MEMORANDUM:

TO: The U.S. Democratic Party's Presidential Nominee
FROM: Gene Sperling
RE: A Progressive Free Trade Policy

Trade is not much fun, particularly if you're a Democratic presidential candidate. Many of your key supporters -- unions, blue-collar workers, and student activists -- oppose market liberalization, and many of your advocates in the business community will congratulate you for your courage only to disappear come election time. In addition, although the benefits of trade -- including growth, innovation, higher-quality jobs, and lower prices -- are often diffuse, the losses are usually concentrated among hardworking families who are simply in the wrong place at the wrong time.

COMMENTS (0) SHARE:

Twitter

 

Reddit

 

More...

Worse still, virtually no one seems to want to build a truly pro-growth and progressive consensus on trade. Too many on the left give the false impression that a better economic future is possible simply by inhibiting global competition. Too many politicians on the right are so stuck in a "less government is always better" mode that they refuse to consider how smart government policies can ensure that trade expansion raises the tide that lifts all boats -- both in the United States and among U.S. trading partners.

The next U.S. president must break this ideological gridlock. Only a president willing to cut through political, regional, and ideological divisions and speak with brutal honesty to all sides can move the country forward together. Your political advisors will want you to stay away from such a difficult issue on the campaign trail, but you need to outline your vision for both the voters and your future governing mandate.

Embrace the Dynamism Economy: You must counter any notion that most of the job loss and economic dislocation in the United States flows directly from recent trade policies. Much of the dislocation -- whether from intense competition, technological advances, outsourcing, or weak economic demand -- is not likely the result of recent trade agreements. This "trade over-blame game" paints a distorted picture of the nation's current economic challenges and will not help produce the broader progressive agenda so critical to the United States' economic future.

During the coming national campaign, be direct about how future prosperity hinges on how well we prepare for, rather than resist, what I call the "dynamism economy" -- the degree to which forces such as information technology and increasing openness in the global economy increase pressure on prices, competition, and innovation. While you must address the recent pain of many families caused by global trade and outsourcing, the largest source of U.S. job woes is not the sudden loss of jobs to global competition but the failure to create new jobs to replace ones lost in the upheaval of the dynamism economy.

Consider the following facts: In 1999, although fierce competition destroyed an astounding 32.9 million U.S. jobs, it also helped create 35.6 million, resulting in a net creation of 2.7 million jobs. At the same time, unemployment fell to its lowest level in 30 years and poverty to its lowest level since 1979. Since the recession ended in November 2001, the force behind the job market's contraction has not been the destruction of jobs, but a dearth in the creation of jobs. Indeed, in 2002, we saw some 500,000 fewer jobs destroyed in the United States than the average between 1998 and 2000. Trying to slow the pace of dynamism could actually kill the goose that lays the golden egg of shared economic growth in the jobs and industries of the future.

Unfortunately, the trade over-blame game allows even the Bush administration to blame China instead of focusing on failed policies that have done little to spur job creation or prepare U.S. workers for future economic challenges and opportunities. Ultimately, the right progressive agenda for the United States requires investing in areas such as universal preschool, college attainment, basic research, technology infrastructure, and bold adjustment policies, to ensure that the U.S. workforce continues to attract the highest-value jobs and investment. 

Recognize the Progressive Contributions of Open Markets: As a candidate representing progressive values, you are right to shape trade policy to ensure that open-market policies not only increase productivity and efficiency but truly raise all economic boats in both the United States and its poorer trading partners. Yet focusing too much on the downsides of trade and dynamism often obscures how open markets can and do contribute to growth and broader progressive values.

Although it is not popular for any politician to acknowledge benefits from imports, progressives must not be afraid to point out that higher prices resulting from protectionism operate like a regressive tax, hitting the pocketbooks of modest- and low-income families the hardest. For example, imported toys carried a tariff before the U.S. Congress voted to eliminate it in 1994. From December 1997 (the first Christmas for which data is available) to December 2003, the price of toys in U.S. cities fell 24.3 percent, which means substantial savings for families at Christmas time. Greater or lesser savings can be replicated across the vast range of goods the United States imports from abroad.

Even if continued job stagnation or fallout from outsourcing and globalization require you to propose new policies to help protect jobs, wages, and health benefits, why pay for them with protectionism that will impose disproportionate costs on average consumers? Wouldn't it be preferable to achieve those goals by embracing the dynamism economy and paying for such benefits with revenues from progressive income taxes?

123NEXT