- The Washington Times - Thursday, September 18, 2003

The WTO talks in Cancun, Mexico, failed for several reasons — European rigidity on farm subsidies and mob violence, to mention two frequently cited. Cancun also failed because the central message of free trade — mutual advantages — got lost, partly because America no longer speaks strongly, and with moral authority, on this issue.

The Bush administration and Congress surely know that opening international markets is an effective way to create American jobs and propel the U.S. economy. But you would scarcely know it, judging by Washington’s reluctance to assert the case for expanding international commerce.

Leading up to the meetings in Cancun, administration and pro-trade members of Congress were surprisingly quiet about the positive case for free trade. Failure to make a stronger public case about the job-producing, wealth-creating benefits of expanding trade, not only reduced the chances of success in Cancun, but handed a dangerous political opening to the foes of open markets — who recently have been exploiting the fears of anxious hometown Labor Day crowds, preaching the shortsighted doctrine of protectionism.

The anti-trade backlash is too dangerous to ignore. Supporters of free trade have no reason to shrink from reasserting the economic logic of open markets — a doctrine shared by mainstream Democrats and Republicans alike. Expanded trade creates jobs and wealth, while protectionism threatens to erode America’s economic vitality. Market-closing measures are worse than futile. The impulse to cling to yesterday’s fading industries diverts investment that is crucial to creating tomorrow’s jobs.

Change can be disruptive and disorienting, and many politicians have been reacting to their constituents’ emotions during Congress’ August recess. Yet, more farsighted lawmakers see change can also be creative — especially when new ideas and new energy propel a force as dynamic as the international economy.

Removing artificial restraints from the free flow of goods, services, capital and ideas accelerates corporations’ progress toward efficiency and nations’ quest for comparative advantage. It is politically easy for skeptics to point to a specific padlocked factory gate in a region that has been slow to adapt to economic change. It’s more difficult — but in the long run, more significant — to recognize the general, more widespread economic dynamic created by free trade: consumers’ easier access to imported goods, increased competition at home, the stimulus to long-term job creation, and the rise in Americans’ living standard.

The logic of enacting additional tariff-reducing agreements — such as the Free Trade Agreement of the Americas, which can build on the momentum of the successful NAFTA pact linking the United States with Canada and Mexico — unfortunately has been caught up in the emotional dispute about globalization in general. Emotion threatens to overwhelm reason in that debate.

Try as they might, today’s skeptics have come up with no coherent arguments against free trade. Capitalism writ large, globalization simply recognizes reality. Capital inevitably flows to the places where it can be put to its most productive use.

The anti-trade activists’ current campaign to foment anxiety about the overseas “outsourcing” of jobs is an example of their economic illogic. In the long run, the flexibility to put jobs where they operate most efficiently will help create higher-skilled, higher-value-added American jobs. If a high-technology company can save money by operating a factory or a call center in a relatively lower-cost country — perhaps an English-speaking nation like Ireland or the Philippines or India — then the company’s efficiency, in the long run, will help sustain the company’s power to create higher-level jobs in higher-cost regions such as the United States or Western Europe.

Economists recognize the human costs of job disruptions can be eased, but such changes cannot be stopped without inflicting a heavy price on the economy. Nor can jobs in faltering industries be endlessly sustained. Such as the billions of dollars in indirect federal support for the U.S. steel industry.

As the Clinton administration argued when it supported NAFTA, such measures as trade adjustment assistance, worker retraining programs, and higher-level education can help displaced workers prepare for the jobs of the future. After all, if companies find it more efficient to perform some types of higher-skilled jobs overseas, the marketplace is signaling that the U.S. education and job-training system is flawed. The market is rewarding those other nations that, for the moment, have better equipped their workers with skills the American work force lacks.

Advocates of free trade should not shrink from stating their case and should not be embarrassed about the rigors of the marketplace. The debate between protectionism and free trade comes down to our nostalgia for yesterday vs. our aspirations for tomorrow. If any nation — even a nation as wealthy as the United States — tries to protect its fading industries from change, it will pay an exorbitant price. That price would inflict economic damage on both the United States and the rest of the world. As America’s trade envoys react to the failure of the Cancun negotiations, that’s the free-trade case that the Bush administration and leaders of Congress should be asserting — with candor and with confidence.

James C. Miller III is an economist and chairman of the CapAnalysis Group, an economic, financial and regulatory consulting firm. He served as director of the Office of Management and Budget and chairman of the Federal Trade Commission in the Reagan administration.

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