The Right Way on Trade?

From Gordon Hanson, at Foreign Affairs, "Can Trade Work for Workers? The Right Way to Redress Harms and Redistribute Gains":

For decades, the promise of globalization has rested on a vision of a world in which goods, services, and capital would flow across borders as never before; whatever its other features and components, contemporary globalization has been primarily about trade and foreign investment. Today’s globalized economy has been shaped to a large extent by a series of major trade agreements that were sold as win-win propositions: corporations, investors, workers, and consumers would all benefit from lowered barriers and harmonized standards. American advocates of this view claimed that deals such as the North American Free Trade Agreement would supercharge growth, create jobs, and strengthen the United States’ standing as the world’s largest and most important economy. According to then President George H. W. Bush, “NAFTA means more exports, and more exports means more American jobs.”

A quarter of a century later, such optimism appears profoundly misplaced. NAFTA and other deals did boost growth, and free trade remains a net benefit for the U.S. economy as a whole. But the overall gains have been far less dramatic than promised, and many American workers suffered when well-paid manufacturing jobs dried up as factories moved abroad. Those who managed to stay employed saw their wages stagnate. The federal government, meanwhile, did little to build a safety net to catch those who lost out.

Unsurprisingly, Americans have complicated views on trade. Although a majority of voters see free trade as a good thing, barely one-third believe that it creates jobs or lowers prices. In response, political elites and elected officials across the ideological spectrum have scrambled to distance themselves from free-trade policies and from the major pacts of the past. For its part, the Biden administration has made a noble-sounding but vague pledge to pursue a “worker-centric” trade policy. The specifics are still unclear, but such an approach will likely include more aggressive so-called Buy American provisions, which require government agencies to give preference to U.S. products when making purchases; increased pressure on trading partners to respect workers’ collective-bargaining rights; and a hawkish relationship with China. Despite the rhetoric, these proposals put the administration well within the bounds of existing U.S. trade policy—tweaking margins here and there.

That approach is unlikely to fix the problems caused by free trade—which, despite the appeal of protectionist talking points, isn’t going anywhere. Instead, the Biden administration should establish targeted domestic programs that protect workers from the downsides of globalization. A responsible policy would capture the gains of free trade but make up for domestic losses. In recent years, the United States has done neither...

Still more.