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http://news.yahoo.com/s/usatoday/20...ctionpushesglobalizationtoforefront&printer=1
Election pushes globalization to forefront
By David J. Lynch, USA TODAYTue Nov 14, 6:39 AM ET
WASHINGTON - To hear some Democrats tell it, the United States is engaged in a costly, ill-advised foreign adventure that is long overdue for a change of course.
Not the war in Iraq. Globalization.
Several members of the Democratic Congress that takes office in January say the Bush administration's unquestioning celebration of free trade is bleeding the middle class and endangering the American Dream. Democrats such as Sen.-elect Sherrod Brown of Ohio want a tougher approach to future trade deals. Others, including veterans of the Clinton administration who back trade, say the solution is to craft new policies that take the sting out of job losses caused by foreign competition.
The new congressional lineup raises the prospect of the most significant globalization debate since the 1992 presidential campaign's bitter exchanges over the North American Free Trade Agreement (NAFTA). Some already expect the issue to play a prominent role in the run-up to the 2008 election.
"There is a real debate on whether to go further and continue reducing trade barriers and opening markets and if so, at what pace and how," says Fred Bergsten, director of the Peterson Institute for International Economics.
In offices on Capitol Hill and in downtown think tanks, Democratic politicians and trade specialists suddenly find their opinions matter in a way they haven't for a dozen years. At the Hamilton Project, the brainchild of Robert Rubin, the former Treasury secretary, economists are mulling new social insurance programs they argue will promote economic growth by soothing public fears of potential financial harm. One idea: reworking unemployment insurance to target aid to those who are out of work the longest.
Despite the political upheaval in Washington and the rising popular angst, the U.S. economy is now so deeply intertwined with other nations that it may be too late to turn back, say mainstream economists. Unlike two decades ago when trade with Japan triggered enormous public unease, U.S. manufacturers are heavily reliant upon imported components for their assembly lines and can't risk an interruption of global commerce.
"Our economy is becoming much more integrated with China," says trade historian Douglas Irwin of Dartmouth College. "It's not 'them' exporting to 'us.' It's U.S. multinationals' factories there exporting to us."
Worries over trade-related job losses, of course, aren't new. In the 1980s, union workers, angry over surging Japanese imports, smashed Toyotas in factory parking lots in Detroit. In 1993, Ross Perot warned Americans a "giant sucking sound" would result from NAFTA sending millions of good jobs to Mexico.
Anti-globalization protestors rampaged through Seattle during a World Trade Organization summit seven years ago. And during the 2004 presidential election, outsourcing of jobs to India ignited intense controversy.
But today's public anxieties are both broader and more intense. In exit polls last week, 40% of voters said they expect the next generation of Americans to have a lower standard of living vs. 30% who said they expect life to improve.
That pessimism may be linked to deep dissatisfaction over the way globalization is working. In a 2005 Program on International Policy Attitudes poll, only 16% of respondents backed the current U.S. approach; 56% said they favor expanded trade but only if much more is done to help affected U.S. workers. Almost one-quarter of those surveyed said they opposed further trade liberalization because the costs would outweigh the benefits.
Democratic candidates used trade as a key issue in 100 congressional districts, according to the left-leaning Public Citizen. Among them: Jim Webb, whose Senate victory in Virginia gave the Democrats control of both houses of Congress for the first time in 12 years. The former Marine and one-time Reagan administration official made "economic fairness" a central element of his campaign and called for overhauling trade laws "so that free trade becomes fair trade."
For two decades, it has been an article of faith, under Democrats and Republicans alike, that gains from free trade far exceeded losses. "Globalization" became the label given to the elimination of barriers to the free movement of goods and capital, but not people, across national borders.
Fueled by the collapse of communism almost two decades ago and the continuing revolution in information technology and telecommunications, that process has delivered enormous benefits for the USA. On an annual basis, globalization boosts the U.S. economy by $1 trillion, or roughly $10,000 per household, according to the Peterson Institute. Those broad gains dwarf $54 billion in costs to the families that suffer trade-related job losses. But the gains are dispersed throughout the economy in the form of less expensive clothing, cars and phone calls while the costs are concentrated in the heartbreak of an estimated 225,000 individual job losses.
White-collar job losses
Rising waves of public unease are being driven by the relentless march of globalization as well as broader economic maladies. In the 1990s, trade-related job losses were confined to comparatively low-wage, low-skill factory jobs. Globalization enthusiasts argued that the USA would prosper by building a knowledge economy filled with well-paid, white-collar positions.
