 Hello everybody, we're going to get started. I'm Susan Collins, the dean here at the Gerald R. Ford School of Public Policy and it is wonderful to see all of you this evening for the third in the series of the Ford Policy Union debates. As those of you who had been here before know, you are in for a very interesting format and an interesting exchange of ideas and the audience participation is an important part of that. So we really are delighted to have all of you joining us this evening. The Policy Union series is essentially one of the major initiatives of the Ford School's International Policy Center and it is also a partnership with the International Policy Students Association and so I would particularly like to thank both of those organizations for their role in organizing and planning and putting on both this evening's event but also the series more generally. So before I turn things over to our moderator, who will be Katie Goddard, who will actually more formally introduce our guests and say a little bit more about what the plan is for this evening, I did just want to welcome our two guests. Let me start to my far right with, well-known to all of us, my colleague Alan Diordorf and then there's a very, very special welcome to someone who was both a colleague in different ways and a good friend of mine from my Washington D.C. days, Thea Lee, and again you'll hear more of an introduction for her as well but it's a great pleasure to welcome her here. Well as you know, the topic is pros and cons of free trade and so before I turn things over to Katie, I just want to say a little bit about some of the things that you might think about in context as you get ready to listen to our debaters. You know, as an international economist myself, one of the things that we stress when we talk about trade issues is the fact that there are winners and losers and those of us who are international trade economists are very well aware of the theoretical dimensions and the fact that in many circumstances, if not most, it is certainly possible to compensate losers but of course reality is not always the same as theory and so I hope that you think about essentially some of the issues that have to do with how the various trade developments might impact different stakeholders and perhaps think about some of the extent to which we recognize that markets function in a variety of different ways and international trade is very much about markets and they're very powerful and are helpful for accomplishing a number of things but because they don't always work well, there are opportunities and important dimensions in which one needs to intervene and what is theoretically the first best option is not always the option that weighs alternative considerations in a political context as well. So again, lots and lots of important issues on the table. I'm sure that they won't all get resolved this evening but I look forward to a lively interaction and with that I will turn the floor over to Katie. Katie, welcome. Good evening. My name is Katie Gadard. I'm a first year, a master of public policy candidate here at the Gerald R. Ford School of Public Policy. As a student with a particular interest in international policy and development, I'm privileged to serve as a moderator for tonight's debate on free trade which is the elimination of import tariffs and other artificial barriers to international trade. I want to welcome you all to what will be a very interesting and engaging debate followed by captivating audience questions. The Ford Policy Union debates are intended to bring leading voices on key international policy issues to the Ford School and contribute to a wider, more informed discussion as part of the Ford School's mission to educate the policy makers of the future. Just like to reiterate what Dean Collins said and welcome Thea Lee and Professor Alan Dierdorf and before explaining the mechanics of the debate, just a formal introduction, Alan Dierdorf is University of Michigan's Gerald R. Ford School of Public Policy Assistant Dean and Professor and from the American Federation of Labor and Congress of Industrial Organizations, the Deputy Chief of Staff, Ms. Thea Lee. Please refer to the event program to read their full biographies. Our debate today will be conducted in a fashion similar to a competitive forensic debate with the difference that there will be participation by the audience. Today's debate will be over this resolution. The United States federal government should pursue free trade agreements with willing countries. Professor Dierdorf, a noted international trade scholar, will argue that the US should actively pursue free trade agreements with any country that is willing. And it should focus those agreements on reducing barriers to international trade rather than on other issues sought by domestic interests in the US. Ms. Thea Lee, an expert trade economist, will argue that the current US trade policy and so-called free trade agreements reinforce corporate power structures and exacerbate inequality in the US and abroad. In all rounds of the debate, Alan Dierdorf as the advocate will go first. And the debate will begin with each debater giving an eight-minute statement of their argument. Following these two statements, the debaters will then pose two questions to each other and offer both answers and rebuttals. At this time, participants will have the opportunity to submit questions and we have Andrew and Alex at the back who will go around the room and take the questions you should have received a note card when you came in. Feel free to ask a question. They will collect them from you and then I will receive them to ask the questions at the front. We fully encourage you to utilize the opportunity to pose questions to two leading