The current Krugman article.
The Trade Tightrope
February 27, 2004
By PAUL KRUGMAN
You can't blame the Democrats for making the most of the
Bush administration's message malfunction on trade and
jobs. When the president's top economist suggests, even
hypothetically, considering hamburger-flipping a form of
manufacturing, it's a golden opportunity to accuse the
White House of being out of touch with the concerns of
working Americans. ("Will special sauce now be counted as a
durable good?" Representative John Dingell asks.) And the
accusation sticks, because it's true.
But the Democratic presidential candidates have to walk a
tightrope. To exploit the administration's vulnerability,
they must offer relief to threatened workers. But they also
have to avoid falling into destructive protectionism.
Let me spare you the usual economist's sermon on the
virtues of free trade, except to say this: although old
fallacies about international trade have been making a
comeback lately (yes, Senator Charles Schumer, that means
you), it is as true as ever that the U.S. economy would be
poorer and less productive if we turned our back on world
markets. Furthermore, if the United States were to turn
protectionist, other countries would follow. The result
would be a less hopeful, more dangerous world.
Yet it's bad economics to pretend that free trade is good
for everyone, all the time. "Trade often produces losers as
well as winners," declares the best-selling textbook in
international economics (by Maurice Obstfeld and yours
truly). The accelerated pace of globalization means more
losers as well as more winners; workers' fears that they
will lose their jobs to Chinese factories and Indian call
centers aren't irrational.
Addressing those fears isn't protectionist. On the
contrary, it's an essential part of any realistic political
strategy in support of world trade. That's why the Nelson
Report, a strongly free-trade newsletter on international
affairs, recently had kind words for John Kerry. It
suggested that he is basically a free trader who
understands that "without some kind of political safety
valve, Congress may yet be stampeded into protectionism,
which benefits no one."
Mr. Kerry's Wednesday speech on trade seemed consistent
with that interpretation. He decried the loss of jobs to
imports, but was careful not to promise too much. You might
say that he proposed speed bumps, rather than outright
barriers to outsourcing: rules requiring notice to
employees and government agencies before jobs are shifted
overseas, steps to close tax loopholes that encourage
offshore operations, more aggressive enforcement of
existing trade agreements, and a review of those agreements
with an eye toward seeking tougher labor and environmental
standards.
I don't see anything there that threatens to unravel the
world trading system. If anything, the question is whether
it provides enough of a "political safety valve."
The answer, I think, is yes - but only if those modest
measures on the trade front are combined with much bigger
changes in domestic policy.
First and foremost, we need more jobs. U.S. employment is
at least four million short of where it should be. Imports
and outsourcing didn't cause that shortfall, but if the job
gap doesn't start closing soon, protectionist pressures
will become irresistible.
Beyond that, we need to do much more to help workers who
lose their jobs. It didn't help the cause of free trade
when Republican leaders in Congress recently allowed
extended unemployment benefits to expire, even though
employment is lower and long-term unemployment higher than
when those benefits were introduced.
And in the longer run, we need universal health insurance.
Social justice aside, it would be a lot easier to make the
case for free trade and free markets in general if, like
every other major advanced country, we had a system in
which workers kept their health coverage even when they
happened to lose their jobs.
The point is that free trade is politically viable only if
it's backed by effective job creation measures and a strong
domestic social safety net. And that suggests that free
traders should be more worried by the prospect that the
policies of the current administration will continue than
by the possibility of a Democratic replacement.
Put it this way: there's a reason why the two U.S.
presidents who did the most to promote growth in world
trade were Franklin Roosevelt and Harry Truman, while the
two most protectionist presidents of the last 70 years have
been Ronald Reagan and, yes, George W. Bush.
E-mail:
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http://www.nytimes.com/2004/02/27/opinion/27KRUG.html?ex=1078888184&ei=1&en=c87381bbd0324a8f
