Blaming Free Trade Alone Ignores Deeper Systemic Issues

Arguments that free trade agreements, including recently signed Trans-Pacific Partnership Agreement (TPP), cause more harm than good are based on limited information and extensive rhetoric. Consequently, the real challenges plaguing the United States are overlooked.

Here are a couple of arguments that appear true to some degree but ignore the real causal factors and, thus, fail to offer long-term concrete solutions.

Boycott in the Senate! What will happen in the House tomorrow?

Free Trade, Education and Employment

A piece titled, “Education Can’t Save Us from Free Trade,” argues that the TPP would worsen the plight of the middle class. To illustrate this point, the author says that “whites and blacks working side by side in semi-skilled industries made more money than they ever had” and that he “saw better race relations in the 1960s there [in South Carolina] than in parts of New England.”

This example of “racial democracy” in the workforce ignores the education, employment and income disparities of the mid-20th century. In the 1940s, the unemployment rates for African Americans were double that of Caucasians. On June 11, 1963, President John F. Kennedy noted that African Americans had “one-third as much chance of completing college, one-third as much chance of becoming a professional man, twice as much chance of becoming unemployed, about one-seventh as much chance of earning $10,000…and the prospects of earning only half as much.” The Civil Rights Act of 1964 took effect to correct for the systemic discriminatory practices that contributed to disparities in employment, as well as education and earning power.

The unemployment gap reached a peak in the late 1980s with blacks having a rate of 2.77 times higher than whites. The North American Free Trade Agreement (NAFTA), which is often blamed for the decline of U.S. manufacturing, had not even taken effect yet.

These disparities continue today, albeit slightly improved. By December 2015, black unemployment dropped to 1.59 times that of white unemployment. Nevertheless, there remains a trending disparity that has its roots in a system developed far in advance of the regulated global economy as we know it today.

Let’s not discredit education. Former Secretary of Labor and UC Berkeley professor Robert Reich finds that those with higher levels of education benefit from increased access to global markets seeking those particular skills, which leads to higher pay. At the same time, those who are not well educated lose out as trade deals may add to the loss of factory jobs that many relied upon for employment, decent pay and great benefits.

The loss of well-paying manufacturing jobs has disproportionately impacted African Americans. However, free trade is merely exacerbating a deeper problem that must addressed.

From 2006-2016, manufacturing employment dropped from 14 million to around 12 million. A higher share of manufacturers do not have a college degree relative to the overall share of U.S. workers. A few years ago, non-college educated manufacturers made 10.9 percent more than workers with similar levels of education in other parts of the economy. Simultaneously, wages in the manufacturing sector have declined dramatically within the last 15 years. Although about 75 percent of African Americans actually accounted for management, professional, service and sales/office positions at the beginning of the century, a good number remain in lower paying jobs that offer minimal opportunities for upward mobility.

Reich writes, “The core problem isn’t really free trade, or even the loss of factory jobs per se. It’s the demise of an entire economic system in which people with only high-school degrees, or less, could count on good and secure jobs.”

Access to quality education at the primary and secondary levels is the real issue. There has been progress in terms of the high school graduation rates for African Americans. However, adequate preparation for colleges and universities remains a problem. For instance, an NAACP study finds that 19 percent of African American students attend schools that do not offer advanced placement (AP) courses compared to 6 percent for Asian; 12 percent, Latino; and 15 percent, white students. As one who had the opportunity to attend public schools that offered advanced courses and had ample resources, I realize the importance of access to a quality education in order to compete.

The figures for college graduation rates also call for deeper solutions. The Journal of Blacks in Higher Education finds that black student college graduation rates have improved in recent years. Nevertheless, the nationwide graduate rate remains low at 42 percent compared to 62 percent for white students. The same study also reveals the importance of education and says, “Most important, blacks who complete a four-year college education have a median income that is near parity with similarly educated whites.”

How We Should Not Respond

While teaching undergraduate courses, some students have criticized free trade and called for protectionism. However, when these same students were asked about where they purchase their food—Walmart–and to read the labels on their clothes—Made in China—the loud rhetoric fell to a whisper.

Placing high tariffs on imports from China in order to protect jobs and save U.S. businesses is not the answer. These tariffs are in response to concerns that China manipulates its currency and subsidizes certain industries. This is an issue of unfair trade practices. The deeper issue rests with the effectiveness of the World Trade Organization (WTO) in making sure that all members, not just China, play by the rules.

As history has shown us, protectionism results in higher cost imports for businesses that rely on lower cost inputs from other countries, higher costs for consumers, businesses losing revenue in the international market, and the loss of jobs in trade-related industries such as transportation.

A More Productive Approach

In sum, free trade merely reveals deeper systemic problems in the United States. The most productive response is to address the more complex structural problems that create economic disparities and push for stronger enforcement of trade rules to reduce unfair competitive advantages in the global market.

 

Creative Commons License This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Unported License.

About Dr. Sarita D. Jackson

is the President and CEO of the Global Research Institute of International Trade, a think-tank/consulting firm that examines trade policies and their impact on domestic businesses. Prior to heading GRIIT, Dr. Jackson was a tenured associate professor of political science in North Carolina and worked as a trade policy consultant for an Arlington-based consulting firm. She has participated in trade policy projects and conducted research on free trade negotiations in Botswana, Antigua and Barbuda, Dominica, Dominican Republic, Mexico and Panama. Dr. Jackson has also traveled to Chile and Argentina to study their political systems and economic integration policies.
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4 Responses to Blaming Free Trade Alone Ignores Deeper Systemic Issues

  1. garry moore says:

    Trump or Clinton as US President

    Means what for international trade agreements?

    Comments from both regarding trade are very concerning

    Moore, Garry R – Solutions Inc

    • Dr. Sarita D. Jackson says:

      Hi, Garry. Thank you so much for your comment. I couldn’t agree more. Trump’s position appears much clearer, even if it is based on rhetoric, whereas Clinton’s shift from supporting the TPP to, now, raising questions about the deal make it less apparent as to what we can truly expect.

  2. atul says:

    Education can not save free trade . Its fact…

    • Dr. Sarita D. Jackson says:

      Hi, Atul. Thank you for your comment. Facts derive from data. Merely stating that education cannot save free trade constitutes an opinion rather than a fact.

      The argument of the piece is not that education will save free trade. Instead, the piece argues that quality education will better help people to compete in a “free trade” economy. The piece points to the idea that those who have gained the skills to compete in the current “free trade” economy fare far better than those who do not have those skills, many of which is gained by a quality education. The inequalities in gaining access to a quality education and resources contributes to the challenges instead of solely the existence of free trade and globalization, which are here to stay.

      ITE welcomes debate. If there are facts to prove that the majority of individuals who have gained access to a quality education at the primary, secondary and/or college levels are doing poorly in the global economy, please do share them.

      Thanks again for contributing to this particular debate.

      International Trade Examiner (ITE)

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