But in recent years, even those jobs have begun drifting to developing countries such as India and China. From 1999 to 2005, the USA lost 139,510 computer-programming jobs, more than one out of every four such positions in the country, according to Catherine Mann, a Peterson Institute economist. There were also small declines in the ranks of electrical engineers and database administrators. All three of these job categories are well-paid: Programmers average $67,400 annually.
At the same time, middle-class families face heightened financial risks. Incomes are more volatile, even as the economy prospers. About half of all families suffer a drop in income over any two-year period, and those who fall today fall further than in the past, according to Jacob Hacker, author of The Great Risk Shift.
In the early 1970s, the typical family that stumbled lost 27% of its annual income. But over the last decade, as globalization moved into high gear, the income loss averaged around 40%. For a family in 2004 earning the median income of $43,200, that would mean a crippling decline of $17,280.
The risk of suffering a 50% drop in family income has more than doubled since the early 1970s, according to Hacker, a political science professor at Yale University. That may be because, even amid a growing economy, the typical spell of unemployment has grown longer. In the 1970s, workers who lost their jobs typically were unemployed for 6.3 weeks, says economist Howard Rosen. Today, those handed pink slips endure on average an additional two weeks of enforced idleness before finding new work.
These real-life financial strains coupled with a steady parade of headlines about mushrooming U.S. trade deficits badly eroded public support for globalization. Earlier this year, Congress forced a foreign company, Dubai Ports World, to sell its stake in operations at six U.S. ports. Negotiations on a new global trade agreement ran aground this summer. And amid a $200 billion trade deficit with China, the U.S. continues to criticize Beijing over a currency policy that some in Congress say costs millions of U.S. jobs.
Rethinking free trade
Those who profit from global financial integration recognize the political headwinds they're confronting, including the risk of a drift toward protectionism. In June, even as U.S. exports were hitting another record, the National Foreign Trade Council board, whose members include Boeing, General Motors, ExxonMobil and Wal-Mart, discussed the gathering storm.
"We agreed the message that globalization is a good thing has fallen flat and no longer resonates. ... Not enough people believe it anymore," says Bill Reinsch, the council's president.
In August, Federal Reserve Board Chairman Ben Bernanke warned that "further progress in global economic integration should not be taken for granted" and suggested additional measures are needed to spread globalization's benefits.
The same month, Treasury Secretary Henry Paulson acknowledged the pain caused by trade but rejected limiting cross-border commerce. Instead, he called for "thinking more creatively" about ways to help those who lose out.
In a subsequent interview, President Bush told USA TODAY that affected workers should take courses at local community colleges.
Now, it's the Democrats' turn to weigh in. On the left, lawmakers such as Brown seek a wholesale overhaul of the U.S. approach to trade negotiations, including renegotiating NAFTA and trade ties with China. Brown wants any new trade accords to include protections for labor, the environment and food safety. And he suggested that the administration's hopes of renewing the president's negotiating authority for new trade deals, which expires next summer, could hinge on winning approval for a "new direction" on trade policy.
"We don't know exactly what the new road is, but we're going to hit the brakes on this road," says Lori Wallach, director of Public Citizen's Global Trade Watch.
Meanwhile, self-described centrists at the Hamilton Project, based at the Brookings Institution, back concepts such as wage insurance to partially compensate workers who take lower-paying jobs after being rendered jobless by foreign competition. Peter Orszag, project director, says new social insurance schemes "could be growth enhancing" if they prevent a protectionist backlash that would crimp cross-border trade.
Existing worker protections are widely regarded as inadequate. Even after a major expansion four years ago, the Labor Department's trade adjustment assistance program helps only about 50,000 people each year and is derided by many as "burial insurance," says Howard Rosen, a former Democratic senate staffer deeply involved in writing the original trade adjustment legislation.
Adding urgency to the debate is the prospect of today's deflating housing bubble causing the economy to slow. Current worries over the costs of global integration arose at a time when soaring real estate values held the economy aloft and helped keep unemployment near rock bottom. Indeed, even as it led to rising inequality and middle-class insecurity, globalization enabled the U.S. to finance a consumption boom by borrowing massive amounts of money from China, says Jeffrey Frieden, author of Global Capitalism.
That can't go on forever.
"There is a broad sense of unease in the land with the pattern of international economic integration, which has been mitigated by the fact that the country has experienced a consumption boom for the past 10 years or so," says Frieden. "What if that starts not being the case?"