experts in trade policy. We will then collate and prioritize them and as I said we will I will pose the questions to the two debaters in the front. And in addition, we also encourage you to join our technologically savvy Madeleine. She will be on Twitter and we have the Twitter hashtag, hashtag Ford Policy Union and you're welcome to submit your questions in that form as well. Many of you also have iClickers. These will be, we will be taking polls before and after the debate in order to discern how many members of the audience may have changed their initial opinion. Finally, both Professor Dierdorf and Miss Lee will have the opportunity to present a five-minute closing statement. And following the statements we will take a second vote and using the iClickers again to decide whether the same opinions remain or we've successfully persuaded people one direction or the other. So once again we're welcome to our ongoing series of international policy debates and before I turn it over to our guests of honor let's quickly take the first poll. So with your iClicker please turn it on and the debate resolution the United States federal government should pursue free trade agreements with willing countries. A for affirmative, B for negative, and C for undecided. And we will start now. All right I'm going to stop it. So we have 52 percent saying that affirmative the United States federal government should pursue free trade agreements with willing countries. 16 percent negative and there's an undecided 32 percent. So pressure is off me and I'll turn it on to you. Correct. Okay. Is my microphone on? Is it supposed to be? Okay. Well first let me just say thank you Pia for accepting our invitation to come in and do this. From the introductions you might have guessed that the reason that she came is that she's a pal of Susan Collins but in fact I've known Pia probably longer than Susan Hans because she was a student here and she took trade from me and I've also known her more recently because we both serve border directors of the NBER. So I'd like to say it was my idea that I may regret that now but that was the idea. All right. So I'm here to try to argue in favor of free trade. It sounds like we have a fair majority already in favor of that so let's see if I can increase that majority. First of all just to be clear what do I mean or will we mean I think by free trade in this discussion. In its extreme and its most ideal form free trade is the complete absence of any artificial barriers to trade. Any tariffs taxes on trade or quotas or any other non-tariff barriers that might interfere with trade. That's the ideal at least from an economist point of view of free trade but to practically speaking we're certainly never going to get there anytime soon and so free trade is a couple of other interpretations that I think we'll be talking about more here. One is a reduction in trade barriers without going all the way to zero applied to say imports from all countries of the world. That sort of multilateral trade liberalization is is the preferred approach to free trade amongst economists but much more common as I'll explain more about in a few minutes is not that but more or less complete elimination of barriers to trade but with just a few partners with a single other country or with a few other countries what are called free trade agreements or free trade areas FTAs and so that's in fact what we're going to be talking about here is because it's the much more likely thing to happen which is the expansion of the number of FTAs that the United States might belong to. Now trade economists like myself have for not like myself over two centuries been arguing in favor of free trade this goes all the way back to Adam Smith who you might say founded economics it was refined importantly by David Ricardo also about two centuries ago and ever since then economists have been further developing their ideas and expanding them and bringing in new ideas and every time we do this we get a better understanding of the sources of benefits from international trade. We now have just in the last 30 years a bunch of new ways the countries gained from trade that that Smith and Ricardo didn't know about so so we are convinced on the basis of all of the theory that trade is beneficial hence we argue for free trade. There's also evidence that at least some pieces of those arguments are in fact empirically correct furthermore there's quite a long history now in the in the last half century or so at least that countries that have had open markets have done better have prospered better than countries that have kept their markets closed to international trade so economists feel there's both a strong body of theory and a good deal of experience to suggest that free trade is a desirable goal now what do we mean by benefiting from trade well I want to make clear one thing Susan already mentioned we're not saying that trade benefits everybody no responsible trade economist would say that there are not losers from changes in trade what we are saying the the the criterion that we use for evaluating trade policy is the same criterion that economists use for evaluating all sorts of other policies and that is that we recommend policies if they stand to increase the aggregate welfare of an economy of a whole country or for that matter of the world the aggregate welfare what does that mean well it doesn't mean that the policy isn't going to hurt somebody there are going to be both winners and losers from just about any policy you could imagine and this is true in trade but it's also true at any other policy area pretty much that there are always going to be winners and losers so what do we argue for we argue that a policy is desirable if it benefits the winners so much that