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May 14, 2007

Paul Krugman: Divided Over Trade

Paul Krugman discusses the recent trade deal and whether the inclusion of provisions such as labor standards will prove to be a substantial benefit to U.S. workers:

NY Times: Nothing divides Democrats like international trade policy. That became clear last week, when the announcement of a deal on trade between Democratic leaders and the Bush administration caused many party activists to accuse the leadership of selling out.

The furor subsided a bit as details ... emerged... But the Democrats remain sharply divided between those who believe that globalization is driving down ... wages..., and those who believe that ... international is ... essential... What makes this divide so agonizing is that both sides are right.

Fears that low-wage competition is driving down U.S. wages have a real basis in both theory and fact. When we import labor-intensive manufactured goods..., the result is reduced demand for less-educated American workers, which leads ... to lower wages... And no, cheap consumer goods at Wal-Mart aren't adequate compensation.

So imports from the third world, although they make the United States as a whole richer, make tens of millions of Americans poorer. How much poorer? In the mid-1990s ... economists, myself included, crunched the numbers and concluded that the ... effects ... on the wages of less-educated Americans were modest, not more than a few percent.

But... We're buying a lot more from third-world countries today... Trade still isn't the main source of rising economic inequality, but it's a bigger factor than it was. So there is a dark side to globalization. The question, however, is what to do about it.

Should we go back to old-fashioned protectionism? That would have ugly consequences:... other wealthy countries would follow suit, closing off poor nations' access to world markets.

Where would that leave Bangladesh, which is able to survive ... only because it can export clothing and other labor-intensive products? Where would it leave India ... if barriers to trade ... went back up?

And where would it leave Mexico? Whatever you think of Nafta, undoing the agreement could ... have disastrous economic and political consequences south of the border.

Because of these concerns, even trade skeptics tend to shy away from ... outright protectionism, and to look for softer measures, which mainly come down to trying to push up foreign wages. The key element of the new trade deal is its inclusion of "labor standards": countries ... will have to allow union organizing, while abolishing child and slave labor.

The Bush administration, by the way, opposed labor standards, not ... to keep imports cheap, ... it was afraid that America would end up being forced to improve its own labor policies. So the inclusion of these standards ... represents a real victory for workers.

Realistically, however, labor standards won't do all that much for American workers. No matter how free third-world workers are to organize, they're still going to be paid very little, and trade will continue to place pressure on U.S. wages.

So what's the answer? I don't think there is one, as long as the discussion is restricted to trade policy: all-out protectionism isn't acceptable, and labor standards in trade agreements will help only a little.

By all means, let's have strong labor standards in our pending trade agreements... But if Democrats really want to help American workers, they'll have to do it with a pro-labor policy that relies on better tools than trade policy. Universal health care, paid for by taxing the economy's winners, would be a good place to start.

anne
 

The column is typically superb, but limited in recourse to what Paul Krugman has several times told us are New Deal tradition resolutions of which universal health care and fair labor, and I would add environmental practices, are part.

anne
 

Move to universal health care, minimal tuition at public colleges and universities, infrastructure development, especially green infrastructure emphasis, and support for unions, including a decent minimum wage, and suddenly American workers are in an immensely better condition and immensely more competitive.

anne
 

There is however recourse, there is adequate compensation, and there is why Paul Krugman and I reference the New Deal legacy. Notice what a mere union can mean to bold janitors....

http://www.nytimes.com/2006/11/21/us/21janitor.html?ex=1321765200&en=f139e42d0ca84d0a&ei=5090&partner=rssuserland&emc=rss

November 21, 2006

Cleaning Companies in Accord With Striking Houston Janitors
By STEVEN GREENHOUSE

Houston's major cleaning companies and the union representing 5,300 janitors there announced a tentative contract yesterday that ends a monthlong strike, raises the workers' hourly wages by nearly 50 percent over two years and provides them health coverage.

Under the three-year deal, the first for the janitors since they unionized last year, their pay, which now averages $5.25 an hour, will increase to $6.25 on Jan. 1, 2007; to $7.25 on Jan. 1, 2008; and to $7.75 on Jan. 1, 2009.

Further, the employers agreed to increase a janitor's typical shift to six hours a day, from four. Many of the janitors had said they were being given too few hours of work to support their families.

As a result of the rise in both hourly pay and the hours in the workweek, the employees expect to see their paychecks double over the next couple of years.

"It's a moment of great victory," said Mercedes Herrera, a janitor for five years who earns $5.15 an hour. "We all came together, and the union gave us strength. Many of us have never received a raise. I've earned the same ever since I started, so the raise is great." ...

anne
 

Remember too that American corporations have continually be setting or nearing profits records year on year, while in Houston in particular corporations served by janitors are especially energy concerns and are profitable far beyond any historical recordings. Can such corporations easily afford a fair wage and health care for janitors? Of course, good grief. However, I still want universal health care and wish employer subsidies to that effect.

anne
 

Wal-Mart will be fine, the conpensation to workers however needs to be in the New Deal tradition, for everyday low prices are not conpensation enough.

anne