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How Bad Trade Deals are Destroying the Middle Class

This is from “Skeptical Economist”.

So far, our global economic failures show up mainly as discontented workers in areas hard hit by import competition. However, the real problems (and the worker problems are quite real) are considerably worse

The United States as a nation is far from self-sufficient or anything close. Back in Kennedy era, imports and exports were in the range of 4 to 5% of GDP. The US economy was closes to autarkic. These days comparable numbers are imports are 16.22% of GDP and exports are 10.46% of GDP. Per se, there is nothing wrong with trade growing as a percent of GDP. However, the brutal reality is that our nation can no longer pay its bills. Imports of goods are almost double exports of goods. We enjoy a small (and shrinking) surplus on services and are now in deficit for payments (profits received from overseas US investments versus profit earned by foreign investment in the US).

If you could only pay half of your bills, would you think you were doing well? Would that be OK? Might some question of economic failure arise? Wouldn’t virtually every American see it that way? Yet, when it comes to our country, it is somehow OK. Of course, it is not.

If you could only pay half of your bills, your debts would be soaring. Guess what? So are the debts of the United States. Of course, the national debt is growing and more than 50% owned by foreigners. However, the debts of ordinary Americans are rising as well and a growing percentage are owned by foreigners as well.

The trade debate is usually depicted in terms of “cramped, narrow minded, locally oriented protectionists” versus “visionary, open minded, free trading globalists”. This caricature is largely correct. However, that doesn’t mean the protectionists are wrong. With America going broke, they are at least on the right side of the issue..

Thomas Friedman demonstrated again the cluelessness of our elites on trade today. His piece “China: Scapegoat or Sputnik” repeated the usual mantra about education solving our problems. His actual words were “health care, portability of pensions, entitlements, and lifelong learning”. Nice ideas, but will they really help middle aged workers without jobs? No, of course not, but the deeper problem is they won’t fix our trade problems either. We will simply go broke faster. What words were missing? How about “overvalued currency”, “RMB versus the dollar”, “China’s lack of currency flexibility”, etc. All notably missing.

First of all Free Trade is not trade as historically defined and practiced. In the past, one nation traded with another nation for a product they did not have in times when there were tariffs and in other times when there were no tariffs.
Today Free Trade is mainly based on moving production and factories from place to place based on the cheapest labor markets of the world. The main commodities being traded today are human beings as workers who are put on a world trading block to compete against one another in terms of wages. It has created a working poor class in the more prosperous nations and impoverished working classes in other countries where even child labor is used.
It must also be noted that the U.S. Government itself started the process. They sponsored the moving of factories to Mexico starting in 1956. It was supposed to be a temporary program but it never ended.
This evolved into Free Trade with the Bush and Clinton families leading the way.
History will show it was President Clinton - a Democrat - and a Democrat controlled Congress that passed both unfair NAFTA and GATT trade agreements. This acted as a Pearl Harbor attack on workers - see http://www.graphicsforums.com/public/list.asp?id=1328 It shows Clinton leading the way with Dole Gingrich and even Limbaugh in the passage of NAFTA and GATT being joined later by President Bush riding shotgun in the attack on workers everywhere.
It must also be noted that workers have had no voice in the process. See http://profile.typekey.com/tapsearcher for more articles and the thought provoking editorial art by Ray Tapajna at http://arkineart.fotopages.com

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