Last week house speaker Nancy Pelosi and congress-man Charles Rangel showed genuine leadership by making a deal with the Bush administration to ease the passage of new trade pacts. But they did so from within a party that is going seriously awry on this issue. Too many Democrats, including most of their presidential candidates, simply wish the subject would go away.
This is a bad strategy for the party and for the country. Bill Clinton's most important political achievement was to transform the image of the Democratic Party into one that was in favor of growth, markets and trade. Clinton supported and articulated a powerful defense for the North American Free Trade Agreement, the World Trade Organization and commerce with China, among many such issues. He spoke confidently of the promise and opportunities of a globalized world. When you talk with elected Democrats now, they could not sound more different. Far too many of them are parochial, pessimistic and paranoid about the global economy.
Globalization and technological change produce real anxieties for many people in the developed world. But the basic facts are incontestable: over the past 20 years, as these forces have accelerated, the United States has benefited enormously. Its companies have dominated the new global economic order; its consumers have reaped the lion's share of the resulting price reductions. America has grown faster than any large industrial economy during these years: over the past two decades, American per capita GDP has roughly doubled. The median income of a family of four rose 23 percent between 1985 and 2005. There are serious problems of dislocation and rising inequality—and I'll return to these—but that there have been substantial gains is indisputable. U.S. unemployment stands today at a stunningly low 4.4 percent, about half that of many large European economies.
In this context it is almost bizarre to listen to the fears of so many Democrats (and increasingly some Republicans). The Central American Free Trade Agreement, which has almost no effect on the $13 trillion American economy but is a huge benefit to the countries in the region, passed the Senate with little Democratic support. Now trade pacts with three Latin American countries—Panama, Peru and Colombia—have been loaded down with amendments, and even so will face opposition from many Democrats. Again, this is a deal that will have almost no impact on us but is hugely important to three crucial allies.
When I was in Asia last month, I was told by several officials that they found themselves in an uncomfortable position. They liked what they heard from Democrats on America's role in the world, but they were terrified by what they heard about trade. One of them, who declined to give his name for fear of giving offense, said, "Look, it's an easy call for us. We don't like the Republicans on foreign policy. We think they've been stupid and unilateral. But they are staunchly progressive on free trade and that's the most important issue for us by far." Democrats cannot plausibly hope to lead the world by abdicating America's historic role as the leader of an open global economy.
It's true that the pace of change is fast and often frightening. And it can cause real pain for real people. But we can't solve this by slowing down or shutting off trade. What advanced economy in history that has closed itself off from the world has prospered? Would Detroit's automakers have been better off if they had never been exposed to international competition? Perhaps the outsourcing of service jobs today is different. But for the past 50 years America has outsourced manufacturing jobs—and yet the economy and personal income and our standards of living have kept growing robustly. Why is it different if the person exposed to international competition now wears a tie?
The current Democratic approach to these issues is misguided. Loading trade pacts with environmental and labor standards is ineffective, unless the aim is to sink them. It will not really change the fact of low-wage competition from poor countries. And, most important, it doesn't really help American workers to prosper in the long term.
What America needs is a new way to tackle trade. It is a C-and-T agenda: cushion and train. The government should help people to weather the shocks of this roller-coaster ride, and it should help train them to be better equipped for the next round of global competition. We do very little of this today. When someone loses his job in America, he loses his health care and pension. Imagine if that didn't happen—and it doesn't in other rich countries—would that worker be as terrified of change? And then imagine if he took a series of retraining and education courses to prepare him for a new job or career.
These two shock absorbers would better equip the average American to face a world of global competition. It would ease the genuine anxieties that people have about trade and build durable political support for expanding the world economy rather than walling us in. It's a more sensible solution than China bashing, bogus labor standards and protectionist subsidies. It's a New Deal for trade. Now is any Democrat willing to say that?