If ... really supported free trade, they would be insisting that we do the exact same thing for our most highly educated professionals

Free Trade, Why "Free" Matters | Monday 07 July 2008 | by: Dean Baker, t r u t h o u t
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The most important point, which I unfortunately have to keep repeating, is that these are not free trade agreements. They do not free all trade and, in fact, increase some forms of protectionist barriers.

The main area in which US trade policy has sought "free" trade has been manufactured goods. A main purpose of most recent trade deals has been to make it as easy as possible for US firms to relocate their production to Mexico, Central America, and everywhere else and to ship their output back to the United States.

This does not mean just reducing tariff barriers. In most cases, the tariff barriers to imports were already low. The point of these deals was to set up an institutional framework that would facilitate foreign investment in manufacturing in these countries for the purpose of exporting back to the United States.

This meant talking to the auto companies, the textile companies, and other businesses and finding out exactly what was preventing them from taking advantage of the low-cost labor in these developing countries and then removing the obstacles. This had the effect of putting manufacturing workers in the United States in direct competition with low-paid workers in the developing world.

Putting US manufacturing workers in competition with low-paid foreign workers lowers their wages. It also has the effect of lowering the wages of non-college-educated workers more generally, since manufacturing has historically been a source of high-paying jobs for workers without college degrees.

Of course, we have seen a decline in the relative wages and job security of non-college-educated workers. This is not a case of the trade agreements not working or not following the course predicted by economic theory. This is what the trade agreements were designed to do - the reduction in the relative wages and living standards of non-college-educated workers is exactly the outcome predicted by economic theory.

But this is not "free trade." We decided to subject our non-college-educated workers to competition with low-paid workers in the developing world. If Senator McCain and others really supported free trade, they would be insisting that we do the exact same thing for our most highly educated professionals.

In other words, we would ask our hospitals, law firms, universities, and other employers of highly educated workers, what exactly is keeping them from filling their staffs with low-paid professionals from the developing world? We would then change the laws and structure the institutions to ensure that smart kids from the developing world, who were trained to our standards, could as easily work as professionals in the United States as kids born in New York or California.

This would send the wages of professionals tumbling, along with the price of their services. This is exactly the sort of gain from trade that economists like so much, except in this case it would come at the expense of the most highly paid workers instead of low- and moderate-income workers. ...