Economy in Crisis
FOR decades, free-trade agreements, called F.T.A.s, have been one of the most solid planks in the platform of economic elites and establishment politicians. True, the occasional political candidate like Ross Perot argued against one deal or another and even President Obama ran on “renegotiating” the North American Free Trade Agreement, but once elected, presidents of both parties sought and ratified trade deals with a wide variety of countries.
Those days may well be over. What changed?
For one thing, the economic populism of the presidential campaign has forced the recognition that expanded trade is a double-edged sword. The defense of globalization rests on viewing Americans primarily as consumers, not workers, based on the assumption that we care more about low prices than about low wages.
It is unquestionable that expanded trade has vastly increased the supply of goods and services and has thus contributed to lower costs for consumers. But basic trade theory connects prices to wages, and in the United States, globalization is widely accepted as a contributor to both wage stagnation and the growth in inequality. For example, the real wage for blue-collar manufacturing workers in the United States is essentially unchanged over the past 35 years, while productivity in the sector is up more than 200 percent.
We should no longer buy the statistically strained arguments about F.T.A.s delivering growth and jobs. The evidence just isn’t there, a fact not lost on those campaigning for president.
Second, various countries with whom we compete have historically managed their currencies to gain a price advantage (i.e., they keep their currency low to boost their exports to us and suppress ours to them), and this has long been a source of our persistently large trade deficits.
Third, the F.T.A. process has been captured by investors and corporate interests. According to The Washington Post, 85 percent of the members of the outside committees advising the administration on the proposed Trans-Pacific Partnership were from private businesses and trade associations (the rest were from labor unions, NGOs, academics and other levels of government).