Washington Post business columnist Steven Pearlstein was online to discuss the Democrats' views on free trade.

He examined the issue in today's column, " A Winning Strategy for the Democrats: Barter for Free Trade ."

A transcript follows.

About Pearlstein : Steven Pearlstein writes about business and the economy for The Washington Post. His journalism career includes editing roles at The Post and Inc. magazine. He was founding publisher and editor of The Boston Observer, a monthly journal of liberal opinion. He got his start in journalism reporting for two New Hampshire newspapers -- the Concord Monitor and the Foster's Daily Democrat. Pearlstein has also worked as a television news reporter and a congressional staffer.

His column archive is online here .

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London, U.K.: What do you consider world opion is of US policy on free trade? Keeping in mind the US pulled out of WTO negitiations so as to protect its farmers and continue subsiding at the expense of third world countries.

washingtonpost.com: Failed Trade Talks Usher in Uncertainty

Steven Pearlstein: One of the things that foreigners, even worldly foreigners, tend to forget is that most Americans couldn't care less what the world thinks of the country. That's not an endorsement of that view, just a factual statement.

The fact is that the U.S., Europe, Japan and even India have been unwilling to eliminate trade barriers to farm products. Our barriers tend to take the form of subsidies, the Europeans and others in the form of import restrictions, although we all have all of these to varying degrees. And the real outrage here that free-trade Democrats have an opportunity to exploit, politically, is that the Bush administration has sacrificed the possibility of creating lots of new jobs and wealth in export service industries,which pay high wages and are locate primarily in Democratic states, in order to protect farm subsidies that go mostly to Republican farmers in Republican states. This is a great chance for Democrats to expose Republican hypocrisy and put forward a positive, free trade message: yes, more globalization, but not before we strengthen the economic safety net for all American workers so that losing a job doesn't also mean losing your health insurance, your pension and your house.

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Laurel, Md.: "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."

Does the business community WANT trade deals at the expense (for them) of health care, pensions, and expanded unemployment insurance; or is the point of most trade deals exactly to lower labor costs by not paying for those things?

Steven Pearlstein: Actually, if you talk with business people, they are generally not opposed to the idea that we need a system that doesn't tie health care so closely to employment and employers. They agree pensions should be portable. They might not like the idea of paying more unemployment insurance premiums to stregnthen and expand that program, but they understand that there are big holes in a program designed more than 50 years ago to take care of temporary layoffs. The problem is that these are not high priorities for the business community. So the trick is to make them high priorities by linking them to the thing the business community cares a lot about, which is getting new trade treaties that will open markets for U.S. products and services. And if people like Bob Rubin and Larry Summers, who have mucho credibility with the busienss community, were demanding such a linkage, the business community would take it seriously and might begin to consider such a grand bargain.

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Wheeling, WV: Mr. Pearlstein,

This is what "globalization" caused to a once proud local industry.

Bob Oglinsky

Wheeling, WV

(Former Centreville, VA resident)

washingtonpost.com: What Happens When Industry Moves On? (AP, July 23, 2006)

Steven Pearlstein: Bob, globalization can be a brutal process, wiping out companies and entire industries. There's no getting around it. But that is how it produces the good things that it does, which is greater wealth and economic growth and higher living standards. The problem is well known: the benefits of trade are widespread, but the costs are concentrated. And economists have always said we need ways to recycle some of the benefits to the losers. So let's get on with that task.

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Maineville, Ohio: Mr. Pearlstein:

After reading your piece, the scene from Primary Colors where Jack Stanton (John Travolta) speaks at a union hall comes to mind.

Stanton was painfully honest with the members...basically telling them to buck-it-up and get educated for the changing/more competitive world.

Wouldn't this type of honesty and 'Realpolitik' be appropriate now from the Democrats?

Steven Pearlstein: Yes, it would be good. But it is also reasonable for Americans to demand that, in a world where jobs and capital are globally mobile, they have a better safety net if they lose their job. And if they have that kind of social insurance, they wouldn't be so fearful of the negative consequences of trade. So its not just a matter of sucking in in and getting an education. It is also a matter of recognizing that these kinds of personal transitions take time and that people need some help during those periods. Not the kind of help like they have in parts of Europe, where you can be on unemployment for years and year. At the same time, losing your job shouldn't mean losing health care for your family.

