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By Peter Coy @petercoy More stories by Peter Coy November 6, 2020, 12:09 PM EST Free trade can benefit everybody if the winners from it compensate the losers.In reality, the compensation provided by the winners, such as consumers, is almost never enough to make up for the damage suffered by the losers, such as displaced workers.
On Nov.5, Harvard economist Lawrence Summers said that the U.S.shouldn’t pursue any more big trade agreements until the social safety net is strengthened.Summers said in a videoconference hosted by the Economic Club of New York that if it were up to him, he would put trade deals on ice “until I felt confident that we were locking in progress on the agenda of combating local disintegration.”
After World War II, the GI Bill, the Treaty of Detroit, and the building out of the suburbs “paved the way for free trade” by increasing workers’ sense of security about their jobs, Summers said.The GI Bill of 1944 helps cover veterans’ costs of school and training, while the Treaty of Detroit was a 1950 contract between the United Auto Workers and General Motors Corp.
that set a pattern for the auto industry of giving extensive benefits to workers in exchange for their agreement to refrain from frequent strikes.
Summers’s opinion isn’t far from that of Democratic presidential candidate Joe Biden, whose “Made in America” platform is pro-manufacturing and pro-union.Summers hasn’t been closely associated with the Biden campaign, but he served as Treasury secretary to President Bill Clinton and head of President Barack Obama’s National Economic Council.
It’s not just Democrats who are talking up the need for worker buy-in.Glenn Hubbard, who headed President George W.Bush’s Council of Economic Advisers, said in the video talk with Summers that trade agreements shouldn’t be done “outside in”—that is, negotiated with other countries and then sold to Americans.
Instead, he said, governments need to figure out what the country needs and wants and then go out and cut deals along those lines—i.e., work “inside out.”
In theory, free trade is good for all.But as the old joke goes, in theory, there’s no difference between theory and practice; in practice, there is.
Peter Coy Bloomberg Businessweek Writer @petercoy Peter Coy is the economics editor for Bloomberg Businessweek and covers a wide range of economic issues.He also holds the position of senior writer.Coy joined the magazine in December 1989 as telecommunications editor, then became technology editor in October 1992 and held that position until joining the economics staff.
He came to BusinessWeek from the Associated Press in New York, where he had served as a business news writer since 1985.Before it’s here, it’s on the Bloomberg Terminal.LEARN MORE Have a confidential news tip?
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