Getting Over the Fear of Free Trade

I am the first to admit that globalization does not make everyone a winner. The challenge ahead for all policy makers, whether in the United States or elsewhere, is simple.

Unless we can convince people that trade is the best tool we have to raise living standards and to assist those who get hurt, we risk losing the consensus favoring open markets that is the bedrock of prosperity.

In essence, we will damage the U.S. and global economies if we continue to permit trade to be held hostage to a growing list of non-trade issues.

To stop that means we must deal with the growing fear of globalization. The question is how to go about that. I believe that in the United States we need to take action in several areas — right now.

In this regard, what could be more instructive than the fact that in 1981, when the United States was in the midst of a recession, International Survey Research found that 12% of U.S. workers were fearful of losing their job.

In 2000, the same organization reported that fear of job loss had more than tripled. Unemployment, of course, had meanwhile declined from well over 7% in 1981 to just 4% last year.

In order to counter these growing worries, every U.S. company — large and small — needs to invest the time to make its employees aware that trade creates far more jobs than it puts at risk.

People also need to be aware that export-sector jobs pay better wages, provide greater benefits and offer more security than others.

This effort should command the CEO’s attention at every company, ranking right up there on the priority list with efforts to enhance productivity and return-on-investment.

These company-based efforts should include education about the World Trade Organization (WTO) — explaining that it plays a vital role in establishing and enforcing the trade rules that keep our economy humming.

Misunderstandings about the Geneva-based organization are as widespread in the United States as they are elsewhere. It is not true, as has been suggested, that the WTO has power to override U.S. domestic laws.

In fact, the WTO neither has the power nor the authority to impose sanctions or change U.S. laws. Rather, it is a treaty-based organization whose power derives from the voluntary commitments of nations to WTO rules.

As such, it serves as a forum for trade negotiations, for administering WTO trade agreements and for handling trade disputes.

Second, U.S. corporations ought to take more aggressive action to move people up the skills ladder, thereby assuring them of higher pay and better benefits.

Displacement that results from globalization can cause serious pain, but protecting lower-skill jobs is not the answer. Nor is putting a hold on new trade agreements.

For its part, the U.S. government should encourage such efforts by enacting the Affordable Education Act, which during the last Congress passed the U.S. Senate, but was never taken up by the U.S. House of Representatives. This Act permanently exempts tuition reimbursements from the employees’ taxable income.

Finally, we could explore the concept of wage insurance to supplement the incomes of displaced workers who take a job in a different, but more promising, sector at lower pay.

This would encourage them to stay in the work force (saving unemployment insurance). It would also provide them with training in a new area of work.

The key goal of all these ideas, as unconventional as they may seem at first, especially to the U.S. business community or the Republican Party, is straightforward.

It is to educate and motivate more Americans to stand up in defense of open markets lest we lose the benefits that come from the free flow of ideas, capital and goods.