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Owatonna, Minnesota: Mr. Pearlstein,

Have the Democrats taken a stance on General Motors and the possible globalization involving Nissan and Renault? If GM does not globalize, I believe that they run the risk of obsolescence. European autos (for instance) run efficiently on renewable and clean diesel fuels. This allows both power and efficiency. No American manufacturer has embraced this technology as of this time. Perhaps a more global influence would get us there.

Thank you.

washingtonpost.com: GM Posts 2Q Loss of $3.2 Billion

Steven Pearlstein: General Motors already IS a globalized comopany. Big production and sales in China. Big production and sales in Europe. Big sales in Europe. Very successful in South America. The Renault-Nissan idea strikes me as just loopy.

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Washington, D.C.: The headline of a Los Angeles Times editorial today proclaims, "Nobody Wants Free Trade". I assume you disagree with that statement? Who would Democrats be holding hostage here? (ie, Who these days actually wants free trade?)

Steven Pearlstein: Not who but what: new trade treaties and new trade negotiating authority for the President. And the people they need to send the ransom note to is the business community. The deal is simple: help us get a better safety net for American workesr (YOUR workers), and we'll give you the votes you need to pass this stuff. Straight, vanilla-variety political horse trade. Anyone got a problem with that?

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Dallas, Texas: How can underdeveloped countries (Africa, Asia, Latin America) compete with the US, Canada, Europe, Japan, Australia and others developed countries in this age of Globalization and Free Trade?

Thanks,

Juan

Steven Pearlstein: With hard-working people willing to do unskilled and semi-skilled jobs for a lot less than workers in industrialized countries, using imported capital and technology. With land that is so cheap that its more cost-effective to grow things on it. Those ways.

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Washington, D.C.: Has anyone reported on what percentage of Americans have actually benefitted from globalization and what percentage have been hurt?

Steven Pearlstein: All Americans benefits from it as consumers. Many Americans benefit for it as producers of exports. The losers are those who lose their jobs or whose wages have not risen because of global labor market competition. IN dollar terms, the benefits outweigh the harm -- I'm fairly confident of that. But there is a not insiginificant minority of Americans who are net losers. Its time we paid them some attention,

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Rochester, NY: Thomas Friedman of the NYT recently said that he supported free trade bills even before he read them. He said that if they had the words "free trade" in them, that he supported them. How realistic an attitude is that towards free trade, in your opinion? Do you think that this sort of knee-jerk free trade attitude is different from knee-jerk protectionist attitudes?

Steven Pearlstein: No, its pretty much the same. I didn't see Tom say that but if he did, he should know better. That's not to say that, as an economic matter, free trade doesn't, on balance, generate more economic growth and higher national income. But as a political matter, if you want more free trade (which Tom does), you have to realize at this point that a political backlash is building and that you need to deal with some of the legitimate fears that are driving it.

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Burke, VA: Thanks, well written column. One of the things you are seeing right now in politics (at least on the Democratic side, and probably later on the Republican side) is people like Rubin et al loosing power, and those who would make the kind of deal you are suggesting gaining power.

washingtonpost.com: Today's column: A Winning Strategy for the Democrats: Barter for Free Trade

Steven Pearlstein: I'm not sure that is true, or necessarily a good thing. The left wing of the party is, frankly, quite protectionist at heart. They wouldn't be willing to make the deal I propose because they really don't believe in trade and they DO want to protect jobs as well as people. Which is why, for a free trader like myself, I see an imperative for people like Rubin and Summers to really leverage their influence to get a grand globalization bargain. Otherwise, they will run the risk you point out, of leaving the party in the hands of protectionists.

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You're surprised?: This is akin to be shocked gambling is going on at Rick's Place.

Now think back. Please name one person in that room who wasn't a mid 6 figure income.

Okay, here's a tougher one. Name three that didn't have upper middle class or higher Mommy's and Daddy's who's connections and wealth bought their kids into the mid 6 figure incomes.

