Free Trade: Good jobs going - Truth About Trade and Technology

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Monday, 24 March 2008 10:05

St. Louis Post-Dispatch

Nearly 700 good jobs will disappear when Western Union closes its St. Louis call center and other operations this summer. Officials of the union that represents Western Union workers say the company plans to move many of those jobs to Costa Rica, the Philippines, Mexico and the Dominican Republic.

It's an all-too-familiar song: Jobs that average $19 per hour plus benefits will disappear from St. Louis, only to pop up across borders and overseas paying a fraction of American wages.

"It's about globalization," says Earline Jones, president of Communications Workers of America Local 6377. "They (Western Union) said they ran the numbers, and it's cheaper for them to do business elsewhere. They're outsourcing America, and what will be left? There will be nothing left for our kids."

That cry comes from the heart, a broken one at that, and it's echoing in the race for the Democratic presidential nomination. Sen. Hillary Clinton, D-N.Y., wife of the president who negotiated the North American Free Trade Agreement, is busy distancing herself from it. She and her opponent, Sen. Barack Obama, D-Ill., are pledging to stem the loss of jobs to overseas competition.

That pledge will be difficult to keep. U.S. trade has risen 700 percent in the past quarter century. Foreign trade — exports and imports combined — now accounts for 28 percent of the American economy. If the United States somehow were to wall off imports, other nations would retaliate against our exports, and we would lose more than we would gain.

Exports are booming at the moment. As the dollar drops, American goods are cheaper abroad, so our overseas sales are up 17 percent this year. That creates jobs at home, one of the bright spots in a dismal economy.

An American worker's view of global free trade depends a lot on where that American works and what kinds of skills he or she has. If he works at a Western Union call center, he hates it. If he works at Boeing, building fighter jets for Korea and Singapore, he's grateful for foreign trade. The average wage in the aircraft manufacturing industry is $30.50 per hour.

A Western Union operator with a high school diploma can't suddenly become a machinist at Boeing or get a specialized job at a technology company with a lot of export business. The biggest winners tend to be the highly skilled workers, along with executives and shareholders of large corporations with export businesses or operations abroad. Half of the manufacturing of U.S.-owned companies now occurs overseas, according to the Economic Policy Institute in Washington.

The institute argues that low-wage foreign competition helps depress American paychecks, and that's right. Adjusted for inflation, hourly wages for non-supervisory workers rose only 4 percent from 1973 to 2005. Globalized trade is one of the reasons for the growing income gap dividing the wealthy from the poor and middle class.

The flip side is that foreign trade also holds down the price of goods in this country. That $15 pair of jeans at the discount store was made by low-wage workers overseas. But that effect may be lessening as the weakened dollar prompts foreign companies to raise their prices.

Foreign competition forces U.S. companies to become more efficient and improve quality. That benefits consumers, but it's hard on workers. The typical American factory today can produce the same amount of goods it did in 1990, but with a little more than half the number of workers. Increased efficiency actually has contributed more to the loss of high paying factory jobs in America than foreign trade has.

On balance, economists tell us that free trade helps America more than it hurts. Studies estimate a gain of $800 billion to $1.5 trillion to the U.S. economy from trade.

The trick, then, is to shape trade so that it benefits more Americans, not just those with high skills or wealth. We need more job retraining to qualify workers for the jobs that trade creates. We need reasonable environmental standards written into new treaties, so that a clean American plant doesn't lose business to a Chinese company with no pollution controls. America should insist that our foreign trade partners establish and abide by minimum standards of treatment of workers. And we need to press Asian governments to stop controlling their currencies in ways that put American goods at a disadvantage.

Perhaps most important, the United States must continue creating the high-value services and products that the world needs and wants. That means nurturing highly skilled, high-wage industries as low paying, lower-skilled jobs continue to move abroad. For government, that means improving education and infrastructure and investing in research. It means maintaining the free market in capital and ideas that has made America the world center for innovation.