Free trade has fallen on hard times in America. With commentators such as CNN's Lou Dobbs promoting protectionism and liberal politicians pandering to Big Labor, the tide has clearly turned.
The U.S. has enjoyed years of economic growth resulting from liberalized trade. Since the late 1990s, gross domestic product has increased nearly 40 percent, and jobs have grown by 13 percent. Now, however, repeated attacks on free trade -- mostly from liberal politicians, but some from conservative quarters as well -- threaten significant economic damage.
At a time when the world is becoming smaller every day, it seems only logical to tear down walls rather than build new ones. But legislation making its way through Congress would erect new barriers, costing the U.S. government millions and doing American workers no favors.
The Trade and Globalization Assistance Act was supposed to be a modest patch to the Trade Adjustment Assistance job-training program administered by the Department of Labor since 1962. This program helps workers who wind up losing their jobs due to trade pacts get the training they need to find new jobs. But thanks in part to the clout of unions, House Ways and Means Chairman Charlie Rangel (D-N.Y.) has turned the measure into a boon for Big Labor and an assault on free trade. The legislation prompted a strongly worded veto threat from the White House, citing both the high cost and vast scope of the bill as reasons for rejecting the measure.
Doubtless the administration is doubly disappointed with the current bill because it was originally intended to renew the president's Trade Promotion Authority (which expired June 30) in return for the modest “patch.” However the TPA renewal is no longer in the mix. In its stead are provisions that help the administration advance only one trade deal: the Peru Free Trade Agreement. The House approved that pact on Thursday, 285-132. But similar deals with Colombia, Panama and South Korea are languishing without any sign they'll win congressional approval.
How did the administration get stuck with such a bad deal? Growing hostility toward free trade has prompted many Democrats who espoused trade liberalization during the Clinton administration to question whether deals such as the North American Free Trade Agreement (NAFTA) are good for the United States.
Those attitudes are fueled largely by political pressure from Big Labor. Despite a sound U.S. economy and historically low unemployment rate of 4.7 percent, liberals have swallowed the union-made Kool-Aid and embraced the claim that free trade hurts the middle class. In fact, the contrary is true. Research from the Institute for International Economics shows that the typical (middle class) family of four saves around $10,000 per year, thanks to the lower tariffs that result from free trade. And there’s a bonus. Because their money goes further due to trade-lowered pricing, families are able to buy more, triggering economic growth and creating new jobs.
Yet despite the well-known benefits of free trade, Rangel and about 40 co-sponsors were able to ram their Trade and Globalization Assistance Act through the House with little resistance. Rather than reform the current program, the new initiative makes it worse by expanding it and giving the government an even greater role.
One of the biggest flaws of the Rangel bill is its expansion of the nanny state. The current program offers trade-displaced workers job training and unemployment benefits for two full two years. The Rangel bill would let some workers stay out of the workforce for up to three years, collecting taxpayer-funded unemployment benefits all the while. (Older workers could qualify for cash handouts if they take a lower-paying job.)
It's unclear how displaced workers will benefit from taking a three-year hiatus from real-life work experience, but that's exactly the approach favored by many “progressives.” An alternative, advocated by Rep. Jim McCrery (R-La.), takes an "earn and learn" approach that allows workers to hold a full-time or part-time job and receive training simultaneously, using the same logic as nighttime higher-education classes for full-time workers. McCrery’s bill also attempts to streamline operations at the U.S. Department of Labor so that it is reoriented to provide workers with the services they desire instead of the services favored by Washington bureaucrats.
No one in Congress argues that the government should “abandon” American workers. But given the relatively minimal number of jobs displaced by international trade each year -- loosely estimated at only 3 percent of all jobs lost in any given year -- Rangel's extravagant plan to expand the job-training program to service workers makes little sense. The administration estimates this expansion would instantly increase eligibility for the program by at least 30 percent.
American workers in all segments of the economy face far greater challenges than free trade. To name just two, there’s the need to keep up with new technologies and to identify and respond to changes in consumer behavior. Those challenges are hard.
But politicians vastly prefer easy targets to hard challenges, and the unions have made free trade an easy -- albeit inappropriate -- target.