Without trade, future would look bleaker

By Lee Hamilton
Nov 4 2008

 Many Americans have become increasingly convinced that international trade harms them. Undoubtedly, trade does hurt some workers, increases their job insecurity, and exacerbates inequality. But trade should not be a scapegoat for all our economic woes.

Trade enriches the U.S. economy and benefits Americans in many ways. Taking account of the impact of trade on stimulating efficiency and innovation trade may add as much as $1 trillion a year to the U.S. economy. It keeps the prices of imports low, increases the variety of goods available to American consumers, creates well–paying jobs, and generates substantial profits for U.S. businesses.

America's recent export boom created 2 million jobs. Eighty percent of America's economic growth in 2007–2008 resulted from trade. Simply put, without trade our economic outlook would be even grimmer.

Nonetheless, popular support for open and free trade is rapidly declining. Many workers fear that cheaper foreign labor is driving down wages in the manufacturing sector and pushing jobs overseas.

Trade does produce winners and losers. We must cushion the blow for those workers trade displaces — a task the government has never taken seriously enough (trade adjustment assistance is a paltry $2 billion annually). That means wage insurance for those displaced workers re–entering the work force at reduced salaries, and flexible health care and pension funds to ease the pains of transition periods. We must dedicate greater resources to job retraining and education.

Trade is also about more than economic growth. It can advance several American foreign policy objectives, such as democracy promotion, human rights, the rule of law, economic development, and poverty alleviation.

In 2001, the U.S. joined 147 other countries in the Doha Round of international trade negotiations to promote economic development. Seven years later, the talks are moribund. The dealbreaker remains tariffs and subsidies on farming and industrial goods.

The European Union does not want to reduce further its internal agricultural supports, and developing countries do not want to liberalize their industrial and service sectors. Both insist that the U.S. lower its farm subsidies and open its markets more to the world's least–developed countries.

As a world leader, the U.S. should do more to facilitate the opening of world markets.

Just because Doha is at a standstill does not mean trade liberalization is. In the last seven years, 100 preferential trade agreements (PTAs) have been negotiated. PTAs have their benefits, but they create an immensely complex web of rules and regulations that have the potential to inhibit the free flow of goods across multiple borders. Rule enforcement is difficult. PTAs also create disincentives for individual countries to commit to multilateral liberalization.

I want the next president to pursue open markets and trade expansion in the interest of all people and nations, with a strong commitment to concluding the Doha Round. His focus would have to be on the liberalization of trade in services, non–agricultural market access, and the reduction of internal price supports and market restrictions for farmers.

Today it is not possible to disentangle trade from other policy debates, including, but not limited to, managing the U.S. trade deficit, distributing trade's benefits, and striking the right balance of multilateral, regional, and bilateral approaches to trade negotiations.

There was a time when the United States, Europe, or the Soviet Union could set the agenda for international negotiations, establishing the parameters of the debate. This is no longer the case. India, China, Brazil, and others expect to exercise influence commensurate with their economic might. And Doha's gridlock will spread to discussions of other international issues — for example, climate change and non–proliferation — if Europe and the United States do not adjust to new global circumstances.

(Lee Hamilton is Director of the Center on Congress at Indiana University and Director of the Woodrow Wilson International Center for Scholars in Washington, D.C. He was a member of the U.S. House of Representatives for 34 years.)