they could in principle compensate the losers and still be better off all right in principle we don't say that the policy has to actually have that compensation take place so we're not saying there aren't going to be losers there are going to be losers from just about any policy we might imagine and although many of us would push for ancillary policies that might help some of the losers lose less we don't realistically expect that we're ever going to find policy proposals in the trade area or anywhere else that aren't going to harm some people so how how can we live with ourselves with that as our objective well by applying this not just in the trade area but in all areas of policy we can argue that every time we do that by raising the aggregate welfare we're also going to raise the average welfare for what that's worth and furthermore because we apply it with lots of different policies the losers from some policies will be winners from other policies and so a lot of people will end up being better off even though from individual policies they might clearly lose overall this approach to policy is going to benefit the most people still probably won't benefit everybody but it is going to be the best that we're able to do and furthermore if we didn't take that approach to policy if we didn't willingly accept policies that are going to have some losers we'd never do anything at all well we're doing nothing at all as a policy as well but it would be hopeless so we have that that's the criterion that we use so so that's the basis for most if not all economists preference for free trade based on that the best thing that we could do economists agree would be multilateral free trade or multilateral trade liberalization lowering the barriers to trade against all countries and that has been done indeed that was done for 50 years starting from moral war two on round after round of trade liberalization was negotiated internationally and then implemented initially amongst the rich countries mainly but it's gradually spread to include more and more of the developing countries and trade barriers tariffs specifically fell dramatically over that 50 year period the US average tariff is about about one-tenth today what it was in the mid 1940s and the same as true for the Europeans and the Japanese and so forth that could work did work but doesn't seem to be working anymore the latest attempt to negotiate such multilateral liberalization in the context of the world trade organization called the Doha round has been stalled now for over 10 years and it doesn't look like it will ever finish instead what we're getting is a proliferation of these free trade agreements agreements where individual countries where individual small groups of countries pairs of countries or small groups negotiate to get rid of the trade barriers amongst themselves those are not ideal they're not even necessarily by an economist criteria necessarily a good thing they may not raise aggregate welfare and therefore we very much prefer multilateral liberalization but that doesn't seem to be on the table fortunately i think because so many countries are negotiating these FTAs with so many other countries there's over there's hundreds of them now that have been negotiated and are in place amongst the countries of the world virtually every country of the world is a member of at least one of those and there were getting more of them every every few months so we're moving in the direction where we may end up with every country having an FTA with every other country and that's getting pretty close it's not the same but pretty close to the ideal of multilateral free trade so that's the reason why i and i think most other economists especially trade economists that teach in academia and don't have to deal with real world as some people do favor the objective of free trade thank you thank you very much and it's a particular pleasure and an honor for me to be here tonight at in Ann Arbor at the University of Michigan and sharing a podium with Professor Alan Deardorf who taught me both international trade and international finance and despite what you might think he did an excellent job and he should not be held responsible for any any disappointments i may have caused him over the many years since then or tonight but uh so i've been in Washington now for about 20 years first at the Economic Policy Institute in the early 90s and for the last 16 years at the AFL-CIO and for much of that time i've been engaged in what i would call the trade wars these huge legislative battles over trade policy and i won't say that what i learned at Michigan wasn't useful to me because it was it's tremendously useful to me as engaging those debates but i would say that when you're in the rough and tumble of Washington and Susan knows this of watching the sausage get made watching the policies get hashed out between the business lobbyists and the government folks and everybody else um there's a lot of blood on the floor at the end of the day and very little of it resembles what we learned in graduate school or undergraduate school about the benefits of free trade the um i've had the privilege of representing working families in the globalization debate not just in the united states but also at various wto ministerials i was in doha in cancun hong kong uh and other places i've debated the chamber of commerce the national association manufacturers the business roundtable and u.s trade representatives of both parties as well as testified before congress but let me say one important thing at the outset as i start on this which is that this is not actually a battle between free trade and no trade and it's not even a battle about whether you're pro globalization or anti globalization the labor movement