Free Trade at a Crossroads

Donald Lambro
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Posted: Nov 05, 2007 12:01 AM
Free Trade at a Crossroads

WASHINGTON -- Another Latin American trade-promotion agreement passed the House Ways and Means Committee last week, proving that free trade is alive and kicking on Capitol Hill.

The bilateral pact between the United States and Peru won unanimous support from the panel, clearing the way for its passage by the House and signaling that future free-trade agreements will have bipartisan backing in this Democratic-run Congress.

The United States has free-trade agreements with 14 countries, and four more FTAs -- with Peru, Colombia, Panama and South Korea -- are waiting in the wings. These four new agreements alone "would expand market opportunities between the United States and countries having nearly 126 million consumers and a combined GDP of $1.1 trillion," according to the U.S. Department of Commerce.

The Ways and Means vote has suddenly breathed new life into the free-trade issue that has become a battleground in Democratic ranks and most likely in next year's presidential elections.

President Bill Clinton, who broke with his party's union-pandering trade posture, championed free trade and won approval of the North American Free Trade Agreement over bitter opposition from Democratic leaders in Congress.

But Hillary Clinton has made it clear that she is not gung-ho about the NAFTA deal her husband implemented and isn't crazy about negotiating future trade agreements that would anger union bosses who play an influential role in her campaign and her policies.

"I said for many years that NAFTA and the way it's been implemented has hurt a lot of American workers," she said at an AFL-CIO presidential candidates forum in Chicago, Ill., on Aug. 7.

"We just can't keep doing what we did (on trade) in the 20th century," she said in a March interview.

It was a clear flip-flop by the New York senator who had promoted her husband's trade agenda for years. But now she "is moving away from her husband's policies by opposing a trade deal with South Korea and raising questions about NAFTA," said Bloomberg financial news service.

Her change of heart on the pivotal trade issue raised suspicions that support from organized labor came at a price of switching positions, one that she is willing to pay to nail down the Democratic nomination with Big Labor's political clout and money.

But the fear-mongering demagoguery of the left's anti-trade forces has been steadily losing ground as evidence mounts that trade expansion has strengthened the U.S. economy by expanding U.S. markets abroad.

"U.S. exports are now at a historically high level and contribute strongly to the growth of America's gross domestic product," Commerce Secretary Carlos Gutierrez said last week after the Peru FTA legislation cleared Ways and Means.

The U.S. economy, as measured by its GDP, grew at a phenomenal 3.9 percent in the summer's third quarter, and one-fourth of that growth came from trade, Gutierrez said.

"This agreement levels the playing field for American businesses and workers. Congress already allows 98 percent of imports from Peru to enter the United States duty-free, while U.S. exports to Peru currently face significant tariffs," he said.

The bottom line for these agreements: They expand opportunities to sell U.S. products in more markets, and that is good for U.S. workers and U.S. companies. They expand Latin American economies, too, providing jobs and reducing poverty. In 2005, small- to medium-sized U.S. businesses exported $7.4 billion in made-in-America products to six of Latin American FTA partners: Chile, the Dominican Republic, El Salvador, Guatemala, Honduras and Nicaragua.

Last year, U.S. exports under the U.S./Central America-Dominican Republic FTA, known as CAFTA, hit $19.6 billion.

Anti-trade fanatics have attacked free trade as a zero-sum deal for the United States, arguing that imports have cost us jobs and stagnated or reduced real wages.

But a study by Daniel Griswold, who directs the Cato Institute's Center for Trade Policy Studies, shows that increased trade "has delivered better jobs and higher living standards for American workers." His chief findings:

-- Trade has "had no discernible negative effect on the number of jobs in the U.S. economy," which is at full employment, with 16.5 million more people working today than 10 years ago.

-- Average real hourly compensation, including benefits, has risen by 22 percent and median household income has increased 6 percent in the last decade.

-- A net loss of 3.3 million manufacturing jobs, largely owing to technology, has been offset in the past decade by a net gain of 11.6 million jobs in other sectors "where the average wage is higher than in manufacturing. Two-thirds of the net new jobs created since 1997 are in sectors where workers earn more than in manufacturing."

His conclusion: "The large majority of Americans, including the typical middle-class family, is measurably better off today after a decade of healthy trade expansion."

And we will continue to be better off decades from now as long as we keep expanding trade with emerging consumer markets in a booming global economy.