"The Obama team is hardly likely to make trade a priority," reports a recent article in the National Journal. "Their inclination is to let sleeping dogs lie," Ed Gresser, director of the trade project at the Progressive Policy Institute, told the magazine. Well, those sleeping dogs need to be awakened, because the results of globalization for the United States, and for many other developed nations, have simply not turned out as advertised.
It is not globalization's underlying premise that is flawed. Rather, the problem is that the US and many countries in Europe are on the receiving end of unfair (and sometimes illegal) subsidies, inhumane labor standards, poor environmental practices, and currency manipulation that are skewing outcomes and overwhelming our open competition approaches to trade. And our nation and our workers have been greatly harmed.
The world's developed economies aren't saying "no" to globalization or to free trade. Quite the opposite. All we are saying is that we can't accept predatory practices that distort outcomes to the detriment of our citizens.
When modern-day globalization was born in the early 1980s, we were told that new high-quality service jobs would generally offset any lost manufacturing jobs, and that, measured economically, our trade accounts would always be in or close to balance, which of course are the same two premises that Adam Smith put forth way back in 1776 in The Wealth of Nations.
Instead, the United States has had a persistent trade deficit, now in the hundreds of billions per year. America's cumulative goods and services trade deficit since 1980 is a stunning $7.2 trillion, according to the Bureau of Economic Analysis; 65 percent of this amount was accumulated during the Bush administration. Just these latter deficits alone have made the American economy about $1.5 trillion smaller than it would have been otherwise—money we could really use right now.
Our once vital manufacturing sector has diminished and now accounts for less than 7 percent of GDP. And just while Bush was president, we lost 4.5 million manufacturing and more than 2 million service jobs to countries overseas—contradicting the theory that a nation would never lose large numbers of both types of jobs at the same time.
Most Americans believe that our large ongoing deficits in trade are also eroding our national security and threatening our economic sovereignty, reports the National Journal. And they are right. Nations with increased financial leverage because of our trade-related overseas borrowings—particularly the oil-producing countries, and especially China with its nearly $2 trillion of foreign exchange reserves—are already demanding stronger assurances about our creditworthiness as the world's largest debtor nation, and more.
On March 13, for example, Chinese prime minister Wen Jiabao spoke at length of his worry about the "safety" of China's holdings of US Treasury bonds. On March 23, China's central bank governor warned that the world now actually needs a new currency to replace the dollar as the world's standard, because the developing world is unhappy with the role of the US in the world economy.
By way of counterargument to such ominous trends, we often hear that American consumers are benefiting from access to cheaper imported goods. Yet when the analysis is fairly done, the nation's overall trade-related losses in wages—from stagnant domestic wages and from millions of American jobs being offshored—clearly swamp the gains from these imports, notes the Center for Economic and Policy Research.