The campaign to misrepresent "free" trade critics

Writing in the most recent issue of the Democratic Strategist, Progressive Policy Institute president Will Marshall and his colleague Ed Gresser purposely mischaracterize the opposition many genuine progressives have for so-called neoliberal "free" trade deals with countries in the Global South. Either that, or the two pundits aligned with the DLC/New Democrat/Third Way movement just don't understand the basis for the progressive critique of these trade deals. Personally, I would argue that the authors are in fact deliberately misstating their opponents' case, as a fair reading of free trade criticism reveals economic policy arguments other than those being confronted in this article, and I think it's worth exploring this fact in some detail.

The point of the authors' piece, "Populist, Social Democrat or Progressive? The Democrats' Choice on Trade" is to create labels for opponents of "free" trade based upon truly meaningless distinctions. They unhelpfully divide up what they consider to be the center-left's three main schools of thought on trade: We have (1) the scary sounding "neo-populists", (2) the confusingly labeled "social Democrats" and what Marshall and Gresser describe as (3) the "progressive modernizers."

Here are the authors' operational definitions of these three ideologies: So-called neopopulists "blame trade for economic woes"; social Democrats want to "import the Nordic model of capitalism from Scandinavia"; and progressive modernizers want to "both raise America's game in global competition and raise the floor of security beneath ordinary working families." Of course, they believe the latter is the best policy position, even though it completely ignores the importance corporate lobbyist-influenced international trade policies play in impacting the economic security and inequality of the Middle Class, and how the critique of free trade played a key role in allowing Democrats to take back Congress last November.

So what exactly is wrong with the people who adhere to the first ideology, including Senator Bernie Sanders (I-VT) and Sherrod Brown (D-OH) - according to the authors? They argue:

The neo-populists, allied with industrial unions and a rump group of surviving protection-minded business lobbies, are convinced that foreign trade pressure is unfair and that the U.S. cannot compete against low-wage countries. A typical approach is to demand an indefinite halt to trade liberalization (a "strategic pause," as Jeff Faux terms it) along with trade protection through tariffs on Chinese goods and strict labor-standards tests on all imports, and to rail against offshoring without offering a policy-based way to block it--because, short of somehow turning off the Internet, none exists.

Notice anything wrong? Look carefully, because this is a textbook example of lying through omission. Yes, Fair Trade advocates like Sanders and Brown do indeed believe that the US cannot compete against low-wage countries, but the reason is that by signing trade deals with countries that pay workers less than a dollar an hour, it creates a race to the bottom in terms of wages for US workers. This is basic labor economics theory, and there is a large volume empirical data to support this contention (see here, here and here). If this doesn't represent a threat to the economic security of US workers, I don't know what does.

Another problem with their argument is the declaration that neopopulists are calling for an “indefinite halt to trade liberalization”, citing Faux as an example. The only problem is that this is not at all what Faux is calling for: Writing in a recent policy brief, for example, Faux explicitly argues that a pause in new trade deals should remain in effect "until Congress and the president come up with a credible program to reduce the trade deficit substantially and to adopt policies that will enable Americans to compete and raise their living standards." What is "permanent" about this?

The argument continues:

Whatever its political utility, populism fails as policy. Higher labor standards in developing countries are a worthy goal, but they wouldn't make countries with vast reserves of low-cost labor less competitive. And the experience of high-tariff U.S. industries like textiles and shoes gives little reason to believe new trade barriers would keep U.S. industries competitive. To the contrary, they would lower living standards and damage our companies' ability to compete, by raising input costs, depressing the purchasing power of their local customers, and jeopardizing access to foreign markets just as America's housing boom fades and we need to rely more heavily on exports to generate growth.

