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Tags: free trade | income | TPP | NAFTA

Fortune: Don't Blame Free Trade for Job Loss, Income Inequality

Fortune: Don't Blame Free Trade for Job Loss, Income Inequality

By    |   Friday, 15 April 2016 12:08 PM

Free trade is being blamed by presidential candidates on both sides of the political spectrum for heartlessly stealing good-paying jobs from U.S. workers and destroying cities that used to prosper from America’s industrial might.

But voters need to reconsider the many benefits of free trade and understand how technology and innovation disrupt the labor market, says Alan Wolff, a lawyer at Dentons Llp who is chairman of the National Foreign Trade Council. He worked in U.S. trade agencies for the Nixon, Ford and Carter administrations.

“Politicians are reluctant to talk about the real causes of income inequality, and negatively talk about trade agreements instead,” Wolff writes in Fortune magazine. “It’s time to stop blaming trade agreements and ignoring other causes of job loss if we’re ever to figure out what to do about the real problems that exist.”

Republican front-runner Donald Trump has made unfair trade a central theme of his presidential campaign, targeting U.S. companies like Ford and Carrier for moving jobs to other countries.

Democratic candidate Bernie Sanders has opposed trade deals from the North American Free Trade Agreement in 1993 to the Trans-Pacific Partnership negotiated by the Obama administration. Democratic frontrunner Hillary Clinton flip-flopped on the 11-nation TPP.

Instead of focusing on trade agreements, Wolff says voters need to recognize that technological change and the drastic drop in shipping costs are bigger causes of job loss in the U.S.

He cites the decline of photographic film company Kodak that used to employ 61,000 people at its height. The advent of digital imaging and the rapid proliferation of smartphone cameras ultimately led the Rochester, N.Y., company to cut its work force to 7,000 before going bankrupt in 2012.

“Neither trade agreements nor trade caused Rochester’s huge job losses. It was advances in technology, something no one can stop,” Wolff says. “Investing in both education and research and development is the best hope to save the cities like Rochester.”

Shipping goods in containers triggered a massive drop in transportation costs, making it less expensive for companies to put their factories overseas and send goods back to the U.S.

“The savings from cheaper shipping costs, due to technological change, dwarfs any effect of trade agreements liberalizing import barriers,” he says. “The average U.S. tariff on imports of manufactured goods was 5.57 percent two decades ago, declining to 2.7 percent in 2013.”

He blames growing income inequality in the U.S. partly on a lack of spending on infrastructure and education, and “a tax system that is not competitive for making products in the United States.”

Wolff says that if the U.S. wants to be a global leader, it needs to remain engaged in the world economy and seek consumers in foreign markets.

“The Trans-Pacific Partnership Agreement is mostly about getting rules in place—rules against state-owned enterprises causing harm to private competitors, better protection of labor rights, and rules to keep the digital economy growing,” he says. “This is not a time to embark upon a new era of turning inward.”

© 2022 Newsmax Finance. All rights reserved.


StreetTalk
Free trade is being blamed by presidential candidates on both sides of the political spectrum for heartlessly stealing good-paying jobs from U.S. workers and destroying cities that used to prosper from America's industrial might.
free trade, income, TPP, NAFTA
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2016-08-15
Friday, 15 April 2016 12:08 PM
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