Making Trade Work for Working Americans


Here is a clear and powerful answer to the present-day dilemma of international trade pacts which, while being strongly promoted by the business world, have caused such havoc among American working men. William A. Galston, writing for October 26 Wall Street Journal Opinion Section, explores what he rightly considers the most serious challenge for the world economy today: making globalization compatible with social and political stability.

By WILLIAM A. GALSTON, Oct. 25, 2016

In 1997, Harvard economist Dani Rodrik published a prescient book titled “Has Globalization Gone Too Far?” At that time, recall, the “Washington consensus” about the path to prosperity—free trade, free flows of capital, deregulation, and so forth—was riding high. The U.S. economy was booming, jobs were plentiful, and wages were rising across the board. Hundreds of millions of workers in Asia and the European states no longer dominated by the former Soviet Union were on track to integration in the global market.

Despite all this good news, Mr. Rodrik detected a structural problem. Globalization, he wrote, “is exposing a deep fault line between groups who have the skills and mobility to flourish in global markets and those who either don’t have these advantages or perceive the expansion of unregulated markets as inimical to social stability and deeply held norms.” From this diagnosis, he drew a prescription for political leaders: “The most serious challenge for the world economy in the years ahead lies in making globalization compatible with domestic social and political stability” or, more bluntly, “in ensuring that international economic integration does not contribute to domestic social disintegration.”

Mr. Rodrik didn’t oppose globalization 20 years ago, and he doesn’t today. In an article published this month by Project Syndicate, he argued that “we need a better balance between national autonomy and globalization.” This implies, he continued, a better understanding of the relation between economics and politics: “we need to place the requirements of liberal democracy ahead of those of international trade and investment.”

This doesn’t mean surrendering to brain-dead populism, or to the nativism and illiberal authoritarianism that so often accompanies it. Rather, it means coming up with responsible alternatives to both hyperglobalization and the populism it spawns. It may mean adopting policies that corporations oppose in order to broaden public support for an international market economy.

If the established center-left and center-right parties cannot identify and implement these alternatives, they are doomed to irrelevance, and the outlook for market democracies will be dismal.

Hillary Clinton has said that she opposes the current Trans-Pacific Partnership (TPP) as a candidate and would do so as president. We should take her at her word; the American people certainly have. Reversing course on an issue of such importance would destroy her presidency, much as George H.W. Bush’s abandonment of his “Read my lips: no new taxes” pledge undermined his support within his own party. Unless the TPP is endorsed during the lame-duck congressional session, it is dead, at least in its current form.

This need not mean abandoning the good work that the trade representatives from a dozen nations have accomplished over years of painstaking negotiation. Nor need it mean accepting the huge blow to U.S. geopolitical influence in Asia that an outright collapse of this effort would entail.

Instead, it would mean going back to the negotiating table with a focused agenda of modifications that would make the TPP compatible with the interests of working Americans while strengthening the beleaguered pro-trade coalition. Modifying restrictions on national sovereignty such as special panels for settling disputes between governments and investors would be a good start; so would more robust protections against currency manipulation.

In addition, the next administration must be visibly on offense against violations of existing agreements. Foreign governments should not be allowed to subsidize structural overcapacity and force U.S. workers and firms to bear the consequences.

But before any new trade agreements can be approved, the next administration will have to persuade Congress to enact significant new protections for working Americans. Since 2000, millions have lost manufacturing jobs paying $25 per hour plus health and retirement benefits and can replace them only with service-sector jobs without benefits and paying half as much.

To cushion the shock, we need a contributory system of wage insurance that would replace a substantial portion of lost wages during a multiyear transition period. We should also make it possible for affected workers to remain on track for decent retirements, through mechanisms such as public contributions to personal accounts.

Many supporters of the postwar international order fear we are retreating to the economic nationalism that undermined prosperity, democracy and peace during the interwar period. To prevent this disaster, we need a new balance between workers and corporations, between national sovereignty and international institutions—and between market forces and the requisites of democratic stability.

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