is actually pro globalization in the sense that we are working people we live work breathe and shop in a global economy we produce the exports we consume the imports and we understand that we are in a global economy irretrievably that's not going to change in our lifetimes nor should it so we're not trying to shut down trade or globalization but what we are saying is that we need our government to do a better job than it's done in shaping the rules of globalization to protect the interests of american workers jobs wages to address the burning issues of inequality of climate change of human rights abuses uh to strengthen democracy not weaken it and to ensure that our own economy is healthy going forward that we are creating the jobs we need to uh to employ our population and that we also have a healthy macro economy and i would submit to you that our current trade policy does none of that that it is a shallow uh vision of what free trade is whether it's the two words free trade and a free trade agreement but that masks the fact that trade policy at both the national level and the global level is today largely about corporate interests about protecting and strengthening corporate mobility corporate flexibility corporate profits and not about what it should be about which is delivering benefits to average people average working people whether here in the united states or in other places and when we when the united states negotiates a free trade agreement so we see the uh the the initial statement with any willing country we should negotiate free trade agreements with any willing country there are an infinite number of choices our government makes when choosing a partner to negotiate a free trade agreement with do you choose a human rights abuser do you choose a democracy do you choose a country that has complementary industrial strengths or uh or competing industrial strengths what what kind of trade balance do we have with that country how is the trade balance likely to change and what are the chapters of the free trade agreement what are the provisions now economists academic economists have the luxury of maybe um abstracting from what's actually in the trade agreements or actually reading the free trade agreements the many chapters that go in how strong are the investment provisions versus the intellectual property rights versus the labor and environmental provisions that's my world my world is fighting every single word of every single free trade agreement on behalf of working people to try to change the terms of globalization and not to just say well we have a template that we call an fta that we developed during NAFTA and now we should just make minor changes and keep on negotiating it with any country that the USTR took a plane to and people came up and said let's do an fta so our priorities and our outcomes need to shift in favor of working people take into account the job impact let me just say one thing about jobs i know it's um that's one of the things economists take to hear is you know why would you think about job creation when you're negotiating a free trade agreement it's so good the benefits are so strong jobs are the last thing you should think about let me tell you that every other government in the world is definitely thinking about the domestic job impact of the trade policies it puts in place and that leaves the United States in sort of a funny place where we're looking out for our corporations and whether they can outsource jobs whether they can move jobs around make big profits and bring the goods back into the united states other countries are being more strategic and more targeted in trying to create jobs at home and that leaves us a little bit naked in the world in a mercantilist world but uh the other kinds of concerns around the environment and climate change around democracy development and human rights are things that do not naturally take care of themselves in the kinds of free trade agreements that the united states government has negotiated it's not enough just to say it's got the two words free trade in it and we're economists and so we support it but trade agreements if you actually read them and anybody in the room all you policy students i hope you pick up the NAFTA or the Peru FTA and actually read through it because a lot of it is about global corporate rights about investment rules that give corporations the right to sue governments over regulations they don't like whether it's an environmental or a public safety or a labor regulation in the free trade agreement since NAFTA not before then but since NAFTA every trade agreement that the united states has done with the exception of Australia has investor state dispute resolution it is a provision that can be very undermining of democratic decision making by democratically elected governments it's a way of empowering corporations over governments intellectual property rights provisions are very strong in the free trade agreements the so-called free trade agreements that the united states negotiates and that can have the impact of redistributing income from consumers poor consumers in poor countries to the richest some of the richest companies in the world that is the u.s pharmaceutical companies for example in NAFTA that the one with the u.s government's negotiating priorities required both canada and mexico to change their own intellectual property rights laws to to raise prices of pharmaceutical products for for consumers and but so in this disguise of a debate over free trade we are instead having a discussion over how the u.s government uses its economic and political power in the global economy essentially to sell access to the u.s consumer market that is something that every country in the world would like more of access