Three Principles For Democrats On Globalization

Can Democrats agree on trade? Our party has been divided on the topic for forty years, and often bitterly. But the policy vision and negotiating skills of Representative Charles Rangel of New York and Trade Subcommittee Chairman Sander Levin, shows that consensus on trade may not be out of reach. Their revision of a free trade agreement with Peru, up for a vote next month, meets the long-held demands of many trade skeptics on labor issues and other matters, as well as the traditional goals of growth through open markets and better relations with foreign partners.

Passage of this agreement can lay the foundation for consensus on the larger set of questions raised by globalization. Americans are rightly anxious about their own jobs and futures as competition from Asia intensifies, rightly convinced the problems emerging from economic stagnation and marginalization elsewhere are at least as serious, and rightly worried by the erosion of America’s good image abroad. A set of issues this complex requires an imaginative new set of progressive policies, at home and abroad and going well beyond “trade” per se. But though the details of such an approach are complex, their principles are relatively simple.

First, response to economic challenge from abroad begins at home.

New powers are rising fast across the Pacific. China has used floods of high-quality industrial investment from Hong Kong, Taiwan, Japan, Korea and Singapore to become a center of world manufacturing. India has combined its technical skills and open society with the low-cost telecom channels opened by the Internet to become a technology and services power. These are structural changes that will not be reversed; rather, they are likely to accelerate. And while the US needs tough policies to prevent financial manipulation and enforce American rights as they proceed, our response to the two giants must rest fundamentally on a willingness to recognize their accomplishment and a determination to match it.

This will require a national competitiveness agenda to ensure continued US leadership in the most sophisticated industries. This includes improved science and technology education, support for accelerated broad-band deployment, more open high-skill immigration, and strengthened investment in scientific and research. And as Congressman Rangel suggests, it requires a new safety net and adjustment system suited to the modern economy. Government will have to compensate for the erosion of the business-led social contract by guaranteeing health insurance for all dislocated workers, ensuring portable pensions, and developing experiments in insurance for mortgage payment and college tuition during periods between jobs.

Second, remember the poor and the marginalized.

The “global” economy of today is not really global; instead it is a belt of wealth and growth extending from the Americas through Europe and East Asia to Australia. Most of sub-Saharan Africa remains outside looking in, as do the least-developed nations of Asia and the Pacific. The environment for the large Muslim states of the Middle East and South Asia is just as troubling. Their share of world trade and investment fell by nearly 75% between 1980 and 2000, even as their populations soared. With a ninth of the world’s population, these countries – Pakistan, Egypt, Afghanistan and others – now produce only one percent of the farming and manufacturing exports that raise incomes, create jobs and spur development. The consequence is worsening poverty and high unemployment rates that provide natural recruiting pools for radicals and fundamentalists.

Trade policy in the next administration needs to do much more for these regions. Priorities should include reform of the American textile tariffs, European and Japanese farm quotas, and Indian and Chinese import limits which tilt world trade policies against African farmers, Cambodian garment-workers and Muslim-world factories. The US must join other rich countries in this effort, through WTO agreements or preference programs like the African Growth and Opportunity Act, that provide the poor with new market access opportunities and capacity-building programs, as well as incentives for improving labor and environmental standards.

Third, enlightened self-interest.

With a still-gaping trade gap, we need to export more. We can only do so by focusing closely on big markets – but almost all of the Bush administration’s recent efforts have been devoted to free trade agreements with smaller countries. Well-designed, these can be good on the merits. But even so, they are no substitute for engagement with the five big partners that account for two-thirds of American trade – the EU, Canada, Mexico, Japan and China – and the fast-growing giants India and Brazil. Only by enforcing agreements and opening markets in these countries, through bilateral programs and WTO agreements focused on new American industries like medical equipment and environmental technology, can the next administration help restore the export and investment growth of the 1990s.

The details of such a program are a matter for the next progressive candidate. The first step, though, is in the hands of Congress. It is the validation of the superb work by Rangel and Levin, in the passage of the trade agreement with Peru.