The Coming Democratic War on Free Trade

It’s an elementary axiom of economics that if Person A sells something to Person B, it’s good for each of them. Otherwise, why would they bother? It should follow that if Country A sells something to Country B, both again benefit. But Democrats have turned against that basic insight. They think if Americans buy something from abroad, it makes us worse off, and they want to protect us from such folly.

"Free," when modifying "trade," is a four-letter word on the left. Bill Clinton favored breaking down barriers to international commerce, but the idea has lost favor in the Democratic party, and in the November elections it sunk further into disrepute. The American Prospect, a liberal magazine, reports with glee that "every single newly elected Democratic senator is a critic of free-trade orthodoxy."

Among the most vocal critics of open commerce is Sen. Sherrod Brown of Ohio, who has never met a trade deal he liked. In a recent interview with National Public Radio, he said, "People feel these job-killing trade agreements have really squeezed the middle class and caused lots of people to lose their middle-class status. . . . [Most Democrats] think our trade policy encourages more companies to leave the country. They think our trade policy has caused more and more businesses to outsource." And he vows not to vote for any agreement that doesn’t impose strong labor and environmental standards on our trading partners.

Brown reflects the views of labor unions, but you shouldn’t conclude that organized labor is merely concerned about low-paid workers in Mexico and Guatemala. The AFL-CIO opposed the 1989 free-trade agreement with Canada. If Canadian workers are a threat, who isn’t?

Demanding the imposition of American-style labor and environmental standards on poor nations is merely a ruse for rejecting trade liberalization altogether. To say developing countries shouldn’t be allowed to take advantage of their workers’ willingness to accept low pay or hard conditions is like saying we shouldn’t be allowed to make use of our high-tech factories or our skilled labor force.

It’s the equivalent of telling them they shouldn’t produce anything until they’ve advanced to our standards — which they can’t do unless they start from where they are and work their way up. Sort of like we and every other rich country did. Likewise with environmental rules. Poor people can’t afford to put a priority on clean air and water until they stop being poor, a process for which trade is indispensable.

What about those job-killing trade deals? The worst villain among protectionists is the North American Free Trade Agreement, which opened up business with Mexico. But since it took effect in 1994, total employment in this country has risen from 112 million to 136 million, and the unemployment rate has dropped from 6.6 percent to 4.5 percent. Funny — those jobs don’t look dead.

Jobs, of course, vanish every day. But it’s rarely because employers are transferring work from Cleveland to Calcutta. A report by the federal Bureau of Labor Statistics found that in 2004, foreign outsourcing was responsible for only 2 percent of all U.S. job losses. The vast majority occur because of vigorous competition and changing consumer demand within our own borders — such as auto production shifting from Ford factories in Michigan to Honda plants in Ohio.

Trade opponents retort that the job growth has been a hollow victory, because the rich are getting richer and everyone else is getting poorer. But the facts indicate otherwise. As economist Alan Reynolds notes in a new study for the Cato Institute in Washington, the Census Bureau calculates that average income among the bottom 80 percent of American taxpayers has risen by 24 percent, adjusted for inflation, since 1982. And income has risen just as fast among the bottom 40 percent of households as it has among the top 40 percent.

Blaming international trade for wage stagnation in this country is like blaming lettuce consumption for rising obesity. Trade is about selling American goods abroad as well as buying imports here. Exports have been rising, and studies indicate that the jobs created by exports pay better than the ones destroyed by imports.

Brown and others cling to the superstition that we can get rich by sealing ourselves off from the world and paying each other high prices for products made entirely in the U.S. of A. If they manage to erect new barriers to trade, we’ll learn once again that protectionism is nothing but fool’s gold.