The Wall Street Journal has a pretty fair front page story by Greg Hitt and Deborah Solomon this morning talking about the role that trade is playing in the Iowa caucuses. It shows how Clinton, Edwards, Huckabee, Obama and even John McCain are talking about fair trade policies in their appeals to voters. But many of the commentators don't get it:
Iowa's ambivalence is all the more remarkable because the state is on
the whole a big winner from global trade. "Iowa, as much as any other
state, is on the plus side of the ledger," says James Leach, a 30-year
Republican congressman from Iowa who now runs Harvard University's
Institute of Politics...
By many measures, the global economy has been good for the state.
Boosted by the ethanol and biofuels craze and surging demand for crops
and farm equipment world-wide, Iowa's exports are up 77% over the past
four years versus 50% nationally. The state's unemployment rate hovers
around 3.7%, below the national 4.6% average...
"It's unfortunate that the Democrats are willing to describe trade as
part of the problem," says Robert Reich, President Clinton's labor
secretary... "It's pandering to a misconception in the public. The
truth is that trade is good for the U.S. but that some people are
burdened by it far more than others."
That was your former elected farm state representative and labor secretary, folks - two people that should know about the price of corn, soybeans and labor. While the volume of U.S. corn and soybean exported increased as predicted by NAFTA’s proponents, the prices received by American farmers declined to the lowest levels in recent memory. While American farmers received $12.64 per bushel of soybeans (in inflation-adjusted terms) when the NAFTA predecessor Canada FTA went into place in 1988, that price halved to $6.30 by 2006. In inflation-adjusted dollars, farmers received $4.29 a bushel for corn in 1995, the year the WTO went into effect and a year after NAFTA went into effect. But a decade later in 2005, the bushel price was at a low of $2.06, and only started increasing with the recent ethanol boom – a development that is threatened with derailment as Brazil and other agricultural exporters plot WTO challenges against U.S. corn ethanol subsidies.
And average and median wages, as regular readers
of Eyes on Trade know, have barely budged from their 1973 levels,
despite a doubling of productivity. It's not a question of compensating a few losers. MOST people, who are wage earners, are net losers from our current trade policy. (The unemployment level, mentioned in the article, is pretty irrelevant, since that is driven by interest rates. It's the composition of jobs (i.e. manufacturing v. services) that is affected by trade.) Nobody serious says that trade does
not play a major if not the leading role in this. So when Reich derides candidates that "are willing to describe trade as
part of the problem," that's about the least they can do in their sometimes tenuous loyalty to reality. In fact, many quoted in the article say this:
- Gene Sperling, adviser to Clinton: "Even those of us who are supportive of the open-market policies of the '90s to take seriously that the large inflow of workers from China and India
digesting American jobs is placing downward pressure on wages."
- Leo Hindery, advisor to Edwards: "My sense is that the families of Iowa have now concluded that the
modest benefit to them from cheaper goods that flow through Wal-Mart
have been overwhelmed by stagnating wages."
Besides these points, there was an odd comment that deserves flagging:
Most economists argue that changing technology is more to blame for the
divergence of economic fortunes. Nonetheless, worker concerns are
roiling the political landscape. "Everywhere you go you've got this
widespread feeling, especially in the labor community, that all of the
wage problems of the middle class are due to trade," says Austan
Goolsbee, a University of Chicago economist advising Democratic
candidate Sen. Barack Obama.
Actually, as a paper for the Federal Reserve Bank of Atlanta (no bastion of labor they) pointed out several years ago, the argument that skill-biased technological change (rather than other factors) is driving rising inequality is a pretty weak one, for among other reasons, because inequality began its rise in the late 1970s-early 1980s, while the workplace computer revolution didn't happen until the 1990s. That's just the most straightforward example; there are many more in the paper.
Oh, and for the record, and we'll be posting this on all election related posts:
Disclosure: Global Trade Watch has no preference among the candidates.