Gary Burtless, Robert Z. Lawrence, Robert E. Litan, and Robert Shapiro,
“Globaphobia. Confronting Fears About Open Trade”
We have written this book to demonstrate that the fear of
globalization — or ‘globaphobia” — rests on very weak
First, the United States globalized rapidly during the golden years before 1973,
when productivity and wages were growing briskly and inequality was shrinking,
demonstrating that living standards can advance at a healthy rate while the United States
increases its links with the rest of the world….
Second, even though globalization harms some American workers, the
protectionist remedies suggested by some trade critics are, at best, short-term
palliatives and, at worst, harmful to the interests of the broad class of
workers that they are designed to help. Sheltering U.S. firms from imports may grant
some workers a short reprieve from wage cuts or downsizing. But protection
dulls the incentives of workers and firms to innovate and stay abreast of
market developments. As a result, its benefits for individual workers and firms
are often temporary. Indeed, protection invites foreign exporters to leap trade
barriers by building plants in this country — as foreign manufacturers of
automobiles, automobile parts, film, and other products have done. We are not
criticizing this result: the United States
has a strong national interest in attracting foreign investors, who typically
bring technologies and management practices that ultimately yield higher wages
and living standards for U.S.
workers. But the movement to the United States of foreign companies
and their plants simply underscores how erecting barriers to imports is often fools’
gold for those who believe
that protection will permanently shelter jobs or the profits of employers.
Third, erecting new barriers to imports also has an unseen boomerang effect
in depressing exports. . . . While higher barriers to imports can temporarily
improve the trade balance, this improvement would cause the value 0f the dollar
on world exchange markets to rise, undercutting the competitive position of U.S. exports
and curtailing job opportunities for Americans in export industries. Moreover,
by increasing the costs of input (whether imported or domestic) that producers
use to generate goods and services, protection further damages the competitive
position of U.S.
exporters. This is especially true in high-tech industries, where many American
firms rely on foreign-made parts or capital equipment. The dangers of
protection are further compounded to the extent it provokes retaliation by
other countries. In that event, some Americans who work in exporting industries
would lose their jobs, both directly and because higher barriers abroad would
induce some of our exporting firms to move their plants (and jobs) overseas. In
short, protection is not a zero-sum policy for the United States: it is a negative sum policy.
Fourth, globaphobia distracts policymakers and
voters from implementing policies that would directly address the major causes
of the stagnation or deterioration in the wages of less- skilled Americans. The most significant problem faced by underpaid
workers in the United States
is not foreign competition. It is the mismatch between the skills that
employers increasingly demand and the skills that many young adults bring to
the labor market. For the next generation of workers, the problem can be
addressed by improvements in schooling and public and private training. The
more difficult challenge is faced by today’s unskilled adults, who find
themselves unable to respond to the help wanted ads in daily newspapers, which
often call for highly technical skills. It is easy to blame foreign imports for
low wages, but doing so will not equip these workers with the new skills that
employers need. The role of government is to help those who want to help
themselves; most important, by maintaining a high-pressure economy that
continues to generate new jobs, and secondarily, by facilitating training and
providing effective inducements to displaced workers to find new jobs as
rapidly as possible.
Fifth, Americans in fact have a vested interest in negotiating additional
reductions of overseas barriers that limit the market for U.S. goods and
services. These barriers typically harm the very industries in which America leads
the world, including agriculture, financial services, pharmaceuticals,
aircraft, and telecommunications.
Sixth, it cannot be stressed too heavily that open trade benefits consumers.
Each barrier to trade raises prices not only on the affected imports but also
on the domestically produced goods or services with which they compete. Those
who would nonetheless have the United
States erect barriers to foreign goods —
whether in the name of “fair trade,” “national security,” or some other claimed
objective — must face the fact that they are asking the government to tax
consumers in order to achieve these goals. And Americans must decide how
willing they are to pay that tax. By contrast, lowering barriers to foreign goods
delivers the equivalent of a tax cut to American consumers, while encouraging U.S. firms to
innovate. The net result is higher living standards for Americans at home.
Finally, to ensure support for free trade, political leaders must abandon
the argument traditionally used to advance the cause of trade liberalization:
that it will generate more jobs. Proponents of freer trade should instead stick
with the truth. Total employment depends on the overall macroeconomic
environment (the willingness and capacity of Americans to buy goods and
services) not on the trade balance. . . . We trade with foreigners for the same
reasons that we trade among ourselves: to get better deals. Lower trade
barriers in other countries mean better jobs for Americans. Firms
in industries that are major exporters pay anywhere from 5 to 15 percent more
than the average national wage. The “price” for gaining those trade
opportunities — reducing out own trade barriers — is one that Americans should
be glad to pay.
In spite of the enormous benefits of openness to trade and capital flows
from the rest of the world and notwithstanding the additional benefits that
Americans would derive from further liberalization, it is important to
recognize that open borders create losers as well as winners. Openness exposes
workers and company owners to the risk of major losses when new foreign
competitors enter the U.S.
market. Workers can lose their jobs. This has certainly occurred in a wide
range of industries exposed to intense foreign competition — autos, steel,
textiles, apparel, and footwear.. . . In some cases,
workers are forced to accept permanent reductions in pay, either in the jobs
they continue to hold in a trade-affected industry or in new jobs they must
take after suffering displacement. Other workers, including mainly the
unskilled and semiskilled, may be forced to accept small pay reductions as an
indirect effect of liberalization. Indeed, the job losses of thousands of
similar workers in traded goods industries may tend to push down the wages of
all workers — even those in the service sector — in a particular skill
We acknowledge that these losses occur…. Nonetheless, we believe the nation
has both a political and a moral responsibility to offer better compensation to
the workers who suffer sizable losses as a result of trade liberalization. . .
. Decent compensation for the workers who suffer losses is easily affordable in
view of the substantial benefits the country enjoys as a result of open trade.
Liberal trade, like technological progress, mainly creates winners, not losers.
Among the big winners are the stockholders, executives, and workers of
exporting firms such as Boeing, Microsoft, and General Electric, as well as Hollywood (whose movies
and television shows are seen around the world). There are many millions of
more modest winners as well, including the workers, retirees, and non-working
poor, who benefit from lower prices and a far wider and better selection of
One problem in making the case for open border is that few
of the winners recognize the extent of the gains they enjoy as a result of free
trade. The losses suffered by displaced workers in the auto, apparel, or
shoemaking industries are vividly portrayed on the nightly news, but few
Americans realize that cars, clothes, and shoes are cheaper, better made, or
more varied as a result of their country’s openness to the rest of the world.
Workers who make products sold outside the United
States often fail to recognize how much
their jobs and wages depend on America’s
willingness to import as well as its capacity to export. People contributing to
a pension hind seldom realize that their returns . . . are boosted by the
fund’s ability to invest overseas, and almost no borrower understands that the
cost of a mortgage or car loan is lower because of America’s attractiveness to
foreigners as a place to invest their money. All of these benefits help improve
the standard of living of typical Americans, and they can be directly or
indirectly traced to our openness. They are nearly invisible to most citizens,
however; certainly far less visible than the painful losses suffered by workers
who lose their jobs when a factory is shut down.