A Winning Strategy for the Democrats: Barter for Free Trade

By Steven Pearlstein
Wednesday, July 26, 2006; D01

To understand why Democrats can't win elections, all you had to do was attend yesterday's symposium at the Brookings Institution put on by the Hamilton Project, an effort by the (Bill) Clinton economic braintrust to generate new ideas and a Democratic election agenda.

The main topic was globalization, which had a certain urgency about it the day after the latest round of global trade talks collapsed.

Because this was the free-trade wing of the Democratic Party, the event featured all the usual arguments about how globalization has helped the U.S. economy, boosting growth and productivity through scale economies, specialization and increased innovation.

And because these were Democrats, there were the requisite acknowledgements that, while trade is an overall plus for the economy, it has had some unpleasant side effects: insecurity about job losses, downward pressure on wages, widening inequality, and an unsustainable trade deficit.

There was even a general consensus on what needs to be done to ameliorate those effects. The prescriptions included some old ideas about balancing the federal budget, investing more in education and repealing the Bush tax cuts, and some newer ones such as universal access to health insurance, portable pensions and wage insurance. Protect people, not jobs, was the headline message in the Hamilton Project briefing paper that rejected the protectionist policies of the union left as well as the "you're-on-your-own" economics of the laissez-faire right.

Policy-wise, this is exactly where the Democratic Party as a whole needs to be in terms of trade and globalization. But the problem is that, when you scratch the surface, the free-trade members of the Democratic establishment turn out to be more committed to Part A of the formula, more globalization, than they are to Part B, making sure the benefits from globalization are widely shared. For them, it's really not a package deal. And if push comes to shove, which it always does in trade politics, they'd welcome more globalization even without the compensatory social policies.

How do I know this? Because they said so.

At the conference's closing session, I asked former Treasury secretaries Robert Rubin and Larry Summers and former deputy Treasury secretary Roger Altman if any of them would be willing to support the idea of a "time out" on new free-trade initiatives until there was some tangible progress toward greater economic security for U.S. workers. To a man, they recoiled at the idea.

They explained to me that globalization is such a widespread and powerful phenomenon that it would hardly be affected by trade agreements.

Then, without missing a beat, they turned around and argued how crucial those agreements are, running through the usual list of horrors that would befall the country if the United States were to put its free-trade agenda on hold:

That the United States would give up its role as the leading force for internationalism.

That such a move would send a terrible signal from the world's superpower about its isolationist instincts.

And, oh yes, my personal favorite -- that if we stopped negotiating trade treaties, other countries would rush around and sign bilateral agreements without us.

All of these arguments, of course, are beside the point. This is about the politics of trade, not the policies. And its a perfect example of how the Democrats have lost the instinct for the political jugular and the ability to use policy disputes to political advantage.

The idea here isn't to kill free trade. It's to take it hostage. Right now, the defection of formerly free-trade Democrats has made it impossible to get any trade treaty or trade-negotiating authority through Congress. That's a big problem for the business community, particularly big corporations such as Lucent, AIG and General Electric. Democrats now have a perfect opportunity to deliver what the business community wants -- and to demand in exchange programs designed to provide workers more economic security. But such negotiations will never succeed if influential Democrats give away the store in advance by signaling they support all trade liberalization, unconditionally.

No guarantees of health care, pensions, expanded unemployment insurance -- no more trade deals. It's a simple message even chief executives can understand. Voters, too.

Steven Pearlstein will host a web discussion at 11 a.m. today athttp://washingtonpost.com. He can be reached atpearlsteins@washpost.com.

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