to the u.s consumer market and the question is what are the conditions that we impose on our trading partners in exchange for access to the u.s consumer market what is the quid pro quo and it's essentially a corporate wish list when we ask so free trade neoclassical trade theory essentially is based on the some very powerful assumptions and you know i haven't kept up with all of free trade theory in the 30 years since i left graduate school but i know that essentially you have full employment balanced trade perfect competition no externalities and a predictable relationship between tariff reduction and trade flows and not much thought to currency currency values which we assume are determined by by market forces and yet and yet the um and and i know that within trade theory there are ways of relaxing one assumption at a time i still remember that the imperfect competitions three countries instead of two and so on and so forth and yet a lot of the strongest neoclassical trade theory results fall apart at that point and even then even within the strongest free trade model the the model of knowledges as professor deardorff said that there will be distributional impacts of increasing trade even if you assume that that's the world we live in and i think it's totally inadequate in the world that we live in in the the u.s economy to assume away the distributional impacts of increasing trade liberalization that that should be something that we take as a starting point i don't think it's enough to assume that if you have a bunch of policies and they all have a distributional impact that those will um wash each other out i don't think that's the empirical results when we look at the incredible growth in inequality in the u.s economy over the last decade and i'll stop now and look forward to the rest of the discussion uh in the q and a thank you so much and look forward to your questions and what we will do is we will let alan pose the first question to thea and thea you'll have three minutes to respond and then in turn you will have the opportunity and we'll do two questions okay um the format i realize now is kind of odd because of course she's just said a whole bunch of things that i i could imagine responding to right now but no i'm supposed to ask her a question so so i will i will ask a question uh sort of uh in in the the position that i took uh that was read at the start here uh i said i was in favor of of negotiating fta's with all willing partners and i said and i didn't get to this in what i was able to say earlier uh try to limit those agreements to just the trade uh barrier removal and not bringing lots of other issues that domestic interest might want and he has touched on a couple of the ones that i have also shared with her tremendous concern about uh the investment provision of the nafta uh i've been unhappy with ever since i heard about it although now i understand it is common not only in other fta's but in our bilateral investment treaties as well so i don't suppose we're ever going to get away from it uh the things on intellectual property uh i've actually written and published uh my my skepticism on some of that so so it's precisely because uh when you open these i am not asking a question am i uh when you when you open these agreements to other issues coming in uh the domestic interest pushed for a bunch of things that i think are solely for them and are not going to benefit the world and and that worries me a lot but let's get back to the the question of of the effect on jobs um you're right that we economists quite often assume away jobs as an issue i'm i would suspect that in my teaching you the course in international trade i probably said on the first day we're going to assume full employment and then we did for the rest of the term uh that was the trade course you said you also took the international finance course and in that we didn't do that at all although from what i hear about the world of international macroeconomics i think they're back to assuming it but back then we had models that did address that but but on the issue of of jobs i know from our conversation at lunch and a little bit from my memory you were very uh critical of NAFTA and the effects that it was going to have on on jobs um and i understand when it hadn't gone into place that we there were lots of things to consider and and we who did analysis often didn't consider some of the things that were relevant but look what happened i mean we had unemployment rates at historic lows in the late 90s and again in the early 2000s i mean we had a dip in around 2001 and of course a big lately but you surely can't blame uh certainly this latest thing and i don't think the one in 2001 on NAFTA uh so is there any way that you can argue that NAFTA in fact uh hurt jobs in the united states well yes oh okay there is and you know one of the measures that was used and we did talk about this at lunch also about what the job impact of NAFTA was going to be it's kind of hard to measure because we don't have a laboratory uh where we can run counterfactual scenarios so we have to live with the world with all the complexity of what happens but you know the model that was used to predict that NAFTA would create jobs was the huff power shot model which i know you don't like but it looked at the trade balance between the countries and projected that the united states would want to trade surplus with mexico for nine to twelve years um and that that would be the basis of creating a couple hundred thousand jobs and that was the model that was used by the clinton administration by the business community and by many others to sell NAFTA that it was a job creation agreement in fact if you look at the trade balance between the united states canada and mexico