A Raspberry for Free Trade

The search for better economic policy.
Nov. 21 1997 3:30 AM

A Raspberry for Free Trade

Protectionists serve up tainted fruit and red herrings.

Would President Clinton have suffered his humiliating rebuff over fast-track trade legislation if the administration had not wasted crucial months failing to take the issue seriously? I don't know. Will that rebuff severely damage the world trading system? I don't know. Is this the beginning of a more fundamental backlash against globalization? I don't know that, either.

What I do know is that the arguments advanced by fast track's intellectual opponents are stunningly specious. Consider the tale of the tainted berries.

Here's the story: Last spring, there was an outbreak of a nasty disease known as cyclosporiasis, which was eventually traced to Guatemalan raspberries. Together with some other incidents, this led to a demand for tougher controls on imported produce. A few weeks ago, Clinton asked for legislation that would allow him to ban food imports from countries that do not follow adequate sanitary standards in agriculture. Intellectual opponents of globalization gleefully noted a double standard: We're willing to seize shipments of foreign berries to protect yuppie consumers (the sort of people who eat raspberries out of season) from inadequate foreign sanitary standards, so why aren't we willing to protect U.S. workers from inadequate foreign labor standards? Isn't it the same thing?

It isn't the same thing, as the example of Kathie Lee Gifford will now demonstrate. A few months back, you may remember, the infernally perky Gifford got some bad press when it turned out that some of her clothing line was produced in Central American sweatshops employing child labor. Since then she has had other problems, which are more up Bob Wright's alley than mine. But it is useful, as a thought experiment, to ask how opponents of imports would have reacted had the story been slightly different.

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I magine that the United States imported a lot of clothing from the nation of Freedonia. Without question, the growth of these imports had cost some jobs in the United States, and possibly exerted some downward pressure on American wages. Economists might point out, in their tiresome way, that the jobs lost in the clothing industry were more than matched by jobs gained elsewhere. They might point out that trade, by allowing each country to specialize in doing what it does relatively well, normally raises productivity and incomes in both countries. But these arguments would not be much consolation to the displaced workers, or to the owners of the affected clothing factories, and we would surely see a campaign against Freedonian products--a campaign that would make the most of stories about the low wages and terrible working conditions in Freedonian factories.

Now suppose that an investigative journalist visited Freedonia and discovered that it was all a sham. In reality, Freedonia was a high-tech, high-wage economy: The Freedonian government had been faking poverty in order to avoid paying U.N. dues. And Freedonian clothing manufacturers were able to undersell their U.S. competitors not because of low wages but because robots and computers made them highly efficient.

Here's the question: Would the people demanding limits on Freedonian exports say, "Oh well, I guess that's OK, then"? Whom are we kidding? The demands for protection would not abate because for the U.S. industry competing against imports, it doesn't matter how the clothing was produced. When the U.S. consumer is offered cheaper shirts from abroad, the United States loses the same number of shirt-making jobs regardless of whether the shirts were produced by workers making 30 cents an hour or $30 an hour.

Now I come to berry seizures--not to praise them (sorry, I couldn't help myself) but to point out how different the case is. For consumers of berries, it does matter how the berry was produced: If it was watered with sewage, eating it will make you sick. And for now the only practical way to enforce health standards on the product is to enforce sanitary standards on its production. But if we impose the Inverted Kathie Lee Gifford test--asking how our attitude would change if it turned out that farmers in Guatemala were actually much cleaner than rumor had it--we immediately see that our concern about foreign sanitary standards, unlike our alleged concern about foreign labor standards, is genuine.

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A re those who want to impose import restrictions against countries with low labor standards willing to lift those restrictions against countries that start to pay decent wages? Circa 1970 Japan was still a low-wage country, accused of keeping its workers in "rabbit hutches" in order to pursue its relentless export drive. By the early 1990s Japanese wages were actually higher than those in the United States. Did the Japan-bashers relent? In 1975 South Korean wages were only 5 percent of those in the United States; by 1995 they had risen to 43 percent. Did opposition to Korean exports dissipate?

The real complaint against developing countries is not that their exports are based on low wages and sweatshops. The complaint is that they export at all. And so the supposed friends of poor workers abroad are no friends at all. If they got their way the result for the poor Freedonian would not just be no sweatshop--it would be no job. And manufactured exports, initially based on low wages, are the only route we know for rapid economic development.

As I pointed out in an earlier column in Slate, the growth of labor-intensive exports from Third World countries, a development possible only because those countries are able to offset their disadvantages by competing on the basis of cheap labor, has brought about a huge improvement in the human condition, even if the wages look miserably low by our standards.

It is hard to believe that people who have spent years, even decades, writing about economics are really so fuzzy-minded that they cannot see the difference between protecting consumers from tainted produce and protecting workers from competing products. On the other hand, I doubt that they are purely cynical. It is more likely that some kind of double-think, some convenient ability to stop thinking clearly when the situation demands it, is at work. But the truth is that I don't know--and I don't think it matters.

Paul Krugman is a professor of economics at MIT whose books include The Age of Diminished Expectations and Peddling Prosperity. His home page contains links to many of his other articles and essays.