U.S. Democrats and trade

Hillary Clinton and Barack Obama both claim to be ready to be president on "day one." But on the campaign trail, both are pandering to organised labour and other antitrade activists on the left, says Rod Hunter, an adjunct fellow at the Hudson Institute.

It is true that there is a lot of churning as jobs are destroyed, but even more are created as firms enter, exit or are resized in a dynamic economy:

In 2004, the Federal Reserve pointed out that about 15 million jobs were lost and 17 million created each year – an annual net creation of nearly two million jobs.

What's more, only about 2.5 per cent of the jobs lost were a result of import competition; the vast majority of jobs lost were caused by changes in consumer tastes, domestic competition, and technology.

Trade is a central reason why American workers are among the world's most productive and prosperous, says Hunter. Trade deals are also important for non-economic reasons, because they have foreign policy implications:

Not ratifying a trade deal with South Korea – as both Democratic presidential candidates have indicated – would send a troubling signal that the United States is uninterested in supporting an ally at a time when our friends in the region are worried about an ascendant China.

The same is true of a trade deal with Colombia – a stalwart ally in the drug war and essential to neutralising Hugo Chávez's Venezuela.

Rather than trying to shut the world out, the next administration needs to pursue the domestic reforms necessary to ensure that American workers can thrive in the knowledge economy, says Hunter. These include shoring up the education system, clearing obstacles to worker mobility by making health care and pensions portable, and replacing the hodgepodge of displaced-worker assistance programmes with a single support, training and relocation system.

Source: Rod Hunter, The Democrats and Trade, Wall Street Journal, March 6, 2008.

For text: http://online.wsj.com/article/SB120476777654215353.html

For more on Trade Issues: http://www.ncpa.org/sub/dpd/index.php?Article_Category=42

FMF Policy Bulletin/ 11 March 2008