Election pushes globalization to forefront
By David J. Lynch, USA TODAYTue Nov 14, 6:39 AM ET
WASHINGTON - To hear some Democrats tell it, the United States is engaged in a costly, ill-advised foreign adventure that is long overdue for a change of course.
Not the war in Iraq. Globalization.
Several members of the Democratic Congress that takes office in January say the Bush administration's unquestioning celebration of free trade is bleeding the middle class and endangering the American Dream. Democrats such as Sen.-elect Sherrod Brown of Ohio want a tougher approach to future trade deals. Others, including veterans of the Clinton administration who back trade, say the solution is to craft new policies that take the sting out of job losses caused by foreign competition.
The new congressional lineup raises the prospect of the most significant globalization debate since the 1992 presidential campaign's bitter exchanges over the North American Free Trade Agreement (NAFTA). Some already expect the issue to play a prominent role in the run-up to the 2008 election.
"There is a real debate on whether to go further and continue reducing trade barriers and opening markets and if so, at what pace and how," says Fred Bergsten, director of the Peterson Institute for International Economics.
In offices on Capitol Hill and in downtown think tanks, Democratic politicians and trade specialists suddenly find their opinions matter in a way they haven't for a dozen years. At the Hamilton Project, the brainchild of Robert Rubin, the former Treasury secretary, economists are mulling new social insurance programs they argue will promote economic growth by soothing public fears of potential financial harm. One idea: reworking unemployment insurance to target aid to those who are out of work the longest.
Despite the political upheaval in Washington and the rising popular angst, the U.S. economy is now so deeply intertwined with other nations that it may be too late to turn back, say mainstream economists. Unlike two decades ago when trade with Japan triggered enormous public unease, U.S. manufacturers are heavily reliant upon imported components for their assembly lines and can't risk an interruption of global commerce.
"Our economy is becoming much more integrated with China," says trade historian Douglas Irwin of Dartmouth College. "It's not 'them' exporting to 'us.' It's U.S. multinationals' factories there exporting to us."
Worries over trade-related job losses, of course, aren't new. In the 1980s, union workers, angry over surging Japanese imports, smashed Toyotas in factory parking lots in Detroit. In 1993, Ross Perot warned Americans a "giant sucking sound" would result from NAFTA sending millions of good jobs to Mexico.
Anti-globalization protestors rampaged through Seattle during a World Trade Organization summit seven years ago. And during the 2004 presidential election, outsourcing of jobs to India ignited intense controversy.
But today's public anxieties are both broader and more intense. In exit polls last week, 40% of voters said they expect the next generation of Americans to have a lower standard of living vs. 30% who said they expect life to improve.
That pessimism may be linked to deep dissatisfaction over the way globalization is working. In a 2005 Program on International Policy Attitudes poll, only 16% of respondents backed the current U.S. approach; 56% said they favor expanded trade but only if much more is done to help affected U.S. workers. Almost one-quarter of those surveyed said they opposed further trade liberalization because the costs would outweigh the benefits.
Democratic candidates used trade as a key issue in 100 congressional districts, according to the left-leaning Public Citizen. Among them: Jim Webb, whose Senate victory in Virginia gave the Democrats control of both houses of Congress for the first time in 12 years. The former Marine and one-time Reagan administration official made "economic fairness" a central element of his campaign and called for overhauling trade laws "so that free trade becomes fair trade."
For two decades, it has been an article of faith, under Democrats and Republicans alike, that gains from free trade far exceeded losses. "Globalization" became the label given to the elimination of barriers to the free movement of goods and capital, but not people, across national borders.
Fueled by the collapse of communism almost two decades ago and the continuing revolution in information technology and telecommunications, that process has delivered enormous benefits for the USA. On an annual basis, globalization boosts the U.S. economy by $1 trillion, or roughly $10,000 per household, according to the Peterson Institute. Those broad gains dwarf $54 billion in costs to the families that suffer trade-related job losses. But the gains are dispersed throughout the economy in the form of less expensive clothing, cars and phone calls while the costs are concentrated in the heartbreak of an estimated 225,000 individual job losses.
White-collar job losses
Rising waves of public unease are being driven by the relentless march of globalization as well as broader economic maladies. In the 1990s, trade-related job losses were confined to comparatively low-wage, low-skill factory jobs. Globalization enthusiasts argued that the USA would prosper by building a knowledge economy filled with well-paid, white-collar positions.
