Trade a Win-Win for U.S. Economy

Posted: Apr 10, 2008 12:01 AM
Trade a Win-Win for U.S. Economy

WASHINGTON -- The Democrats' blistering attack on trade has turned it into one of the most inflammatory economic issues of the 2008 election. Ironically, though, its benefits are defended by some of their party leaders and advisers.

Take Hillary Clinton's former chief campaign strategist, Mark Penn, who lost his job in her campaign last week when she discovered he was secretly meeting with government officials to promote the Colombian free-trade agreement now before Congress.

Penn, a former adviser to President Clinton, was wearing his other hat as worldwide CEO of Burson-Marsteller when he met with the ambassador to Colombia, which was paying his lobbying firm $300,000 to promote the trade deal on Capitol Hill. A centrist Democrat, Penn has earned a lot of enemies in the Clinton campaign, but this issue was dear to his heart. He says free trade is good for the economy and good for the countries we trade with.

That was President Clinton's position too, when Penn worked for him as a pollster and campaign strategist, and as far as anyone knows, it's still the former president's belief. He passed the North American Free Trade Agreement through Congress and called for similar free-trade agreements elsewhere in Latin America.

Since the Clinton years, Penn has polled for the Democratic Leadership Council, which Bill Clinton chaired and which strongly supports free trade as the best means to lift Third World countries out of poverty and to open up new markets for American exports.

Hillary also supported NAFTA, and she is on record as saying that it was one of her husband's greatest accomplishments. But organized labor told her that the price for its support in her bid for the presidency was to oppose and work against NAFTA and any other free-trade deals. She eagerly paid that price, and Penn lost his campaign job in the process.

Barack Obama ran into some trade trouble too, earlier this year, when his economic adviser, University of Chicago Professor Austan Goolsbee, was caught briefing a group of worried Canadian envoys who feared that Obama's growing anti-trade rhetoric meant he would turn against NAFTA, a critical part of Canada's economy.

Goolsbee allegedly told them not to worry because Obama's rhetoric was more for political consumption and did not reflect his support for bilateral trade agreements. The professor says he was misinterpreted, but conversations I have had with him in the past revealed an adviser who sought to portray Obama as more pro-growth, pro-capital investment and pro-trade than his leftist tax-and-spend-and-regulate rhetoric and voting record suggests.

Trade has become an intensely unpopular issue with voters who are worried about rising unemployment, and Democrats believe they can win on this issue by connecting it to job losses.

But there are good reasons why it may not be the Democrats' key to winning back the White House.

Opposition to trade is "pervasive and crosses party lines," says Robert Litan, senior fellow of economic studies at the Brookings Institution.

But Litan also told me that "trade is wildly exaggerated by politicians as a cause of job losses. The overwhelming verdict of economic studies of job losses is that it is attributed to non-trade reasons, including technological changes, increased productivity and fluctuations in the economy.

"Virtually every respective study of job loss finds that trade is a minor factor in job loss for the economy as a whole," he said. Even in economic good times, "one-fifth of all jobs turn over every year. Maybe trade affects 50,000 jobs, but roughly 20 million to 30 million jobs are turning over each year" as workers leave jobs and find work elsewhere, Litan said.

Technological advances, which allow us to make products with fewer workers at less cost, have revolutionized manufacturing. It is largely the reason that factory jobs have declined in recent decades, not trade. We make more and sell more products ($1.6 trillion a year in exports alone), which is why we are the biggest economy in the world.

Democrats are trying to turn the trade issue to their advantage, and this time both Clinton and Obama are proposing that the United States pull back from NAFTA and other trade deals, which would be disastrous for our economy and would not create a single job. Indeed, we'd lose jobs as our export market share shrinks instead of grows.

Al Gore and John Kerry ran against trade in their presidential bids. Both lost. The last Democrat to win on trade was Bill Clinton, and he promoted it as win-win for our economy.

"The fact is that anti-trade rhetoric used by Hillary Clinton and Obama is inconsistent with the views of most professional economists," says Kevin Hassett, an economist with the American Enterprise Institute.

"Most Americans gain from trade. Their employers sell more because exports are up a lot. Their homes are filled with consumer goods from other nations, like Sony television sets," Hassett said.

There is one worrying sign. Republicans seem to have lost the ability to craft the political arguments needed to blunt the Democrats' protectionist demagoguery. That's why the Colombian trade agreement's prospects are bleak right now.