Free Trade with Humanity

Free trade provides the best and most efficient allocation of investments and ultimately gives everyone the best possible life. But we live now, not in the ultimate times. So how do we deal with the dislocations caused by free trade? That is especially international free trade. The opposite to free trade, autarky or isolationism, is quite unworkable. So the answer has to be somewhere in the middle.

The conservatives and libertarians are free trade extremists. They expect each person to fend for himself or herself no matter what the cost. Of course, only the wealthy win in this system and it in fact creates a less efficient society and worse economy than does careful government intervention to protect workers from such economic tsunami waves. Andrew Tobias today offers a small part of the answer.

From Andrew Tobias, March 17, 2005

FREE TRADE
Frank McClendon: “I would like to know what you think of the Lou Dobbs interview in Playboy – ‘America's Other War - By Outsourcing, Corporate America Kills the
Middle Class and the American Dream.’ The gist:

I'd prefer that corporations return to being good citizens – and because of the dictates of their conscience – end outsourcing. But if corporate America can't forgo short term profits for the broader interests of our society, it is Washington's responsibility to act. . . . It seems however that business leaders would rather collect seven-figure bonuses for cutting costs – usually by dumping jobs or shipping them overseas.

F I am more of a free trader . . . albeit biased toward using our influence to push trading partners to improve working conditions and environmental regulation – e.g., instituting a “minimum wage” program as suggested here last week.

I understand that family comes first, and that close neighbors are more important than distant neighbors. Ohioans (if you’re from Ohio) clearly outrank Kentuckians, just as we care more about Americans (if we’re American) than we care about Canadians, let alone the French.

But how steep should the curve be? I first wrote about this 35 years ago in a book (The Funny Money Game) that included a “conversion table,” by nationality, as one might show how many pounds or francs or baht or yen there are to the dollar. But it remains a puzzlement even today.

To take a childish example, if you had a choice between one neighbor dying or one Bangladeshi, you'd probably – reluctantly – choose the Bangladeshi. But if it were one neighbor versus two Bangladeshis? Ten? Ten thousand?

Fortunately, with respect to outsourcing, no one has to die (except possibly, indirectly, from the poverty of joblessness). So it’s not as wrenching to come right out and say one American job is worth two or ten or ten thousand jobs in Dhaka.

But there are two other factors that, even so, make it a damnably difficult calculation. Because not ONLY does giving the job to the Bangladeshi help the Bangladeshi . . . but it also lowers the cost of the clothes we buy to keep our kids warm (making clothes in Bangladesh is cheaper than making them here); and, in the long run, enriches us as well as the Bangladeshis, because someday that newly-employed Bangladeshi will be able to buy some product or service WE sell. (And perhaps buy a few shares of the stock that we will need to sell to pay our nursing home bill.)

So I lean strongly toward free trade, but with assistance for those who are displaced here (e.g., extended unemployment and continuing education/retraining opportunities) – and with a very conscious, creative effort to include in our trade agreements progress on wage and environmental issues . . . pushing hard for and making progress on those things . . . but pushing not quite so hard that we kill the deal.