Kristin Sampson, Senior Research Associate of the Engendering Economic and Social Policy project - December 08, 2006.

International trade issues have frequently emerged as a topic in recent Washington Post editorials. Last week, Robert J. Samuelson in his editorial “’Fair Trade' Foolishness” argued that “In the name of “fair trade,” we may punish our own exporters.” Samuelson goes on to suggest that opposition by Democratic leaders to the pending free trade agreements with Colombia and Peru signifies “trade obstructionism.” The basic crux of his argument is that the indictment against free trade is largely wrong and that now is precisely the time for the U.S. to be involved in trade negotiations to expand export markets.

Samuelson’s analysis and reasoning are a sleight-of-hand exercise in factual manipulation and omission that would make any magician proud:

* Yes, “from 1980 to 2006, the trade deficit jumped from $19 billion to an estimated $786 billion, or from less than 1 percent of gross domestic product to about 6 percent.” But, as a study by the Economic Policy Institute points out, during that time the trade deficit fluctuated. After climbing to around2.5% of GDP in 1986 it began to decline until reaching around 0% in 1992. NAFTA went into effect in 1994 and the WTO in 1995 – right around the time that we began to see a much sharper increase in the trade deficit as a percent of GDP – reaching around 6% in 2006. Many factors contribute to a trade deficit or surplus, but we can’t ignore the role of trade liberalization.
* Yes, “employment in the same period rose from 99 million to 145 million,” and “Every three months, 7 million to 8 million U.S. jobs disappear and roughly an equal or greater number are created.” But, this assumes that all jobs are equal and the reality is that they are not. The jobs being created are overwhelmingly in the services sector which pays less and offers fewer benefits than manufacturing. A manufacturing or skilled services job paying $17/hour plus benefits is NOT the same as a minimum wage retail job. To properly analyze the benefits and costs of trade liberalization, we can’t ignore these details.
* Some U.S. exporters may benefit from these trade agreements. Of course, this assumes that they offer a product of interest to consumers in the importing country, which they may or may not, and that consumers can afford to buy it. More importantly though, free trade agreements cover much more than market access (lowering and eliminating tariffs in other nations) which is what would be of interest to exporters. They lower U.S. tariffs as well, and are therefore of interest to workers and companies that would have to compete with imported goods. The same holds true for our trading partners.

“Free Trade” is not as simple as Samuelson portrays. FTA’s cover a host of issues that profoundly impact the flow of goods and services, access to those goods and services, job prospects, the functioning of democratic governments, and shared resources like the environment. For example, FTAs also cover:

* Investment – Establishes rules on who gets to set up a business in the country and what rules they must follow;
* Services – Establishes rules on who gets to sell services in a country and how they will or will not be regulated;
* Government Procurement – Sets out the criteria by which the government will determine from whom to buy goods and services;
* Intellectual Property – Usually extends patent lives and establishes stronger enforcement.

The impacts on the economies and societies of our trading partners can be even more severe, especially if they are a developing country with many people living in poverty. Are more jobs being lost than created? Are the jobs created able to support a family and allow them to move out of poverty? When for-profit companies begin offering services-like electricity or telecommunications-are the poor and those in remote areas being left out? When patents are strengthened (which keeps prices high), particularly on medicines and agricultural inputs like seeds, are the poor effectively denied access to
life-saving medicines and vital agricultural inputs?

It’s a complicated picture, and Samuelson’s over-simplification of the situation adds nothing to the debate over how to address the reality that every free trade agreement creates winners and losers in the U.S. and among the citizens of our trading partners. Criticizing “free trade” is not to be obstructionist, but to be seeking more just and equitable trade rules for all.