Commentary

Opportunism on Steroids

This article originally appeared on National Review Online on March 2, 2004.
The techniques John Edwards honed as a trial lawyer are proving indispensable to his presidential campaign. But like the ruinous consequences of unrestrained litigation we are witnessing in health care, insurance, and other industries, his divisive, bleak message of economic victimization is destructive.

The overarching theme of the Edwards campaign is that America is a country of haves and have-nots, and the economic policies pursued by the Bush administration are to blame for the latter’s plight. His strong finish in the Wisconsin primary is an unfortunate affirmation of the resonance of his anti-trade message with certain groups, particularly those who have lost jobs and are looking for someone to blame.

The Bush administration deserves some blame, but not for the reasons Edwards argues. The administration has helped create the environment in which protectionist rhetoric can flourish. It has failed to make a compelling case for trade liberalization. When given the opportunity to defend trade as a vital engine of economic growth and to dispel the myth that imports destroy jobs, it has abandoned its post. Sweeping steel tariffs, capitulation to textile-industry demands, exemptions for sugar producers in the U.S.-Australia free-trade agreement, and massive subsidies for agribusinesses convey at best tepid faith in the value of trade.

Now look where the administration stands. Domestic interests criticize it for pursuing trade policies to the detriment of U.S. workers, while trade partners criticize it for not standing up to protectionist pressures. This is the product of hypocrisy: preaching the virtues of free trade, while being unwilling to expend the political capital to show you really mean it. Accordingly, prospects for meaningful trade liberalization are doubtful in the foreseeable future.

This failure has lent credibility to the idea that protectionism has merit. It created a vacuum that people like John Edwards are happy to fill. And as the administration backs further away from its free-trade rhetoric, as it did by leaving its chief economist, Greg Mankiw, out to dry for his truthful comments on the benefit of outsourcing, it gives even more cover to protectionist arguments.

Edwards says he would revisit, and possibly cancel, the North American Free Trade Agreement. It has cost too many U.S. jobs, he claims. He would seek to impose penalties on U.S. companies that set up operations in foreign locales. He would insist that any future trade agreements include stringent requirements that our prospective trade partners adhere to environmental and labor provision on par with America’s.

Vilifying trade and erecting new barriers is not going to bring jobs back to the United States, just as embracing trade has not caused jobs to disappear. While it is true that there are some 2.3 million fewer U.S. jobs today than there were in 2001, U.S. trade policy is not to blame. The economy is always creating and eliminating jobs — between 2 and 3 million per month. It just so happens that since 2001, it has been creating slightly fewer jobs each month than it eliminates. Chalk this up to supply and demand, not trade.

Since 2001, the United States and most of the rest of the world has endured recession and subsequent sluggish growth. This has not inspired much in the way of business investment, a prerequisite to job creation. On the supply side, investments in new technologies and upgraded production processes made during the 1990s unleashed rapid increases in productivity.

Americans can produce much more with less — including fewer man-hours — than was required just 20, 10, and even two years ago. In the textile industry alone, productivity increased by 111 percent between 1980 and 2002, while employment declined by 35 percent. This dynamic exists throughout manufacturing and is the primary explanation for negative job growth in recent years. That being said, the unemployment rate still hovers just above record lows.

But productivity growth is something to embrace and celebrate, not revile and attempt to stunt. Just a decade ago economists were clueless as to if, when, and how a positive supply shock would manifest itself. Productivity growth allows firms to provide more goods and services for less cost, saving them and their customers resources to invest and spend. This process has created wealth, higher living standards, and better jobs.

To blame trade and propose scrapping trade agreements or raising import barriers to address job concerns is political opportunism on steroids. Imports rose throughout the 1990’s as employment levels and unemployment rates reached records highs and lows, respectively. Over the past 24 years, the number of people employed in the United States increased by 31 million, while imports more than tripled. And as imports rose, so did GDP. There is a very tight correlation between the two.

While John Edwards is experienced in the art of ascribing blame to win awards, his anti-trade message asks jurors to pay damages from their own pockets.

Dan Ikenson is a trade policy analyst at the Cato Institute.