There will be winners and losers among American industries and various regions of the country if trade "liberalization" is one of the net accomplishments of the multilateral trade agreement soon to be taken up by Congress.
The uneven distribution of the benefits is a main theme of a new Congressional Budget Office background paper, which was released yesterday to help Congress in its consideration of the trade treaty.
The paper also makes the point that despite the attention given the multilateral trade negotiations (MTN), still being pursued in Geneva, many of the most serious trade problems facing the United States are not part of that negotiation.
These include increasing government intervention in trade matters and the growing trend toward "bilaterism" -- such as the two-way oil deals between Mexico and France and Mexico and Japan.
The paper suggests that "only the most blatant" forms of government intervention can be modified by international agreement, and the "more subtle and complex" forms of intervention will continue.
The report, by C.R. Neu and Emery Simon of the CBO staff, also noted that there is little the United States can do to halt the outflow of U.S. technology, a source of bitter complaint by American labor unions. With very few exceptions, the report says, U.S. technology is available in other rich nations, who could transfer it even if the United States tried to bar its export.
"The trade negotiations in Geneva are proceeding in an environment that is decreasingly favorable to liberalized trade," the report says. Yet Congress, because it will only have the opportunity to vote the treaty up or down, will have little chance to alter the formal terms of the agreement.
While some consumers and producers should benefit greatly from freer trade arrangements, "some businesses will be forced to close and some workers will lose their jobs because of increased foreign competition," the report says.
Biggest potential U.S. industrial losers: texiles, footwear and other leather products, pottery, food utensils, steel products, radio and TV and jewelry. These industries are relatively labor intensive or use simple, well-known technologies.
The winners: Industries producing tobacco products, semiconductors, computing machines, office machines, mechanized measuring devices, electronic components, aircraft and aircraft equipment. These industries employ new or sophisticated technology. U.S. agriculture also stands to benefit, especially if American negotiators win reduction of nontariff barriers in Europe and Japan.
Layoffs would be borne disproportionately by semiskilled and minority workers -- and impact that would be especially noticeable in the textile industry, where minorities make up 23 percent of the labor force and 65 percent are women. Unless some provision is made for dislocated workers, the report says, Congress is not likely to approve the treaty. The present "adjustment program" is termed inadequate.
Geographically, the urban areas of the North and East would be hit hardest, especially in Illinois, Massachusetts, Michigan, New York, Ohio and Pennsylvania.
Newly created jobs would be concentrated in the South, Midwest and West, with the best gains in the farming areas of Kansas, Minnesota and the Dakotas.
Consumers as a group should benefit from lowered trade barriers, the report says, since some of these were erected in the first place to protect domestic industries from lower-priced foreign competition.
But it notes also that the job losses among a relatively small number of industries will be highly visible and well-publicized, while the benefits "will... perhaps not even [be] easily discernible."
The report goes on to say that the "marginal" price benefits accruing to consumers are quite small compared with the negative effects of the depreciation of the dollarr, which had the net effect of raising overall import prices 8:2 percent in the year ended last September.
Overall, the report says, the removal of trade barriers as contemplated in the MTN may increase or decrease U.S. net exports by no more than $1 billion or $2 billion over the course of several years. "Macroeconomic considerations will not serve to argue strongly either in favor of or in opposition to liberalized trade." the CBO document says.
The real importance of the MTN, the report concludes, is not in its economic potential but as a political achievement that will fend off growing protectionist sentiment: "In a sense... the current round of trade negotiations is important not for what it may accomplish, but rather for what it may accomplish, but rather for what its successful conclusion may prevent."