Thursday, July 22, 2004

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How do Americans and Europeans feel about trade?

That's the question asked by the German Marshall Fund of the United States, which helped commission a four-country public opinion survey on the subject entitled Reconciling Trade and Poverty Reduction.

The fund concludes that "support for free trade remains robust." After reading the report, I'm more pessimistic. This is from the accompanying press release:

[W]hile free trade is popular, the instruments through which it is delivered – the EU internal market and NAFTA – are not. Forty-three percent of American respondents support the “free flow of people, goods, and services” between the US, Canada, and Mexico, but only 4% support NAFTA....

More than half (56%) of respondents feel that multinational corporations benefit most from trade. The numbers are particularly high in France (65%), Germany (62%) and the US (53%). Slightly less than half of the British respondents (43%) see multinationals as the prime beneficiaries. (emphasis added)

The report goes onto suggest ways to pitch free trade policies in politically friendly ways. Consider this proposed phrasing:

International trade contributes to prosperity and should therefore be welcomed, but not at all cost. The United States and European Union must stand up for labor and human rights standards and protect our jobs, the environment, and our children. Otherwise we'll get a race to the bottom, with jobs being moved to sweatshops in China, workers in developing countries living under abominable conditions, and the loss of our ability to protect against tainted foods. That would be a race without winners, perhaps with the exception of a small group of big business.

That's just a God-awful way to sell free trade, because it admits a falsity. Smart people like Stephen Roach are dredging up the race-to-the-bottom argument to explain the current job market, but it's just wrong. The statement that "workers in developing countries living under abominable conditions" with more globalization is particularly egregious.

On the other hand, this message works for me:

International trade has both positive and negative effects. International trade brings a lot of benefits -- lower consumer prices, more choice -- but also causes a lot of disruption in millions of workers' households with people losing their jobs. With the world becoming a smaller and smaller place, we need to make trade work for everyone. For us here in the United States and Europe, that means we need to invest more in skills and technology so that our economy becomes more flexible and innovative -- that is where our best opportunities lie for the future.

This phrasing has the twin virtues of greater acccuracy and greater optimism.

One final interesting finding:

Americans are less favorable toward further international trade deals than Europeans. A high proportion of Europeans – 82% of French and 83% of British – want more international trade agreements, compared to just 54% in the US.

Go check it out.

posted by Dan on 07.22.04 at 03:42 PM


The wisdom of crowds. NAFTA is, in the context of free trade, rightly unpopular. Because it isn't free trade. From a market point of view Mexico could profit more if it traded more with Europa and Soutern-America than with the U.S. Wherever it's comparative advantage is. But this process is blocked by NAFTA and it's "rules of origin". And so we have trade diversion, instead of free trade, which could leave a country like Mexico worse off.

posted by: Ivan on 07.22.04 at 03:42 PM [permalink]

I think it's the difference between supporting globalization and supporting "globalization."

posted by: praktike on 07.22.04 at 03:42 PM [permalink]

I wtie in telegram form as more efficient.

Economics is a set of archaic,fallacious theories. There is no free trade, no invisible hand,
rational people making rational choices, etc. Those theories are ruining the United States.

Protectionism? We must devise some smart ways to protect this nation, our nation, other than militarily. [Just as we must protect our borders, restrict and filter out people as another key to protecting this nation, our nation.]

I am not alone in saying that allowing our technological prowess, industrial, and research to decline is totally disgusting. It's only a matter of a short period before it all hits the fan, it may be too late in my view. There's too much funny money out there as investment. Trade deficits are too large. Another piece of the picture is the number of foreign countries which have purchased U.S.companies. There's been a fire sale os assets for over a decade. [No,I am not pro-high union benefits nor am I pro corp greedy princes or off shore tax havens.]

We have consumers gorging on cheap foreign made goods, on entertainments, on sporting events, etc. Any item picked up at Home Depot, Best Buy, or pro sport event,etc. is made elsewhere. How many Chinese missiles and subs are you all going to buy?

Exports? Oh, wow, Agricultural is big in the Congr. eye. Many of us would mcuh prefer having a good, clean food supply here rather than what these corp farms produce.

posted by: Alex on 07.22.04 at 03:42 PM [permalink]

"but only 4% support NAFTA..."

That seems remarkably low, implausibly so, in fact. I know NAFTA is unpopular, but that can't be the right number. I'd believe that only 4% of my readers support NAFTA (despite my best efforts), but they -- though fine folks, one and all -- aren't really a representative sample.


P.S. Ivan writes, "Mexico could profit more if it traded more with Europa and Soutern-America than with the U.S. Wherever it's comparative advantage is." Mexico does have a comparative advantage with the US. In fact, one of the first results of international economics is that all countries have a comparative advantage vis a vis other countries, including the US, in the production of some goods.

posted by: Angry Bear on 07.22.04 at 03:42 PM [permalink]

One probable reason for higher European support for international trade is that they are living in smaller markets. Even the large European economies are, individually much much smaller than the US economy. Starting deep in the heart of Texas, for instance, you can grow a humongous company and never have to leave the American market. From deep in the heart of Yorkshire, or Provence, or Bavaria, you're into international trade PDQ. When traveling 50 miles takes you across an international border, you're going to be conscious of and positive about international trade.

posted by: Doug on 07.22.04 at 03:42 PM [permalink]

Boy-Professor Drezner writes:

"Smart people like Stephen Roach are dredging up the race-to-the-bottom argument to explain the current job market, but it's just wrong."

There are 2 links in this sentence, 'Roach' points to Roach article in NYT ( and 'just wrong' points... to the same Roach article?

Roach article is a sober and clear description of labor stats for the last 12 monts, all well documented and referenced. There is no speculation and almost no theorizing, most of the article is just restating data from BLS.

As refutation Boy-Professor offers link to the very same Roach article. I guess that's how academy works nowadays.

Roach ends his article thus:

"It was only a matter of time before the globalization of work affected the United States labor market. The character and quality of American job creation is changing before our very eyes. Which poses the most important question of all: what are we going to do about it?"

Boy-Professor offers the answer:
We should put our collective head up our collective ass and enjoy.

posted by: kufar on 07.22.04 at 03:42 PM [permalink]

Kufar: Thanks for picking up that cut-and-paste error. The proper link has been substituted into the proper place.

posted by: Dan "That's 'Man-Professor' to you" Drezner on 07.22.04 at 03:42 PM [permalink]

Don't know the mindset of the ones who responded to that survey, but it's not all that contradictory to oppose certain of our trade agreements yet support free trade in princple. If globalization allegedly involves corporate subsidies and/or lopsided rules that seem to shoot ourselves in the foot (as has sadly become all too close to the norm) then isn't that defeating the purpose? If I were Semi-informed Average Joe & that were what I was sold as "free-trade" I'd be skeptical too.

Free trade -- REAL free trade -- involves risk, not just reward. Anyone expecting Uncle Sam to cover their butts don't even deserve to call themselves capitalists, let alone advocates of free trade. The existence of such people can't help but contribute to awkward attitudes on trade in the US: make it clear to our congressmen that them & their lobbyists are to be laughed at & sent on their way, and things will turn for the better.

posted by: b-psycho on 07.22.04 at 03:42 PM [permalink]

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