International trade deals have been trashed by presidential candidates in both parties, but realistic alternatives that would do more good than harm have been scarce.
Economists admit globalization of manufacturing and distribution, huge cross-border capital flows and accelerating technology changes have taken their toll on jobs and job security. However, they warn scrapping trade deals and trying to erect trade barriers will create worse economic problems without protecting workers they seek to shield.
A better approach, according to economists, is to increase support, especially in terms of job training for workers who lose their jobs because of globalization or trade deals that favor some sectors at the expense of others.
The Trade Adjustment Assistance program exists to provide that support, but is woefully funded compared to dislocated worker programs in other industrialized nations. It also isn’t very practical. The program pays for job training, but unemployed workers still need to earn money to pay a mortgage and put food on their family table.
Increasing funding for Trade Adjustment Assistance hasn’t been a political priority, but the deep discontent that has welled up by working class families all across the nation, as reflected by their votes for “outsider” presidential candidates strongly opposing trade deals, may change that.
Another idea kicking around in economist circles is called wage insurance. This involves wage subsidies to workers who lose their jobs so they can afford to take lower-paying jobs while obtaining job training. President Obama mentioned wage insurance in his final State of the Union address earlier this year.
Bolstering the Trade Adjustment Assistance program or enacting some type of wage subsidy doesn’t have the same raw appeal on the political stump as GOP frontrunner Donald Trump saying he will cut better trade deals with China, Japan and others. But his promise, based largely on his negotiating skill as a hotel developer, may not be worth the risk of a costly trade war that triggers a global recession.
Democratic contender Bernie Sanders has criticized former President Bill Clinton for pushing through the North American Free Trade Agreement, which has resulted in the transfer of U.S. manufacturing jobs to Mexico. Both he and Democratic frontrunner Hillary Clinton have expressed opposition to the Trans-Pacific Partnership, a key Obama priority. But neither Sanders nor Clinton have articulated a clear alternative to the TPP, which Obama defends as a roadmap for economic development in the Pacific Rim written by the United States, not China.
Free trade policies have been problematic for labor-backed Democrats and now appear to be a challenge for big business friendly Republicans, too. Protectionism also faces headwinds because American consumers are savvy enough to know that would mean higher prices for goods. Businesses, farmers and workers in states like Oregon and Washington that have export-dependent economies realize protectionism would hurt them.
As a result politicians on both sides of the aisle may be forced to pursue policies that produce tangible improvements for middle-class workers who have been and likely will remain vulnerable to new economic realities.
It is one thing to rail about trade policy on the campaign stump (Obama certainly did in his 2008 campaign), but it is another to stare at the hard realities. The United States remains the dominant world economy, but it no longer commands a position where it can call all the shots. The global economy is more intertwined so a hiccup on the Chinese stock market or refugee flows into Europe can impact the U.S. economy.
Just about everyone has a stake in figuring out trade policy. It may be the most fundamental middle-class American issue. It matters to young people who must navigate careers that don’t have life-time job guarantees. Those at the top of the economic heap may face growing unrest and a sharper shift to the political left if more isn’t done to provide greater job security to a growing group of Americans.
Activist labor programs could be the best defense against worker frustration, the least statist policy and the most popular political talking point. There is a general election coming up this fall to try out this approach.