• December 4, 2014
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  • Trade

Weighing the Benefits and Challenges of Trade

America needs to do more to mitigate dislocation.

In late December of 1942, a small group of American officials traveled to London for a secret meeting with British officials. The purpose of their trip was to begin planning for the reconstruction they knew would be necessary at the end of World War II.

They believed that the protectionist reactions of the developed countries in Europe and the Americas in the late 1920s and early 1930s had tipped the world from recession into the Great Depression. That created the conditions that contributed to the Second World War. They wanted to create a set of international rules that would encourage trade and make less likely a reversion to protectionism when the economies of the world turned downward in the future.

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It took the efforts of several presidents to bring the World Trade Agreement to a conclusion.

The culmination of their efforts came five years later, at an international economic conference in Havana, Cuba. There, 50 countries, including the United States, signed a treaty to create a world trade organization.

But there was another formidable hurdle to clear. The Senate at that time was hostile to President Truman. They were determined not to permit him to pass any major actions. So they rejected the treaty.

Not to be rebuffed, Truman used his executive power to implement what became the General Agreement on Tariffs and Trade, the GATT, which provided for reductions in tariffs as a way of combating restrictions on trade.

However, in the post-World War II period, while tariffs generally went down and trade increased, some countries devised methods to restrict trade by non-tariff means. The Japanese pioneered these efforts, but others followed suit.

Ultimately, it took the efforts of several presidents, including Presidents George H.W. Bush and Bill Clinton, to bring the World Trade Agreement to a conclusion.

I’m proud of the fact that the Senate ultimately ratified the treaty. It was the last act in my tenure as Senate Majority Leader. The roll call vote tally hangs on a wall in my office today. Along with other factors, it contributed to the great expansion of trade from which the United States and other countries have benefited.

Observing the Challenges

Despite its many benefits, and my own personal history, trade cannot be described as all-benefit, no cost (or as the opposite).

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While trade has boosted many economies and made nations more competitive, it also causes dislocations.

While trade has boosted many economies and made nations more competitive, we must acknowledge that it also causes dislocations. If you work in a factory that shuts down because it’s too expensive to make your product in the U.S., you understandably don’t think free trade is a good idea.

But I believe we haven’t done a good enough job educating, retraining and assisting people who have been at the short end of trade-related dislocations. We’ve pretty much left people to fend for themselves. The reality is that most economic dislocation is not the result of trade agreements, but is the result of dynamic changes in a free-market economy.

No one makes stagecoaches anymore, but the country’s clearly better off because we have motor vehicles. On the other hand, if you had a job at a stagecoach factory, and you lost it and couldn’t find another job, you were affected. We don’t do enough to help people in those circumstances. They need reeducation, retraining, relocation and other assistance.

We can’t and shouldn’t build fences around America. It won’t work and it will be contrary to our own interests. We must continue to promote and expand trade because overall it’s helpful to us – not least of which, of course, is in providing consumer goods in our country at relatively low prices, clothing being probably the most obvious example.

But at the same time, we have to be sensitive to the needs of those who are injured. And that includes doing a better job requiring other countries to enact and implement better practices on safety, environmental effects and health concerns, so that we don’t trigger a race to the bottom.

Trade’s benefits can go beyond economic benefits and can even reach into areas such as poverty and socioeconomics. But you have to be careful not to overstate the case; we must acknowledge that not everybody benefits.

Some will suffer dislocation, and we need a national commitment to assist them in dealing with that dislocation. So everyone moves up a notch, instead of, say, 80 percent moving up and 20 moving down.

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The answer is not to stop and build walls, but to be more effective in dealing with the problems.

For example, Germany has a very aggressive and active apprenticeship program to help people lacking in skills. Employers get tax credits and other incentives to hire people and keep them over a long period of time.

In our country, we too often treat people as though they were as disposable as machines. But, of course, people are not machines. They’re human beings, and that should be foremost in our considerations.

So you have to be very careful in crafting the types of trade agreements now being negotiated. No one can operate with impunity, without regard for the health or safety of their workers, without regard for the environment, without regard for compensation.

There are advantages and disadvantages in all these things. Leaders have a responsibility to make a careful judgment based not on the slogans that label globalization as all bad or all good. They must figure out what’s the best policy for their shareholders, employees, management and the consumers of their services or products.

We believe – and I think history conclusively proves– that democratic capitalism represents the best way to provide broad shared general prosperity and opportunity in any given population. But it doesn’t mean that you can’t frankly acknowledge that globalization has produced some problems and created some difficulties.

The answer is not to stop and build walls, but to be more effective in dealing with the problems and recognizing, acknowledging and stating right up front, yes, there are issues, there are problems … and we’re going to deal with them. goldbrown2

Sen. George Mitchell served as a United States Senator from Maine from 1980 to 1995 and as Senate Majority Leader from 1989 to 1995. He is the Co-Founder of the Bipartisan Policy Center.

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