Robert Reich: We Must Share the Benefits of Free Trade

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Employees at a Saic GM Wuling factory in Liuzhou, China, on June 19. Robert Reich writes that Americans whose pay has been declining because of trade don’t make up for that loss through access to cheaper goods from abroad. Norihiko Shirouzu/reuters

This article first appeared on RobertReich.org.

Free trade is figuring prominently in the upcoming presidential election. Donald Trump is against it. Hillary Clinton has expressed qualms.

Economists still think free trade benefits most Americans, but according to polls, only 35 percent of voters agree. Why this discrepancy?

Because economists support any policy that improves efficiency, and they typically define a policy as efficient if the people who benefit from it could compensate those who lose from it and still come out ahead.

But this way of looking at things leaves out three big realities.

1. Inequality keeps growing. In a society of widening inequality, the winners are often wealthier than the losers, so even if they fully compensate the losers, as the winners gain more ground, the losers may feel even worse off.

2. Safety nets keep unraveling. As a practical matter, the winners don't compensate the losers. Most of the losers from trade, the millions whose good jobs have been lost, don't even have access to unemployment insurance. Trade adjustment assistance is a joke. America invests less in jobs training as a percent of our economy than almost any other advanced nation.

3. Median pay keeps dropping. Those whose paychecks have been declining because of trade don't make up for those declines by having access to cheaper goods and services from abroad. Yes, those cheaper goods help, but when adjusted for inflation, the median hourly pay of production workers is still lower today than it was in 1974.

So if we want the public to support free trade, we've got to ensure that everyone benefits from it.

This means we need a genuine re-employment system, including not only unemployment insurance but also income insurance. So if you lose your job and have to take one that pays less, you get a portion of the difference for up to a year.

More basically, we've got to ensure that the gains from trade are more widely shared.

Robert Reich is the chancellor's professor of public policy at the University of California at Berkeley and a senior fellow at the Blum Center for Developing Economies. He served as secretary of labor in the Clinton administration, and Time magazine named him one of the 10 most effective Cabinet secretaries of the 20th century. He has written 14 books, including the best-sellers Aftershock, The Work of Nations, Beyond Outrage and, most recently, Saving Capitalism. He is also a founding editor of The American Prospect magazine, chairman of Common Cause, a member of the American Academy of Arts and Sciences and co-creator of the award-winning documentary Inequality for All.

Robert Reich: We Must Share the Benefits of Free Trade | Opinion