Again, the authors are being disingenuous here, probably intentionally so in my judgment. That is because there is much less of a need (economically, not politically speaking) to require huge trade barriers if our trading partners are required by law to pay their workers something north of slave wages. Yes, this will cost US-based corporations more in terms of their labor costs (e.g.: Nike won't see as much profit if their workers in Southeast Asia are paid $3 an hour instead of 10¢ an hour), but it will also decrease the threat of them offshoring hundreds of thousands of manufacturing jobs which inevitably creates downward pressure on US workers' wages as well as job losses. Same thing goes for human rights and environmental standards, not just implied by side-agreements but codified in legislation and subject to the core labor standards issued by the International Labor Organization.

The writers next go on to dismiss those whom they label "social democrats" such as journalists Robert Kuttner and Harold Meyerson (and I suppose this generally describes my views on economic/trade policy as defined by Marshal and Gresser) and claim that:

The U.S. social democrats seem determined to hold progress on trade liberalization hostage to highly ambitious and sometimes unattainable goals--a dramatic expansion of America's welfare state; a miraculous revival of militant trade unionism (emphasis added - by the way, what does the DLC have against labor unions anyway? -ed); global governance mechanisms; and full implementation by low-income countries, enforced by trade sanctions, of labor and environmental standards which took Washington decades to develop. This means growth, efficiency, and trade reforms to help the poor must wait for a social-democratic millennium.

This is a critique that really is scandalous in its cynicism - the authors are basically claiming that insisting our trade legislation would require that our trading partners guarantee the right for workers to unionize (something absolutely essential to protecting their rights),institute better corporate governance practices and enforce labor/environmental standards is some kind of unrealistic, pie-in-the sky scheme that is simply not possible in our current political environment.

What is their supporting evidence for making this sweeping dismissal? They provide none, of course, because no such evidence exists. It's just a convenient fiction told to us by those pundits who don't think it's worth the effort of the Executive and Legislative branches of government to make sure our trade policies help working American families and prevents slave labor from manufacturing goods that are imported to our country.

So what approach then do the authors favor?

[Progressive reformers] reject claims that Americans can be shielded from technological and structural forcesaffecting the whole world, and hope instead to replace the industrial-era safety net with a new social contract that helps working Americans manage the risks of global competition and share in the rewards of growth. They agree with social democrats on a key point: as U.S. businesses and labor provide less security for workers, government must step into the breach and provide more.

I agree with their point that we need replace the industrial-era safety net with a new social contract (see Jacob Hacker's "The Great Risk Shift" for some specific ideas on how to do this), but I disagree with the contention that it's simply unavoidable that employers and labor are going to continue to shirk their responsibilities, and that the public sector has to pick up the slack. What about, for example, passing regulations with some teeth that strengthen the hand of organized labor (e.g.: the Employee Free Choice Act) and require corporations that benefit from being domiciled in the US don't use offshore tax shelters, closing tax loopholes for the super-rich and then using this additional revenue to guarantee a more viable safety net for the middle class?

But the contention I most fundamentally object to is their disagreement that Americans can be shielded from "technological and structural forces". That's because the not-too-subtle implication here is that "neopopulists" and "social democrats" do contend that the best use of trade policy should be to do exactly that. I have no idea where they got this idea from - it's certainly not supported by anything I've read by either Kuttner or Meyerson. In fact, these writers argue for something quite different - that our trade policy shouldn't try to isolate the US from the effects of globalization (which I agree is obviously untenable) but rather that it should ensure a fairer playing field for US workers competing in a global marketplace by pushing for all the numerous, common-sense protections I have been arguing for in this post. Is it impossible for Congress to succeed in doing this? We'll only know if Democratic lawmakers expend some political capital to do, which they haven't done so far, or if they at least give us Faux's "strategic pause" so that more harm can be done.

I think that it's pretty depressing that such high-profile Democratic pundits would peddle such a misleading narrative, wholly unsupported by important things like facts or evidence, to shore up Democratic and progressive support for more free trade deals without any protections.

Update (6/8): Dean Baker has more on the topic on his blog here.