In an article today in the Boston Globe, Rep. Barney Frank (D, MA) commented on the closure of a fabric maker located in or near (the article is unclear) his district:
These working-class people are bearing the brunt of a policy of globalization that benefits the few and damages the many,” Frank said. (my emphasis)
Mr. Frank has the problem precisely backwards. Open trade benefits the many — through more competition and lower prices — even though it takes away the protection of a chosen few. It is tariffs that impose (relatively small) costs on many dispersed consumers, but benefits concentrated interests (and harms the economy overall). In this case, the closure of a 900-employee textile plant is a highly visible manifestation of a phenomenon that has been largely postive on net. It is sad for those losing their jobs, to be sure, but millions of American consumers benefit every day from opening the U.S. market to cheaper imports.
As a Wall Street Journal article yesterday pointed out (and my colleague Dan Ikenson blogged about here last week), the power of organized labor in the Democratic Party has probably spoiled any further trade liberalization in the near future, despite the month-old and much-hyped “bipartisan deal” on trade. This backtracking comes after the administration agreed to Democrats’ demands for stronger labor and environmental provisions in trade agreements.
The recently-inked deal with Korea — the biggest trade deal for the United States since NAFTA, and one that promises large market opportunities for American farmers and service providers, not to mention deals for U.S. consumers — is probably off, all because of American automobile makers who fear competition from Korean imports and assert that the Korean market was not going to open enough for their liking. (Of course, if the deal fails, then the market probably won’t open further at all, but that logic is apparently unconvincing.) Talk about benefiting the few and damaging the many.