Sign Up
420 Medbook helps you connect and share with the people in your life.

Posted: 2015-07-06 04:00:00
Photo
Shipping containers in Newark, N.J. Credit Aaron Showalter/Bloomberg News, via Getty Images

One way to think about the recent fight between President Obama and Democratic lawmakers over trade agreements is that the fight is part of the larger debate among liberals over what policies are best at creating good jobs and raising wages.

The two Democratic camps generally agree on this much: Most Americans have seen their incomes stagnate in recent decades. And trade probably deserves some of the blame, along with technological change and the decline of labor unions, for destroying jobs and depressing wages, especially in occupations that have traditionally not required a college education.

Trade has always created winners and losers. But in recent years the growth of imports from developing nations like China has had a particularly devastating effect on certain American workers, said David Autor, an economist at the Massachusetts Institute of Technology. As the labor-intensive production of goods like clothes, furniture and electronics has moved to cheaper factories overseas, the number of manufacturing jobs in the United States has declined by five million, or 28 percent, between 1995 and 2015.

A 2013 paper by Mr. Autor and two other scholars concluded that a quarter of the decline in manufacturing employment between 1990 and 2007 could be explained by a surge of imports from China. And Josh Bivens, the research and policy director at the Economic Policy Institute, estimated that increased trade with developing nations lowered wages by 5.5 percent for workers without college degrees.

Where Mr. Obama and many of his fellow Democrats part ways is on how big an effect trade agreements (as opposed to trade in general) have had. This question is particularly important for the Trans-Pacific Partnership, which the administration is negotiating with 11 countries, including several developing nations like Malaysia, Mexico, Peru and Vietnam. The deal could be concluded as early as the end of this year.

The president argues that this deal, unlike earlier ones, will help the American economy by forcing Asian and Latin American countries to adopt higher labor and environmental standards. He also says it will force Japan to lower trade barriers to American goods like auto parts, potentially increasing employment for less-educated workers.

Many Democrats like Senator Elizabeth Warren of Massachusetts disagree, arguing that the pact will mostly benefit corporations and that the labor standards and other protections Mr. Obama is asking for are not enough to curb the threat to American jobs.

The administration won the most recent round of this debate when Congress approved a bill, primarily with Republican votes, that would allow Mr. Obama to sign trade agreements that lawmakers will be able to vote up or down but not amend.

It’s hard to assess the conflicting arguments because, in fact, both sides assign far too much importance to individual trade agreements, pro or con.

For instance, the economic gains from the agreement will most likely be modest. The most frequently cited study on the impact of the Trans-Pacific Partnership, by the economists Peter Petri, Michael Plummer and Fan Zhai, says it will boost gross domestic product in the United States by 0.4 percent by 2025 — hardly a significant economic stimulus. Economists who are more skeptical of trade deals say the income gain could be even smaller and would mostly benefit people at the top of the income distribution.

At the same time, it is hard to figure out how much deals like the North American Free Trade Agreement actually hurt jobs and wages. The Economic Policy Institute estimates that the United States lost 700,000 jobs because of Nafta. Another study found that the impact of trade with Mexico and with Central American countries that also have a trade deal with the United States on jobs and wages was small. Most scholars do agree, however, that imports from China, a country with which the United States has not signed a trade agreement, have had a far greater impact on American workers.

Even if Congress ultimately rejected a Trans-Pacific Partnership deal, that would not shield American workers from an increasingly competitive world. The way to shore up the economy and expand job creation is to make investments in public goods, like transportation systems, better housing, stronger schools and skills training, especially for the most disadvantaged Americans. In the meantime, lawmakers could certainly help millions of workers by raising the minimum wage, regardless of what trade agreement is approved.

Of course, Republicans, who control Congress, do not support most of these policies. But Mr. Obama and Democrats could try to get Republican acceptance for some of this agenda by making it a condition for advancing trade agreements, which conservatives do want. Unfortunately that seems unlikely, since the Democrats aren’t speaking with one voice on this issue.

Captcha Challenge