But in recent years, even those jobs have begun drifting to developing countries such as India and China. From 1999 to 2005, the USA lost 139,510 computer-programming jobs, more than one out of every four such positions in the country, according to Catherine Mann, a Peterson Institute economist. There were also small declines in the ranks of electrical engineers and database administrators. All three of these job categories are well-paid: Programmers average $67,400 annually.
At the same time, middle-class families face heightened financial risks. Incomes are more volatile, even as the economy prospers. About half of all families suffer a drop in income over any two-year period, and those who fall today fall further than in the past, according to Jacob Hacker, author of The Great Risk Shift.
In the early 1970s, the typical family that stumbled lost 27% of its annual income. But over the last decade, as globalization moved into high gear, the income loss averaged around 40%. For a family in 2004 earning the median income of $43,200, that would mean a crippling decline of $17,280.
The risk of suffering a 50% drop in family income has more than doubled since the early 1970s, according to Hacker, a political science professor at Yale University. That may be because, even amid a growing economy, the typical spell of unemployment has grown longer. In the 1970s, workers who lost their jobs typically were unemployed for 6.3 weeks, says economist Howard Rosen. Today, those handed pink slips endure on average an additional two weeks of enforced idleness before finding new work.
These real-life financial strains coupled with a steady parade of headlines about mushrooming U.S. trade deficits badly eroded public support for globalization. Earlier this year, Congress forced a foreign company, Dubai Ports World, to sell its stake in operations at six U.S. ports. Negotiations on a new global trade agreement ran aground this summer. And amid a $200 billion trade deficit with China, the U.S. continues to criticize Beijing over a currency policy that some in Congress say costs millions of U.S. jobs.
Rethinking free trade
Those who profit from global financial integration recognize the political headwinds they're confronting, including the risk of a drift toward protectionism. In June, even as U.S. exports were hitting another record, the National Foreign Trade Council board, whose members include Boeing, General Motors, ExxonMobil and Wal-Mart, discussed the gathering storm.
"We agreed the message that globalization is a good thing has fallen flat and no longer resonates. ... Not enough people believe it anymore," says Bill Reinsch, the council's president.
In August, Federal Reserve Board Chairman Ben Bernanke warned that "further progress in global economic integration should not be taken for granted" and suggested additional measures are needed to spread globalization's benefits.
The same month, Treasury Secretary Henry Paulson acknowledged the pain caused by trade but rejected limiting cross-border commerce. Instead, he called for "thinking more creatively" about ways to help those who lose out.
In a subsequent interview, President Bush told USA TODAY that affected workers should take courses at local community colleges.
Now, it's the Democrats' turn to weigh in. On the left, lawmakers such as Brown seek a wholesale overhaul of the U.S. approach to trade negotiations, including renegotiating NAFTA and trade ties with China. Brown wants any new trade accords to include protections for labor, the environment and food safety. And he suggested that the administration's hopes of renewing the president's negotiating authority for new trade deals, which expires next summer, could hinge on winning approval for a "new direction" on trade policy.
"We don't know exactly what the new road is, but we're going to hit the brakes on this road," says Lori Wallach, director of Public Citizen's Global Trade Watch.
Meanwhile, self-described centrists at the Hamilton Project, based at the Brookings Institution, back concepts such as wage insurance to partially compensate workers who take lower-paying jobs after being rendered jobless by foreign competition. Peter Orszag, project director, says new social insurance schemes "could be growth enhancing" if they prevent a protectionist backlash that would crimp cross-border trade.
Existing worker protections are widely regarded as inadequate. Even after a major expansion four years ago, the Labor Department's trade adjustment assistance program helps only about 50,000 people each year and is derided by many as "burial insurance," says Howard Rosen, a former Democratic senate staffer deeply involved in writing the original trade adjustment legislation.
Adding urgency to the debate is the prospect of today's deflating housing bubble causing the economy to slow. Current worries over the costs of global integration arose at a time when soaring real estate values held the economy aloft and helped keep unemployment near rock bottom. Indeed, even as it led to rising inequality and middle-class insecurity, globalization enabled the U.S. to finance a consumption boom by borrowing massive amounts of money from China, says Jeffrey Frieden, author of Global Capitalism.
That can't go on forever.
"There is a broad sense of unease in the land with the pattern of international economic integration, which has been mitigated by the fact that the country has experienced a consumption boom for the past 10 years or so," says Frieden. "What if that starts not being the case?"
