The survival of free trade

The ghosts of Adam Smith, David Ricardo and other great economists must be looking on in shock and horror. The United States — the world’s leading force for free trade and open markets in the post-WWII era — seems to have lost confidence in the invisible hand of the marketplace, at least when it comes to trading with the rest of the world.

Consider these developments: Congress recently decided to suspend consideration of a free trade agreement with Colombia; two other FTAs with South Korea and Panama face a similar uncertain future. The all-but-certain Democratic nominee for president, Illinois Sen. Barack Obama, has argued for withdrawing from the North American Free Trade Agreement — a signature achievement of the last Democratic president, Bill Clinton. Finally, recent polling from Gallup and Pew Research suggests that Americans now have grave doubts about the desirability of free trade and globalization.

As ominous as this list of recent news seems, the United States is not likely on the brink of a hopeless retreat into protectionism. All of these developments suggest only that the American political system is searching for answers to the challenges of globalization. The often-extolled benefits of free trade and open markets — greater consumer choice, lower prices through competition, and others — are certainly real.  But the United States is lagging badly in developing a safety net to ensure that the average American can actually benefit from free trade.

The outlook for free trade is certainly not completely bleak. The United States has ratified new FTAs with a number of important trading partners in the last eight years, including Australia, Singapore and Chile.

Although there is constant and understandable criticism of China’s trade practices, there is no serious consideration of raising major new trade barriers to all imports.

It is possible that the FTAs now pending in Congress will not be approved in the near term, but each is stranded more because of unique bilateral issues rather than a rejection of the merits of global commerce.

Without a doubt, part of the problem facing these agreements is that their negotiator — President Bush — is deeply unpopular in Congress. It is possible that the next president — whoever he may be — may find a way to complete work on these three important trade agreements.

It is also likely — as he as much as conceded in recent interviews — that Obama, should he be elected president, could find a way to rework NAFTA rather than simply abandon the cornerstone of trade with the United States’s largest trading partners.

But all that should not lull observers into the assumption that free trade will continue on its merry way after the 2008 election. The public has lost confidence in the premise that free trade will inevitably rebound to their personal economic benefit. Years of exaggerating benefits and a frequent failure of advocates to acknowledge that globalization has costs as well as benefits have left average Americans skeptical about the case for free trade.

A good part of restoring that public confidence — and with it a political consensus in support of free trade — can only be addressed through “big picture” changes, like expanded availability of healthcare, which can only increase public confidence in the competitive global marketplace.

But there is also a failure of the only federal program aimed directly at solving the problem at the heart of popular concern. The Trade Adjustment Assistance program was allowed to expire at the end of 2007, though it continues operation through stopgap funding. Since 1962, TAA has offered American workers who might lose their jobs because of trade the prospect of being offered opportunities to retrain for new careers while getting income support and healthcare for themselves and their families.   This year Congress and the Bush administration have been discussing reviving TAA, perhaps even in expanded form, but to this point an agreement has been elusive because of election-year maneuvering.

Even a revitalized and expanded TAA program would not relieve all of Americans’ lingering anxiety about free trade and globalization. The challenges are real and — though globalization will certainly bring winners — it will also certainly have losers. That prospect is sobering under the best of circumstances, and if Americans’ government is so callous as to allow the primary program that provides a small measure of protection to workers to expire, their skepticism on the benefits of trade that David Ricardo laid out two centuries ago is understandable.

Mastel is a senior adviser to the Trade Adjustment Assistance Coalition, a nonprofit group. He is also a senior adviser at Akin Gump Strauss Hauer & Feld, a Washington law firm.