Put simply, These folks are the big winners in any free trade deals. You say gains are diffuse, while costs are concentrated. Partially true. Gains are very concentrated in the top 5% of wealth holders. That's where almost all the economic growth of the past 5 years has gone.

They may intellectually care about the poor and middle class, but at a gut visceral level they don't. They want their kiddies to go to St. Albans, and get to the top the same way they did...through inheritance and family connections. And they have no intentional of risking giving up deadwood gains going directly into their pockets.

As long as the political class is mostly made up of folks like this, you will get the results you are relating. Period.

Steven Pearlstein: Maybe because I have a good income and live in a nice neighborhood of NW Washington, I don't like the way you've framed it. And there are lots of examples where rich people back policies that are good for people less well off than themselves. I don't thinnk you need to make a class argument here. Remember, the disagreement in that room wasn't about policy. Most of the people agree that free trade is good but ameliorative social polices are needed to make it work for everyone and reduce anxieties over globalization. The only disagreement is the strategy: do you link the two, or do you support free trade indefinitely and unconditionally. I don't think that disagreement has to do with class or self interest. Bob Rubin is set for life and he'll do well no matter what happens with this stuff.

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Silver Spring, MD: For years I've struggled with this in my head... I'm an engineer.. logical, rational. Maybe as an economist, you can clear this up for me? My elected officials would have be believe that free trade, and in turn massive trade deficits, are "good for the country as a whole". Yes... I can buy cheap disposable goods at walmart for half the price I used to. However, simple point in fact trade deficit = wealth leaving this country... end of story, right? OK, so the chinese our financing our debts at the moment... OK, IOU's are building up, and wealth will SOON be leaving the country, same difference in the end. How is this good? I understand how it's good for the CEO's of companies that in turn do better, the small percentage of the nation holding stock in said companies... but the country as a whole? I just don't get it... seems like a pretty basic equation I learned when I was about 5 yrs old, money in - money out = wealth or debt, and at the moment, it equals debt... My rational brain is failing me on this one, please help explain? Thanx

washingtonpost.com: China to Be 3rd-Largest U.S. Export Market

Steven Pearlstein: First, I'm not an economist. I just play one in the movies....And nobody things these kinds of trade deficits are a good thing. As Summers said yesterday, its a bit like smoking two packs of cigarettes a day. It doesn't insure that you'll have a bad end, but it certainly raises the probability.

The trade deficit phenomenon is a complicated puzzle. It is unsustainable. And in theory, it should be self-correcting. It isn't, essentially, because China, Japan and other Asian nations would, for complicated reasons, essentially keep wages low and employ more people than go through the painful economic adjustment of allowing their wages and the price of their goods to rise. Instead of getting more money for what they produce, in effect, they are willing to take a chunk of it in IOUs. So the dollar remains higher than it should and the self-correction (exports increase, imports decrease) doesn't happen.

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Washington, D.C.: Mr. Pearlstein,

What happens now that doha has collapsed (not that we didn't see it coming from miles away)? Will countries turn more to regional trading agreements and depend less and less on the wto?

Thanks for taking my question!

washingtonpost.com: Trade Talks Fail After Stalemate Over Farm Issues (Post, July 25, 2006)

Steven Pearlstein: Some of that will happen. And trade will continue to increase anyway, under the existing WTO rules. My sense is that it will be a few years before countries like the U.S. and Europe work through some economic issues and are ready to open themselves up to another increment of trade liberalization. Politically, that is now impossible.

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Washington, D.C.: Mr. Pearlstein--As a liberal democrat who is fully committed to free trade, I greatly enjoyed your column.

The question, though, is how do we sell FTA to the other arms of the Democratic party--the unions, farmers and others? Further employment programs sound nice when spoken at think tanks, but many of these people recoil in Lou Dobbsian horror whenever the word "free trade" is even spoken, as if it is a specter looming over them, ready to rob them from house and home.

Steven Pearlstein: Look, there are some people, maybe included the aforementioned Mr. Dobbs, who will never buy into the free trade idea, because of the very real dislocations that it causes. But there is another group in the center that basically understands the overall benefits of trade -- they're just feeling a bit anxious of what it could mean for them if they lose their jobs. Giving them more economic security by assuring them that job loss doesn't equal health care loss, or pension loss, or such a huge drop in income that they'll lose their house -- that would be enough to win them back into the free trade column, where they were a decade ago.

