Free Trade Must Come With Trade-Offs

Digest this: The Asia-Pacific Economic Cooperation forum is discussing a vast free-trade zone that would include China, South Korea, the Philippines, Indonesia, Australia, the United States and 15 other Pacific Rim countries. And to think our Congress can't even agree on expanding trade with Peru.

Plans to "grow" trade keep popping up, but the American passion for them has cooled by about 20 degrees since the Democratic sweep on Nov. 7. Many of that day's victors had promised to apply the brakes on what they see as overly generous trade agreements, and others who did not got the message. The House immediately denied President Bush the two-thirds majority needed to grant Vietnam permanent normal trade relations with limited debate. Republican House leaders declined to submit a bill under the regular rules that required only a simple majority.

Flourishing world commerce is generally a good thing, but free trade should come with trade-offs. Such compromises have been sorely lacking in recent negotiations. Social policies that help Americans on the losing end of globalization can be even more important than the trade agreements themselves. Up until now, globalization has been used as an excuse for wage and benefit cuts -- rather than a driving reason for government to ease the pain they cause.

In his book, "The Audacity of Hope," Barack Obama tells how the neglect of free-trade's victims had made his support of sensible trade liberalization next to impossible. For example, voters in Illinois blamed NAFTA for a traumatic loss of factory jobs, so when CAFTA came along, the Democratic senator felt obliged to vote against it. The crazy part was that the combined economies of the Central American countries involved about equaled that of New Haven, Conn.

"My vote gave me no satisfaction,'' Obama wrote, "but I felt that it was the only way to register a protest against what I considered to be the White House's inattention to the losers from free trade."

What sort of attention might the displaced workers need? Guaranteed health coverage would seem No. 1. Obama suggests education accounts that workers can use to retrain and wage insurance, an interesting concept. Most blue collar jobs lost these days are replaced by lower-paying substitutes, and wage insurance could provide 50 percent of the difference between the new and old wages for a year or two. The point is to ensure that the loss of a good job does not throw an entire family into economic freefall.

Concerning the actual trade agreements, sure, toughen them up. Organized labor's insistence that American workers be spared having to compete against children is not unreasonable. And it's only fair that workers in countries granted access to U.S. markets be allowed to unionize.

Fast-track authority? Forget about it. Bush's power to make trade pacts to which Congress may give only a simple up-or-down vote expires next year. "Congress isn't going to stand for it," opined Sherrod Brown, the Democratic senator-elect from Ohio who made trade skepticism his signature issue.

That said, no amount of fiddling with trade accords can protect American workers from this iron fact: People in poor countries are happy to work for a fraction of even a lousy American wage. Labor-intensive, low-skilled factory work is going, going, gone from the U.S. economy.

As for the Vietnam trade bill -- it should have passed. A new member of the World Trade Organization, Vietnam is opening its economy to competition in telecommunications, financial services and agriculture. Vietnam deserves normal trade status. But the new New Deal is this: Every expansion of trade comes paired with protections for Americans who are hurt by it. The winners help the losers. Nothing wrong with that.