Thursday, March 29, 2007

As Globalization's Benefits Grow, So Do Its Skeptics

Free trade in decades past wasn't sold so much on the economics but as a way to achieve a foreign-policy end. After all, the economics of trade have always been a hard sell. Even its most fervent admirers concede trade creates winners and losers. Franklin D. Roosevelt's secretary of state, Cordell Hull, led the pre-World War II effort to lower tariffs because he believed trade led to peace. After World War II, the European Union was created to avoid another war between France and Germany, and the U.S. pursued trade deals to win the Cold War. And while President Bill Clinton talked loudly about the jobs the North American Free Trade Agreement would create, his Treasury secretary, Lloyd Bentsen, saw the trade pact as a way to assure a pro-U.S. regime in Mexico.


While economists argue whether technology, globalization, deregulation or changing social mores are most to blame for the widening gap between economic winners and losers, the public has no such doubt. It's far easier for an American worker to damn the Chinese for his falling wages than to damn the personal computer in his den. "In public perception," says Mr. Irwin, "we have widening inequality, a widening trade deficit and trade is a greater percentage of the economy. It's easy to say trade is part of the problem. So it's part of the solution."

The changing nature of trade plays a role, too. Technology makes it cheap and easy to hire workers in, say, India to do tasks once done in the U.S. and to ship the work back to the U.S. by fiber-optic cable or satellite, a phenomenon likely to grow in years to come, as Princeton University economist Alan Blinder points out loudly. This production of services at a distance makes it easier for owners of capital in the U.S. to reap the rewards of globalization even if many American workers do not.

The issue, in this light, isn't whether trade makes the world as a whole richer. It does. The issue is the distribution of those gains. If American workers sense they are at risk of being losers -- even if those fears are overstated or ignore the benefits they get from imports as consumers -- the political consensus for encouraging further globalization will evaporate.

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