Free Trade, China, and US workers by mattsteinglass
February 28, 2007, 11:55 am
Filed under: China, Economics, United States

Ah, the blogosphere. At TPMCafe, Jeff Faux and Brad DeLong have gotten into a spat: Faux says free trade is only in the interests of America’s ruling class, but hurts American workers by sending their jobs to China. DeLong asks why he should morally privilege the welfare of $40,000-a-year American workers over $1200 $3000-a-year Chinese workers, who obviously need the jobs more. Faux says free trade doesn’t really help the Chinese workers, either, but Ezra Klein points out that Faux just claims this by fiat and doesn’t really make a case. Then Dave Sirota goes ahead and makes the case that free trade doesn’t really help 3rd-world workers…by claiming that the fact that investment is turning from China to Vietnam as Chinese labor costs rise shows that free trade doesn’t really help Chinese workers in the long run either. Whew.

To the point: Sirota makes a bad, logically flawed and evidentially under-supported case. In a key example, he cites a year-old BusinessWeek article, claiming it shows that “rural China’s potential growth would be undercut by new “free” trade policy with Communist Vietnam, where wages, human rights and environmental stadards [sic] are even lower than in China.” But that’s not what the BusinessWeek article said at all. It just said wages and real estate were cheaper in Vietnam, and that companies like to diversify operations to different countries in order to spread risk. In fact, “human rights and environmental standards” are not “lower” in Vietnam than in China. (Human rights are pretty intricate, and saying they are “lower” in Vietnam than in China is like saying that democracy is “lower” in the US than in Japan. It approaches the meaningless.) And wages and real estate are cheaper in Vietnam because Vietnam is poorer than China — about 10 years behind on the capitalist growth curve. No doubt that will equalize out over a few decades, as Vietnam maintains its 8%+ growth rate while Chinese growth slows.

Anyway, the upshot is that the freer trade agreements that have been negotiated in the past 20 years have been good for some countries and bad for others, but to argue that they have not been good, or will not be good, to East Asian countries like China, Thailand, Indonesia and Vietnam is basically impossible. People in China and Vietnam were starving before they started exporting to the US. Vietnam had over 50% malnourishment. It’s a cliche to say that they all have cell phones now – in fact only about a quarter do, but that’s growing every month – but half of them have motorbikes, and they’re all gorging themselves on pork. You simply cannot make the case that free trade has not done vast good in the Far East, lifting hundreds of millions of people out of abject penury; and whatever harm it may have done to US workers pales in comparison.


2 Comments so far
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“…but to argue that they have not been good, or will not be good, to East Asian countries like China, Thailand, Indonesia and Vietnam is basically impossible.”

Well, this is a good point, and one that begs a question: why are liberals trying to argue such a view? It seems to me to be the following: liberal economic thought supports policies that improve conditions for the least well-off. In the 80s-90s, liberals were sold a set of globalization policies that had just this effect (on an international level), and hence, liberals supported them.

Nowadays liberals are backpedaling. They criticize these policies primarily because of their entirely predictable effects: globalization has centralized economic power even more dramatically, has not led to a rise in worker rights, and perhaps most importantly, has hurt the American worker. But to criticize the policies themselves as NOT improving the base-level wages in China is ridiculous.

What’s really at issue? That protection of the rights and opportunities of the American worker is an entirely CONSERVATIVE policy position. But a good liberal like Sirota can’t say this. Instead, he has to argue the impossible: that neo-liberal policies have not, in fact, increased China’s and India’s per-capita income level.

As a side note, this is just one example of many in which todays liberal-progressives get the policy debate exactly backwards: progressivism is about protecting and extending core political and economic values from single-interest constituencies that threaten those values. Dismantling the American middle class to increase China’s GDP is definitely not progressive.

Comment by scudbucket

Thanks, scudbucket, but I’m afraid you’ve got me caught in a whirlwind of terms and their actually existent vs. theoretically proper meanings. I take it you’re saying that “true progressivism” SHOULD be about protecting and extending core values from single-interest constituencies. But when you say that the protection of the rights and interests of the US worker is “conservative”, I’m unsure whether you mean it “should be considered conservative”, in the sense that it protects the status quo, or whether you mean that it actually coheres better with the ideology of people who call themselves “conservative” nowadays, which I don’t think is true. Our definitions of the terms “progressive” and “conservative” owe a lot to where those positions stood in the 1930s, when the current economic contours of US government were laid down, and it doesn’t bother me much that some “progressive” positions (hands off Social Security!) are actually conservative in a purely semantic sense.

I am not sure that I really believe that the US is “dismantling its middle class to increase China’s GDP”. The main thing that sent US manufacturing jobs to China over the past 25 years was the transformation of China from a Communist to a capitalist economy. The overwhelming reason for the development of the staggering wage gap between China and the West was the artificial barrier created by, first, the diplomatic clash, and, once that changed, the non-market Chinese economy. Once China became a market economy, there was no stopping the explosion. Trade and tariff agreements between the US and China are important, but they can’t possibly outweigh a thirty-fold (or, now, tenfold) difference in wages. The US would have had to move aggressively to bar Chinese imports in order to counteract this change. I don’t think this would have been morally defensible, any more than our and Europe’s protectionist farm policies are.

The number one priority of the US now in China should be forcing the Chinese government to aggressively enforce copyright law. Copyright violation in China is massive and illegal under Chinese and international law. The notion that the Chinese government is incapable of enforcing copyright law is simply not credible. Rather, such enforcement is not a priority for the government. We should make it a priority for them, by taking them to the WTO constantly and threatening massive retaliation on perfectly defensible legal grounds. Over 90% of software and digital media in China is pirated. That represents a staggering loss of income for Microsoft and Warner Bros. Retaliation on a similar scale against Chinese manufacturing would be devastating. These are the grounds on which the US should be contesting its relationship with the Chinese economy — not trying to protect inefficient US industries, but making sure that the shift to a software and services based economy brings home the bacon.

Comment by mattsteinglass

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