Monday, August 08, 2011

The Republicans have been delaying consideration of free trade agreements

I quote from the Farm Press:
Senate Majority Leader Reid (D-Nev.) and Minority Leader McConnell (R-Ky.) have announced that when Congress returns from the August recess, they have agreed to consider free trade agreements (FTA) with Korea, Colombia and Panama and the Trade Adjustment Assistance (TAA) program.
I hope that the free trade agreements will be approved. I also hope that the trade adjustment assistance program will be continued.

One of the grave errors of the global depression that started with the stock market crash of 1929 was the wave of protectionism that reduced international trade. It is well known that all economies can take advantage of their comparative advantages and prosper through international trade. Of course, protective tariffs can reduce the advantages of such trade.

It is also the case that comparative advantages can change relatively rapidly, certainly as compared with the working lifetime of the average worker. One of the reasons that innovation is so important for the American economy is to develop new areas of comparative advantage that we can exploit.

Ultimately, the economy has to be flexible in order to move out of areas in which the advantage has declined and move into areas in which it has been created, and to do so rapidly. The workforce has to be able to move from the downsizing industries to growing industries. Retraining, such as that provided under the TAA program is one way to help them do that. (Note, too, that people may also have to move to another place to work in a new industry, and those people who can't sell their homes and especially those who owe more on their homes than they have equity in the homes can not move easily.)

The Republicans have been refusing to approve the free trade agreements, which they like, due to their being linked to the TAA program. This is simply wrong headed!

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