Will they move — or be moved — to the
nations where their jobs were outsourced, as free-trade theory calls
for?
If Americans are not to follow their jobs to Third World
countries, they will need to be retrained and relocated within our
borders, a transition that, even when it works, generates high
adjustment costs.
Every time we pare down an industry because
its labor can be performed more cheaply overseas — say, most recently
reading X-rays — those who used to work in it here either need to be
retrained to do something else or live off unemployment or welfare.
Such transitions also entail, as studies have shown, a significant
increase in mental illness, suicides and family breakdowns, all hefty
human and social costs. Economists tend to ignore all these public
costs, which end up in the laps of taxpayers, when they tell people how
wonderful it is that they can buy T-shirts at Wal-Mart at a discount.
Organized labor's claim that free trade involves a race to the bottom
is valid. As flight attendants and grocery workers recently discovered,
the pressure is on to reduce benefits, job security and the wages given
to new employees and possibly to old ones.
Remaining
competitive in a world in which billions of workers are paid about a
dollar a day and have no benefits, and in which corporations need not
worry about environmental costs, requires us to drastically lower our
own standard of living.
Economists argue that eventually
other countries will raise their living standards (as South Korea and
Taiwan already are doing) and then we will all compete on equal
footing. But there are two ways to get there: lower our standards until
the rest of the world catches up or insist that we compete freely only
with those countries where companies give their workers a basic basket
of benefits and elementary environmental protection. This is what is
referred to as "fair trade."
Americans should have the
opportunity to vote in November on which form of trade they prefer: the
mismanaged variety (masquerading as free trade) or fair trade. They
will have this opportunity only if one of the political parties has the
civic courage to lift the fog in which economists, big business and
naive liberals have shrouded this whole sordid business. Then fair
trade will not only be sound economics for America but also good
politics.
*
Amitai Etzioni, a
professor of sociology at the George Washington University, is the
author most recently of "My Brother's Keeper: A Memoir and a Message"
(Rowman & Littlefield, 2003).
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