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Washington, DC: A central objection to the trade bills that have come before Congress recently (Bahrain, Oman, CAFTA) is the lack of adequate safeguards for workers in other countries. Do you think that it's appropriate for the United States to insist that our trading partners adhere to the core labor standards outlined by the International Labor Organization?

Steven Pearlstein: No, I think one of the problems with the trade debate up to this point is that too much attention was focused on these labor and environmental standards that leftist critics of free trade want to write into trade treaties. First of all, our trading partners are very opposed to that kind of meddling in their affairs, and with reason. Second, they won't do much to ameliorate the impacts of trade on Americans--if they have any affect at all, it will be reduce trade, which isn't really the point of the exercise. My point is that we need to look broadly at the economic safety net underneath all American workers, and make sure this net is strong and wide enough so that Americans will feel like they are not so vulnerable if the ill-winds of globalization hit them personally. Its about our micro-polilcies, not the micro-policies of our trading partners.

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Bethesda: Neither Rubin nor Summers is a trust fund baby.

Steven Pearlstein: No, but I think they grew up in comfortable households.

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Arlington, VA: I think that the pro/anti globalization or the pro/anti trade debate pins too much on trade policy. Both sides seem to think that free trade is either the cause of or the solution to all economic and social issues.

The reality is, in my opinion, more complex. Trade policy is only one part of the economic policy toolbox. It has to be used in conjunction with macroeconomic and monetary policy and social programs in order to be truly effective. You can't think of trade policy or trade agreements in a vacuum, otherwise you end up with these entrenched pro and con positions.

Steven Pearlstein: I agree. On the other hand, as a practical politcal matter, you use the tools that are available to you. And if your goal is to get micro-economic policies (health, pensions, etc) that help protect people from some of the ill-effects of trade, there's no harm I can see in trading support for trade treaties for action on those items. This is a tactical question, not an economic one.

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RE: Suck it in and get educated: Suck it in and get educated?? I spent 4 years learning more calculus than most of the county even knows exists. I'm halfway through a masters degree. I'm currently living in maryland and working in defense because an ENTIRE INDUSTRY disappeared from New Jersey. Telecom ran off to china, india and every other country across the globe, and suddenly electrical engineers were a dime a dozen in the state. And as soon as we wise up and quit invading every foreign countries like a bunch of 5th grade bullies, these engineering jobs are gonna disappear too. I've got more education that 75% of the country, and my jobs are being shipped overseas as fast as anyone else's. So what exactly do you suggest that I "sucked it up and get educated" in??? And P.S... it's not just engineering, it's back office medical work, financial services, etc.. etc.. etc... anything that CAN be done overseas IS being done overseas, and at a rapidly increasing pace. So please, tell the xray technician who's diagnosing your next broken bone to "suck it up and get educated"... I'm sure that job didn't take much education either.

Steven Pearlstein: Which is precisely why the "education" solution isn't the silver bullet economically or politically.

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Princeton, NJ: Golly! I can't believe it. I agree with just about everything you say. Does this mean you will now support a single payor health care system like Medicare for all which will allow us to completely cover everybody while spending no more money than we do now? This will also remove the burden from businesses.

Steven Pearlstein: No, it doesn't mean that. I think we can make sure health care is universally available without having a single payer system. But nice try. Will such a program cost more money. You betcha -- and some of that cost may have to be borne by the winners from trade, including businesses, high income people and investors. But I can tell you the cost will be a lot less than the cost of foregoing the next increment of gains from freer trade.

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Washington, D.C.: Could you flesh out a bit some of the proposals in circulation to mitigate negative effects of globalization on US workers? My sense is that most of the energy expended by anti- globalization activists has been to fight the phenomenon, rather than adjusting to it, which seems to be what you are talking about.

Steven Pearlstein: I agree with your characterizations.

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Steven Pearlstein: Got to go, folks. Thanks for another lively chat. See you next week.

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