Clinton and Obama's Protectionism Won't Help U.S. Workers
Senator Clinton wants to halt all new trade agreements and strictly enforce existing agreements, including the North America Free Trade Agreement (NAFTA).
Senator Obama blames "politicians in Washington" for signing trade agreements that he says are bad for the economy because they provide perks for businesses but don't protect workers. (Source: IHT, Clinton and Obama address economic fears, February 18, 2008)
There are two fallacies with these arguments:
- Job outsourcing is a result of declining U.S. competitiveness, not free trade agreements. Declining U.S. competitiveness is a result of decades of the U.S. not investing in education. This is particularly true for high tech, engineering, and science.
- Free trade agreements do more to help the U.S. economy than hurt it. That's because increased trade opens new markets for businesses to sell their products. For example, NAFTA increased trade from $297 billion to $810 billion. The Peterson Institute for International Economics estimates that ending all trade barriers would increase U.S. income by $500 billion. (See Pros and Cons of Free Trade Agreements)
Free trade creates more jobs than it outsources. For example, the formation of the European Union free trade area created 300,000–900,000 net new jobs. In the U.S, 1.3 million export-related jobs were created between 1994 and 1998. (Source: World Trade Organization, Benefits of Free Trade)
Increasing U.S. protectionism will further slow economic growth and cause more layoffs, not less. If the U.S. regresses and closes its borders, other countries will do the same. This could cause layoffs among the 12 million U.S. workers who owe their jobs to exports.
Comments
Could you comment, please, on the effects of US government-subsidized agricultural products being shipped out to developing nations? If we consider general well-being rather than just our own, is our current implementation of free trade still useful?
Hi Patrick,
Of course, your point is well-taken. Other countries’ concerns about the subsidies to U.S. and EU agribusiness is what effectively killed the Doha round of WTO trade talks. The subsidies mean that U.S. food is cheaper than local farmers can produce in their own countries, essentially putting them out of business.
Kimberly
I cannot totally agree with the first argument you made that outsourcing is a result of declining U.S. competitiveness. The jobs that people say are being outsourced overseas are mainly those that don’t have much added values and don’t require advanced knowledge and technologies. Those are the kinds of jobs that low-wage workers in China, Mexico and other developing countries can relatively easily learn. Although I agree with you that U.S. needs to put more emphasis on education, especially technology, to maintain its economic strength, the high added value jobs are still mostly done in workers of the U.S..
The free flow of goods across political boundaries is essential to a healthy overall economy. This principle applies on a large scale to countries of the world, just as it applies on a smaller scale, for example, to states within the U.S.A.. States don’t find it necessary to impose import restrictions on goods from other states because of a strong central governing body (the U.S. federal government) that assures fair competition, product safety, and controls criminal behavior through a comprehensive framework of rules coupled with strong enforcement. Internationally, there is no equivalent governing body, therefore, its up to organizations like the WTO to provide overall coordination, and a means of dispute resolution where the interests of member countries conflict. Bottom line… its a world economy & trying to change a level playing so that its tilted in favor of US industry will only hinder growth.
I disagree entirely with the two premises:
(1) You ignore the fact that a software engineer in India making $10k per year is much more attractive to an employer than an American making an average $80k per year. Therefore the software jobs go overseas. This is why outsourcing works so well for companies based in America.
(2) What has happened to American industries as a result of free trade? They have all moved overseas. Why? Because we have removed tariffs from the equation. A factory in China can pay it’s workers $1 per day and then ship their product to America for huge profits. American factories can’t compete with this under the yolk of “free trade”. Bring back tariffs, yes bring back protectionism, and then we’ll see the American industry reborn in this country.
Sure some countries might start a trade war against us and we won’t be getting goods from that country as a result. But the greater reward is that we will have jobs in this country manufacturing goods that we can use and not useless junk from China.