Trade liberalization has come under heavy fire from the left this campaign season. John Edwards — erroneously claiming a million American jobs have been lost because of the North American Free Trade Agreement — wants out of the agreement. Hillary Clinton has also apparently cooled on it since her First Lady-dom and is even proposing a general moratorium on free trade agreements. Of course, the opposition — Giuliani, Romney and other Republicans not named Ron Paul — thinks FTAs are just swell. The result is the trade debate has narrowed to a single question: Are FTAs and liberalization desirable or not?
It's not the right question, though. I don't think there's a choice besides the affirmative if we want to stay economically competitive, though the pace with which we should proceed is debatable. Yet Democratic concerns that our current system of trade increases disparity and unfairly burdens the blue-collared and their families are valid. So what's a Dem to do?
The problem lies in the way we tend to view trade as a sort of untamable beast; if we are crazy enough to open our house to it, we have to accept any damage that follows. In reality though, liberalized trade is easily domesticated by smart domestic policies. If the past 50 years of political economic history have shown anything, it is that liberalization affects countries in very different ways according to their guidance of investment, distribution of gains and a host of other factors.
Considering this, I propose a new trade question for 2008. Liberalization is going to continue, and it is foolhardy to pretend otherwise, so what can we do to make sure it benefits all classes?
If I may have a drum roll, please: Here are three answers, bold ideas for the Democratic candidate who wishes to sophisticate the trade debate.
A more progressive tax code
The United States' tax scheme hits the poor far more heavily than most European states of similar per capita income. Freeing trade and capital gives the advantage to capitalists over labor — it is much easier to transfer your money to the ideal investment opportunity than to move to the optimal work location. So, unless trickledown suddenly starts to work, we should seek to rectify this imbalance.
A more progressive tax code is a way to redistribute trade gains from our glut of exorbitantly compensated CEOs and investment bankers to lower- and middle-class families that doesn't distort trade — unlike, say, a higher minimum wage, it doesn't itself affect our nation's trade competitiveness.
Changing the code while simultaneously pursuing trade liberalization might allow us to drastically cut taxes for the lower- and middle-class people who need money to pay the bills, not a new beach house. Progressive tax reform is a necessary concession to labor as we continue to dismantle trade barriers.
More stringent labor codes in free trade agreements and a commitment to enforce them
As tariffs and other trade barriers tumble across the globe, the only means a country has for increasing its industries' competitiveness is to decrease costs. This creates a natural incentive for countries and companies to cut labor protections such as health standards, overtime and collective bargaining rights in order to gain a competitive advantage.
Since NAFTA, the United States has included clauses of variable stringency that obligate FTA partners to respect certain labor standards, but they have almost always been poorly enforced, especially during the Bush administration. Cutting labor protections is not in the spirit of free trade and should be treated as an unacceptable trade distortion. The government is far more active in ensuring investor and intellectual property rights are respected in FTAs than it is in ensuring labor rights are respected. The next president should include strict labor clauses in free trade agreements and allocate enough resources to enforce them as well as they do other stipulations (Barack Obama has expressed some desire to implement stricter FTA labor provisions — kudos to him).
Better, more extensive job retraining services
The U.S.'s Trade Adjustment Assistance offers retraining and job placement programs for manufacturing workers whose posts were casualties in the trade war. Yet it inexplicably does not cover the service sector, from which IT jobs are hemorrhaging to the subcontinent. It also seems illogical to favor employees who lose jobs to trade over those who lose them for other reasons, such as changes in technology.
A better course of action would be to emulate Denmark's excellent "flexicurity" model of employment, in which job security protections are reduced in favor of universally available retraining and placement services as well as social security. To allow employers such flexibility is a ticket to a responsive, dynamic and highly competitive economy that can adjust in step with the increasingly quick and complex demands of a globalized world.
Workers, in turn, can take solace in the fact that they will be provided for as jobs are created and destroyed, whether by the demands of trade or for other reasons, and will benefit from the increased demand for labor their mobility will propel. I know what you're thinking — this may be too Scandinavian for our national taste. It is worth considering, though.
This certainly isn't an exhaustive list, but I hope that it encourages some critical thought on the issue and perhaps some even better proposals. As a general principle, a socially conscious model of liberalization is both feasible and worthy of the Democratic Party's pursuit.
John Sprangers ([email protected]) is a senior majoring in political science and international studies.
