August 11, 2011

Maine Voices: Michaud downplays benefits, overstates problems of new trade pacts

The benefits of approving the three treaties for Maine are not large, but they are real.

Special to The Press Herald

BRUNSWICK - In his recent opinion piece in this newspaper ("Washington should move ahead on a balanced trade policy," Aug. 1), U.S. Rep. Michael Michaud accuses the advocates of pending international trade agreements, including The Press Herald, of "trotting out the same old talking points" heard before.

ABOUT THE AUTHOR

Stephen Meardon

is an assistant professor of economics at Bowdoin College.


What's true of The Press Herald is truer of Michaud. The congressman's argument brings to mind another Maine politician from more than a century ago -- one from a different party, but of similar conviction and greater renown.

I mean the Honorable James G. Blaine.

Like Blaine, Michaud claims to be really a supporter of trade notwithstanding his unmistakable protectionism. The difference is that Blaine's claim was more credible. Somewhat more credible, at least.

Blaine wished to protect American producers of a host of goods from flour to machinery. He saw trade agreements as a means to that end.

Michaud says he wants trade agreements, too. But only on terms that would make "a truly level international playing field." Blaine knew better. The gains from trade are found not where the traders are on the same "level" but where they are different. That was reflected in more than a dozen trade agreements that Blaine championed successfully in Latin America and the Pacific.

Try to imagine Blaine stonewalling the Cuban agreement he negotiated in 1891, when he was U.S. secretary of state, on the grounds that the foreigners' "labor is cheaper" (to borrow Michaud's words).

Cheap labor, plus perfect geography, produced cheap sugar for U.S. consumers. Their sugar imports gave Cubans the means to buy U.S. exports.

To be sure, Blaine's embrace of trade had its limits. Critics complained that his agreements expanded trade only with certain partners, not all the world. They created trade in some channels but also diverted it from more lucrative ones. They sapped the nation's political will for comprehensive trade liberalization.

All the same criticisms could be leveled against the pending agreements with South Korea, Colombia and Panama. But Michaud's criticisms are completely different. To accept them would be to stave off not only the most lucrative gains from trade, but even the more modest ones.

Unfortunately, in making the case for the pending agreements, The Press Herald makes an error akin to Michaud's. The congressman claims that the Korean agreement in particular will diminish U.S. manufacturing and "cost us 159,000 jobs."

The Press Herald's editorial of July 28 casts doubt on such claims, but for the wrong reason. The editorialist seems to deny the likelihood of manufacturing-job losses.

The U.S. International Trade Commission has estimated that in some industries, especially textiles and apparel, increased imports under the Korean agreement will indeed cause job losses.

But the net effect on total employment will be about zero. Within manufacturing, the job losses will be partly offset by gains elsewhere. Machinery looks promising. Outside of manufacturing, the losses will be offset even more by gains in meat and animal products, fruits and vegetables, and other foods. U.S. exports of those products will grow. (U.S. gross output will grow modestly, by perhaps a tenth of 1 percent.)

To deny the likelihood of job losses is disingenuous. It is also, in an important sense, pessimistic. Jobs are lost to trade because they are taken up in another place to greater advantage. The advantage is mutual. New jobs are created at home. More goods are produced abroad and at home.

The potential gains for Maine are not large, but they are real. They will probably not be felt by the thousand or so people working in the footwear industry, where times may get tougher and jobs scarcer.

They will be felt by the several thousand more working in blueberries, poultry, potatoes, fishing and aquaculture, among other industries. And they will be felt ultimately, if only slightly, in the greater abundance of goods in Maine households.

The question of trade liberalization, whether by the partial and problematic means of bilateral agreements, or by promoting world trade, is partly an economic question. By how much will output change, and in which industries?

But it is more importantly a value question. Should we foster new opportunities at the cost of the accompanying, and unevenly borne, dislocation?

Or should we protect some jobs at the cost of impeding others and dampening our overall prosperity?

In the debate over the pending trade agreements with South Korea, Colombia and Panama, let's by all means get past "the same old talking points." (They are old indeed.)

To do so requires asking the right questions.

 

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