Is free trade good or bad for America? The answer to this economic question was once clear: Free trade benefits Americans because it allows us to peddle an increasing volume of goods and services to foreign nations while taking advantage of the best quality and lowest prices that the rest of the world can supply.
Yet both the question and the answer have become muddied in recent years by a growing suspicion on the part of ordinary Americans that trade, coupled with technology, is allowing businesses to send more and more jobs overseas to places like Bangalore and Shanghai.
To be sure, direct losses due to so-called offshoring are not thought to be substantial. Solid data are not available and estimates vary widely, from 100,000 to as many as 400,000 jobs, but most economists agree that only a small percentage of the 900,000 or so net jobs lost during the Bush administration were shipped abroad. According to the Bureau of Labor Statistics, overseas job relocations accounted for less than 2 percent of nonfarm job losses in the first quarter of 2004. "Offshoring hasn't amounted to a hill of beans so far," says Bill Dickens, a senior fellow at the Brookings Institution. The lion's share of U.S. job losses, he says, have been the result of macroeconomic factors such as high productivity growth, which allows businesses to produce the same with fewer employees.
Nevertheless, the offshoring issue—a hot button for many voters in swing states like Michigan and Pennsylvania—has pushed trade into the spotlight this presidential election. President Bush and Democratic candidate John Kerry are at odds on the issue but, interestingly, not so much with each other but with themselves. Where each man stands on the issue depends on whether he is judged on his actions or his rhetoric.
The Bush administration portrays itself as a champion of free trade, and can cite evidence to support that contention. Bush won congressional authority, which lapsed under Clinton, to negotiate trade deals, and has signed free trade agreements with Jordan, Singapore, Chile, Australia, and Morocco. Agreements with 16 other nations are in various stages of negotiation or enactment. Many of the deals are with small nations and will have little impact on the giant U.S. economy, but the sentiment is right, say trade advocates, and may prod or open the door to larger multilateral agreements.
Yet the president has on occasion allowed politics to trump his ideals. He implemented steel tariffs to fulfill campaign promises to workers in the Midwest (he later lifted them), and signed a farm bill that increased trade-distorting subsidies.
According to his election platform, "President Bush rejects economic isolationism because he understands that free and fair trade and global economic growth means more jobs, higher wages, and greater prosperity for Americans." Bush's proposals include opening foreign markets, ensuring a "level playing field", and training American workers to compete internationally. The platform also mentions pushing for market-based exchange rates, which means pressuring China and Japan to end their practice of maintaining their currencies at artificially low levels. Those initiatives sound good but are extremely hard to implement, analysts say.
Kerry's voting record makes him at least as strong an advocate for free trade as Bush, according to a recent research paper by investment bank Goldman Sachs. During his two decades in the Senate he has supported virtually all free-trade legislation that's come his way, from the North American Free Trade Agreement to permanent normal trade relations with China, once a contentious issue. Indeed, according to the report, Kerry often went against his party on the issue of free trade.
Yet Kerry has sprinted left on trade during the campaign, partly to compete with protectionist minded candidates like Howard Dean, and partly to please constituents, especially labor unions. His platform speaks of "free and fair" trade and includes promises to hold trading partners to tough labor and environmental standards, which staunch free trade advocates interpret as protectionism.
Though it may be only campaign rhetoric, free traders fear that Kerry might be handcuffed by his words, or owe too much to anti-trade supporters. "Calling executives who utilize outsourcing 'Benedict Arnold CEOs' could put him in a tough place down the road," says economist and free trade advocate Jagdish Bhagwati.
A reelected Bush, on the other hand, might pursue free trade with abandon. "In a second term, relatively free of [political] pressures, we would expect the Bush administration to pursue a free trade agenda," says the Goldman Sachs report.
As for the costs of trade, a Kerry presidency would be more sensitive to them, says Jared Bernstein of the left-leaning Economic Policy Institute. "I see Kerry's policy set as crafted more carefully toward addressing those hurt by trade. You'd be hard pressed to find much like that in the Bush platform."
