If a government policy creates many higher-paying jobs while putting fewer lower-paying ones at risk, would you favor it?

Virtually everyone would say yes. So why are free trade agreements — mechanisms that generate far greater benefits than disadvantages — perceived so negatively?

The answer comes down to misinformation disseminated by trade detractors and the failure of trade advocates, such as the business community and the Bush Administration, to effectively make their case.

According to a new study conducted by the Washington, D.C. research firm APCO Insight, a healthy 61 percent majority of Americans believe that "free trade in goods and services" is a good thing for their household and 56 percent believe that the entire nation benefits as well. But when asked about specific free trade agreements they've heard about, a 45 percent plurality oppose the deals, while only 28 percent support them. What is the reason for this contradiction?

The study’s data suggest that opponents of trade agreements often cite a litany of familiar criticisms with impressive specificity that amounts to a vote of no confidence in U.S. trade negotiators. Supporters, on the other hand, lack specific language and symbols necessary to frame an effective debate.

What is the result? The possibility exists that the Trade Promotion Authority (TPA), the mechanism that gives our trade negotiators credibility at the international negotiating table, will not be renewed by its June 30th expiration date. Under the TPA, Congress cannot add amendments to negotiated trade agreements and must vote to ratify them by an "up or down" vote.

Without the TPA in effect, foreign governments are reluctant to make deals and concessions that might be changed later by Congress. In turn, the United States will not be well positioned to negotiate new foreign market-opening accords.

What is the impact? Federal Reserve Chairman Ben Bernanke states, "Trade allows us to enjoy both a more productive economy and higher standards of living." But he also points out that "Economic isolation and retreat from international competition would inexorably lead to lower productivity for U.S. firms and lower living standards for U.S. consumers."

Although not well understood, the benefits of trade are enormous. For example, trade enables American producers to sell beyond the U.S. market of 302 million consumers to reach the world market of 6.6 billion. This is important since exports support millions of American jobs that pay 13-23 percent higher than the average wage, as well as strengthen our companies and farms.

According to a recently published study by the Business Roundtable, an association of chief executive officers of leading U.S. companies, more than 31 million U.S. jobs depended on trade in 2004. This means one in every five jobs is linked to exports and imports of goods and services.

Plus, trade and globalization have generated an increase in U.S. income of approximately $1 trillion annually. This translates into annual income gains, on average, of approximately $10,000 for each American household. By removing all trade barriers, according to a study cited by Fed chief Bernanke, household incomes would increase another $4,000 to $12,000 annually.

Opponents often blame trade agreements for the declining number of manufacturing jobs. Nothing could be further from the truth.

New technologies, increases in productivity and the dynamic American workforce have transformed American manufacturing. Over the last 10 years, this has resulted in an annual increase in manufacturing productivity of 4.5 percent, which is much faster than the 2.7 percent annual growth in overall business productivity. Consequently, fewer workers can turn out more products faster than ever.

The result: As American manufacturing output continues to rise, the number of manufacturing jobs continues to fall. Thus, from 1979, the year of highest U.S. manufacturing employment, through 2006, the number of manufacturing jobs fell from 19.8 million to 14.1 million. Concurrently, the value of U.S. manufacturing shipments rose from $1.7 trillion to nearly $4.8 trillion.

Will the economy replace jobs lost? And if so, how well will they pay?

The Department of Labor projects the creation of 19 million net new jobs from 2004 through 2014. And if current pay trends are any indication of the future, we're in good shape. Last month’s data indicate that the average hourly earnings for production workers in private services has nearly caught up to those in manufacturing, at $17.06 and $17.20, respectively.

Free trade may not be a panacea, but it certainly has a very positive effect on our economy and our quality of life — even if this fact is not well communicated. Business should roll up its intellectual sleeves and get to work.

This article appeared in Impact Analysis, July-August 2007, and was syndicated by McClatchy-Tribune in May and June 2007 and appeared in The Buffalo News, Corning Leader, Great Falls Tribune, Modesto Bee, and Trenton Sunday Times.
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John Manzella
About The Author John Manzella [Full Bio]
John Manzella is a world-recognized author and speaker on global business, competitive strategies and the latest economic trends. He also is CEO of World Trade Center BN, chair of the Upstate New York District Export Council, and founder of The Manzella Report and Manzella Trade Communications Inc. His latest book is Global America: Understanding Global and Economic Trends and How To Ensure Competitiveness.




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