Jill on Money: Free trade: Good or bad for America?
Sunday, April 17, 2016

By Jill Schlesinger

Tribune Content Agency
 
There has been a lot of trash talk about U.S. trade policy this political season. Candidates Bernie Sanders and Donald Trump have led the rallying cries about how trade deals have killed U.S. jobs and upended the economy, which is a great way to incite disgruntled voters. However, as always, the facts are a bit murkier. 
 
  It is important to start this analysis with a brutal truth: Some U.S. industries and employees have been hammered by a trifecta of forces over the past three decades: globalization/lowered trade barriers, the technology revolution and a reduction in the power of unions to protect workers' wages. The combined effect of these long-term trends has amounted to a loss of jobs in some goods-producing sectors of the economy and wage stagnation for some in the middle class.
 
  Yes, trade is part of the equation, but it is not the whole story. Bureau of Labor Statistics research has found that the total number of manufacturing jobs peaked in 1979, 15 years before North American Free Trade Agreement (NAFTA) and more than 20 years before China became a member of the World Trade Organization in 2001, which opened that market more fully. So to blame a specific trade deal for the erosion of manufacturing sector employment omits the other factors at play and likely overstates the negative impact of trade deals on the labor market.
 
  That's why PolitiFact called into question a Bernie Sanders ad that refers to 850,000 jobs lost under NAFTA. Sanders cites that number from a report from the Economic Policy Institute, which gets about a quarter of its funding from unions. PolitiFact found other nonpartisan analyses, which concluded that NAFTA's influence was less dramatic. According to the Congressional Research Service: "NAFTA did not cause the huge job losses feared by the critics or the large economic gains predicted by supporters. The net overall effect of NAFTA on the U.S. economy appears to have been relatively modest." 
 
  Of course, that impact wasn't nominal if it was your job that vanished. Technological advances, globalization and free trade have combined to create losers and winners across the globe. Blue-collar American workers have been among the losers, while highly skilled ones were able to succeed. U.S. consumers have been winners, having enjoyed lower prices on imports. Perhaps the biggest winners have been the millions of workers in developing markets who have been lifted out of poverty.
 
  Economists and politicians may have overstated the benefits of trade deals and minimized the potential pitfalls, but one thing is clear: Even the hint of ripping up existing agreements has raised warning flags around the world. A report from the Economist Intelligence Unit listed a Donald Trump presidency as the sixth biggest risk to the global economy (tied with the rising threat of jihadi terrorism), primarily due to his "exceptionally hostile" posture toward free trade, including notably NAFTA, and his repeated accusations about China being a "currency manipulator."
 
  Economists are concerned that a potential trade war would be devastating, because it would decimate U.S. exporters, raise prices for Americans and escalate geopolitical tensions. As proof, they cite the 1930 Smoot-Hawley legislation, which contributed to making the Great Depression even worse.
 
  So what is the solution? Economists Ed Dolan says: "It would be far more reasonable to employ direct forms of aid. Retraining, adjustment assistance to workers or employers, income support or wage subsidies are some of the possible remedies." 
 
  Despite the anger and rhetoric, the campaign season has raised awareness that the country needs to do more to help displaced workers.
 
Contact Jill Schlesinger, senior business analyst for CBS News, at askjill@JillonMoney.com.
 
This column was printed in the April 17, 2016 - April 30, 2016 edition.
 

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