uh we had a small trade surplus with mexico prior to NAFTA that went almost immediately to a deficit and grew fairly large partly because the peso devalued and you can say that wasn't NAFTA's fault that there was a peso crisis but it's also true that NAFTA didn't incorporate any snapback measures or any uh any countervailing measures to deal with currency movements and i would say that's a weakness of the free trade agreements that we do negotiate when you look at what happened in the united states it certainly was true and i know public citizen did some research on this that of all the corporations that lobbied for NAFTA and they lobbied for NAFTA saying they wanted to export more to Mexican consumers virtually none of them exported more to mexico after NAFTA what almost all of them did instead was move factories from the united states to mexico causing job loss and it's it's hard as you say the economy is growing for other reasons uh you know we had a lot of other things going on including the dot com bubble and at some point the housing bubble that was um you know keeping the economy going but um but if you look at the u.s of Mexico canada trade balance you saw that there was actually a big shift of jobs from the united states to mexico to the maquiladoras some of that subsequently left Mexico and went to china uh which was i think a disappointment to a lot of people in mexico and one of the arguments that we would make about so-called free trade and free trade agreements is that they're not a gift to workers in our trading partners either a lot of people said oh you know it's rich mech rich American workers who hate mechs poor Mexican workers and if we care about Mexico we care about development we have to be for NAFTA you look at the the results of NAFTA and that you actually had some pretty rough years in mexico for working people you didn't have any um strengthening of worker rights or protection of worker rights because the NAFTA labor and environment side agreements were so weak that they had no enforcement mechanisms whatsoever and even though we the AFL-CIO brought a lot of cases under the NAFTA labor side agreement there were no trade sanctions and the companies and the government paid no attention to them so if you contrast within NAFTA the strength of the IPR and the investment protections versus the labor and environment protections you see an enormous contrast and a lot sidedness where the corporate concerns were taken care of and the labor and environment were not so on balance i would say that there definitely was a big exodus of jobs from the united states to mexico and that's part of what we don't do a good job trade economists don't do a good job taking account the impact of investment flows and production location decisions as result of trade agreements as opposed to just the lowering of tariff barriers so now i respond to that is that right okay well uh there's a reason why i asked you about jobs in the u.s not in mexico i agree but it turns out to be very bad in mexico i blame that more on the peso crisis not on nafta but that's that's a separate issue but you're doing it exactly the same thing that analysts at the economic policy institute where you were uh at that time i think uh maybe you were the one that was doing this and that i teach my students that they shouldn't do which is to add up the exports attach job numbers to those exports add up the imports attach job numbers to that and say that's the effect on employment well if you do that based on what you've just described uh add take the number of jobs that you are saying were lost due to nafta if we hadn't lost them who would have filled those jobs our unemployment rate soon became so low we couldn't possibly have accommodated uh all those i think we could have what i think we could have you're kidding no not without inflation i mean we we were at historically there was very big concerns uh that we were way below the natural rate of unemployment we never did see that inflation did we no we didn't that's so we were obviously not below the natural rate of unemployment well but we were often we were closer than we'd ever been to follow point until we get the inflation you really start worrying about the natural rate of unemployment but you really think we could have employed that many people i i really do okay well i don't now it's her turn to ask a question is that right it is okay okay um so i think this is an interesting point about you know with the ancillary provisions of trade agreements and you know so and i know a lot of economists don't like the investment provisions of the electoral property rights provisions but the truth is you support them even though they have those provisions you support the nafta exactly so you support the nafta so you know the trade agreement part of you know my job is to engage around the content of the trade agreement to fight as hard as i can for better provisions and different provisions and to to try to change the balance uh within the agreement between the corporate interests and the working families interests and when i lose i oppose the trade agreement you know and so a lot of people think well labor is protectionist and business is free trade but really what's true is that labor's interests are just ignored more often by the the people who make trade policy and business interests are sort of internalized in the way the u.s trade representatives office or the white house does trade policy and i'll just give you one example which is the jordan free trade agreement which was towards the end of the clinton administration where we we worked with the clinton administration and they strengthened the labor and environment protections in the jordan agreement and the afl cio actually supported the