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Congressional Quarterly: Can Trade Deals Aid U.S. Workers, Too?
08/06/07 The United States has 3 million fewer manufacturing jobs today than it had in 2000. Labor unions argue that’s because work that was once done here is now handled by sweatshops around the globe. And that, they say, is in no small part the result of negotiated agreements designed to stimulate trade and benefit factory owners. Labor standards written into the pending free-trade accords with Peru, Panama, Colombia and South Korea are intended to help prevent the exploitation of foreign workers. But these agreements will only win the approval of Congress if its Democratic majority leaders and Bush administration officials can convince lawmakers that opening those markets won’t just suck American jobs overseas in what organized labor calls “a race to the bottom.” That’s why some proponents of the latest accords argue that imposing labor standards on other countries will also help to protect American jobs. Establishing unions and banning forced labor abroad is supposed to make it more expensive to use foreign workers, or so the theory goes. But it isn’t exactly certain that improving working conditions abroad will improve the demand for labor in the United States. Many experts argue that requiring other countries to protect their workers might actually reduce costs abroad by increasing productivity, which could mean more work now done in the United States moving abroad. And many also argue that in any event the price of labor contributes only a small fraction to the total cost of manufacturing. The one point where experts on all sides tend to agree is that putting more money in the pockets of foreign workers will raise their standard of living and increase the potential overseas market for U.S.-made goods. Stories abound of how treating workers better improves their output. Although the International Labor Organization continues to report that some Cambodian workers aren’t provided chairs either while they work or during rest breaks, at least one factory in that country reported a 48 percent productivity rise when it stopped requiring its seamstresses to stand all day. Kimberly Ann Elliott, a senior fellow at the Peterson Institute for International Economics, says it depends on which kind of labor rules are being discussed. “Cash” labor standards — requiring countries to pay a certain minimum wage, for example — and “core” standards that uphold basic human rights have been shown to have different effects on the price of labor, she said. The standards in the pending agreements involve basic rights, not wage levels. “There’s not a lot of evidence that the core standards have any direct and systematic impact on labor costs, because there’s a variety of ways they could lead to productivity improvements,” Elliott said. “It’s not clear that those core standards have a negative effect on a country’s competitiveness.” The National Association of Manufacturers (NAM), which favors the pending trade accords, is worried about U.S. competitiveness in global markets, but contends that the cost of labor isn’t a determining factor for why manufacturing is typically more expensive here. “There are far greater concerns in terms of our ability to produce efficiently and cost-effectively,” said Douglas Goudie, director of international trade policy for the organization. “We have concerns about the price of energy, about transportation and infrastructure.” NAM, the U.S. Chamber of Commerce and other business groups disagree with unions about why the number of U.S. factory positions has declined: They say jobs simply disappeared as productivity rose. In fact, manufacturing employment was fairly static throughout the 1970s, 1980s and 1990s; it peaked at more than 19 million workers in 1979 but averaged more than 17 million during those three decades. By early 2001, however, the number of factory jobs was falling in earnest and was down to barely 14 million in June, according to Labor Department statistics. Nonetheless, some labor-friendly Democrats insist they will support these trade pacts only if they are certain that adequate job protection measures are in place. Members of the Finance Committee, which has Senate jurisdiction over trade, introduced a bill last month that would double spending on the program in fiscal 2008 to $440 million. The legislation, by Chairman “I have two questions with every trade deal,” Hare said. “What is going to be the impact on American agriculture and manufacturing, and are we going to lose jobs? If we are, we have to have very good reasons for continuing to do this. If there is a loss, we need a complete overhaul of the trade readjustment stuff we’re doing.”
At the same time, U.S. workers, particularly those in manufacturing, became dramatically more efficient. Factory labor productivity has risen an average of 4.5 percent a year over the past decade, and the average worker can produce twice as much today as in 1987. More efficient workers allow companies to get by with many fewer employees. “It has nothing to do with” the North American Free Trade Agreement among Mexico, Canada and the United States in 1993, Goudie said. “The 14 million manufacturing employees today are producing far more than the 17 million were five years ago.”
The biggest trade complaint from business organizations has little to do with labor costs. Instead, they say countries such as China underwrite their exporters, unfairly cutting the relative cost of production abroad. NAM also accuses China of artificially keeping the value of its currency low relative to the dollar, making U.S. goods relatively more expensive in global markets.
The United States, which early this year filed a complaint with the World Trade Organization about China’s subsidy practices, can’t compete when the cost of doing business is artificially altered by foreign governments, NAM and the Chamber say. (Other countries make similar complaints about U.S. farm subsidies, saying it’s impossible for them to compete in the production of agricultural commodities.)
But NAM and the Chamber maintain that improving labor conditions overseas would help U.S. exporters by raising workers’ standard of living and creating new markets for goods produced by American labor. And that’s a point on which business groups agree with the Democratic sponsors of these trade pacts.
Whether workers in Peru and Panama will end up doing jobs now held by Americans or not,