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The End of Free Trade
The era of increasingly-free trade comes to a close.
by Irwin M. Stelzer
05/22/2007 12:00:00 AM

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SO IT DOES INDEED end with a whimper rather than a bang. Free trade, I mean. Thanks to a president too weak politically to withstand the protectionist surge of a Democratic Congress, the era of ever-freer trade has come to an end. It expired quietly, with few mourners, and some of those who have done it in claiming that the corpse is alive and well.

Susan Schwab, U.S. Trade representative, found it politically necessary to claim that the deal cut by a weakened President Bush and a reluctant Treasury Secretary Hank Paulson with a triumphant Congress "shows the U.S. is not turning protectionist." I doubt whether her more candid predecessor, Bob Zoellick, could have been persuaded to claim victory in the face of so significant a defeat.

The deal, still subject to congressional approval, is this: The Democrats will agree to approve two minor trade agreements, one with Peru and the other with Panama, in return for a Republican agreement to require its trading partners to adopt a series of environmental and labor market "reforms." Those "reforms" include the recognition of the right of trade unions to organize workers, the outlawing of most child labor and of workplace discrimination, and a requirement to allow patent protections of pharmaceuticals to lapse overseas when they expire in the United States. We can sue our trading partners if they violate the agreement, and they can sue us. For example, if some country such as Panama decides that we are violating trade union rights here at home,

they can bring suit to pressure Congress to change the law.

Never mind that these provisions are an invitation to anti-trade forces in America to bring suit against countries deemed to be lax in enforcing these new standards. Or that the agreement opens the door to suits against our own government. More important is what this deal tells about the shift in the balance of political forces that determine future trade policy.

Until now, the administration's supporters of free trade have been able to fight off Democrats' attempts to force these restrictions on America's trading partners. No longer. For two reasons:

First, there is Iraq, which has sharply reduced the president's ability to keep his congressional party in line. The presidential coattails, once clung to by congressmen trying to ride Bush's popularity to victory, now are frayed beyond any ability to be useful to aspiring politicians. Indeed, the name of the game in Republican circles is to create as much distance as possible from the Oval Office.

Second, there is a shift in attitudes towards trade. Trade unions and Democratic politicians looking for a free-trade scapegoat are arguing that Wal-Mart prices, so attractive to consumers, come at the expense of exploited children in Asia and an underpaid workforce in America. Child laborers in Asia might be working themselves out of poverty, and Wal-Mart might be providing jobs for thousands unable to find work elsewhere, but that doesn't matter to critics of free trade and of the company.

In one sense, the free-trade advocates in the administration have no one to blame but themselves. They have been unable to craft and to explain effective programs to transfer some of the gains of free trade to those who suffer from it--displaced workers. Yes, there is a host of programs aimed at doing just that, but most workers can't cope with the bureaucratic shoals that must be navigated in order to be eligible for benefits. And yes, unemployment is virtually non-existent, but until very recently, workers' wages have not kept pace with the growth of profits and executive compensation. That created an opportunity for the administration's critics to claim that globalization and free trade raise corporate profits and executive compensation, while exposing ordinary workers to competition from dollar-a-day laborers in Asia and below the border.



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