jordan agreement and the chamber of commerce opposed it because they said unless the labor and environment provisions were stripped out they didn't want to see it so i guess i'd love for you to close the question the question for you is given that you can't change the fact that the fta's include these investment ipr should they also have binding labor and environmental protections i think i want to say no uh but i admit that's a that's a tough question i'll tell you my concern about strengthening the labor environmental protections of these free trade agreements and i've said this to my students as well is that once those are in there uh domestic companies corporations in fact uh we'll see the opportunity to use weak labor standards in other countries as an excuse for protectionism that they're going after just to increase their profits now maybe it will help our american workers but it will hurt those other countries and it's going to be most seriously felt in developing countries so that's what concerns me uh is that it will unleash the constraint on protectionism that an fta is supposed to provide and be very harmful to some extent for our consumers who of course include labor but more so harmful to the the people and i think mainly labor in the developing countries who will have their adverse working conditions used as an excuse to stop buying from them and put them out of work that's what i worry about i can put your worries at rest oh i'm sorry because corporations hate the labor and environment provisions and would never dream of using them they have many better tools no i'm we bring a lot of labor cases and the the companies scream and yell and kick and scream they can't stand the labor and environment protection so i don't think you need to worry about them being used as disguised protectionism and when the when the aflci brings them we bring them in conjunction with our union counterparts in those countries to to make sure that their interests are being taken care of as well so you don't need to worry about business misusing the labor and environment chapter because they hate it well i'm i'm glad you have such trust in business i have such experience with business okay well speaking of that uh so you see the benefits of free trade primarily and a free trade agreement primarily going to corporations and at the expense of labor uh and i certainly don't entirely disagree with that i i totally agree that corporations have played uh have had way excessive influence in in the drafting of these things uh and and the things that they say um but i'm wondering how far you go with that uh concern about corporations uh my impression is that Ralph Nader i'm guessing you know him i don't i don't uh that that that he views anything that's good for corporations as simply bad because it's good for corporations uh do you accept the possibility that trade could be beneficial both for corporations and for labor and that there might be a way of tailoring uh free your trade to that purpose that's a really interesting question and absolutely you know and i think labor can't be anti-corporate because those are our bosses we want our corporations to be successful we want them to be profitable but we do have a difference in a globalized economy between whether they're going to be profitable by sending good jobs overseas and taking advantage of lax regulations overseas and lax protections for workers versus uh being profitable on american soil and our worry is that u.s trade policy creates so many incentives and protections for offshoring we give tax breaks for offshoring we negotiate free trade agreements that protect investment abroad and electoral property rights abroad and move the risk for for companies of going abroad i've often made the argument and i'm dying to find corporations who will agree with me on this that actually having strong labor and environment protections in our trade agreements is good for us corporations and could be good for them and every once in a while i find somebody who agrees with me they just don't end up in lobby in congress or the white house on this behalf but the reason is that us corporations are operating in the global economy they're producing in other countries and even those companies that have good high standards they want to treat their workers well and protect the environment are then undercut by bottom feeders by unscrupulous um companies that that um violate those provisions and then they have a choice which is that in order to compete they also need to violate workers rights you know hire children or forced labor or violate the environment and have unsafe production uh methods uh in order to be competitive because there's no you know national labor laws there's no international protections and so i think the idea for us of having internationally enforced lay minimum labor and environment protections the idea is to create a framework where those things are not part of competition you know that you don't get ahead by hiring child labor or by trashing the environment that you get ahead by having the best product getting it to market quickly and treating your workers well and and operating in a good um environment and so we should have enforceable worker rights and environmental standards and it could be good for business and i would love to see business join in in demanding that our government negotiate a different kind of trade agreement actually i'm a little bit surprised that some of them don't because one of the things that we do know and i'm sure you do too is that multinational corporations do have pay higher wages have better working conditions just across the board everything is better than their local competitors in in developing countries and you would think that that given that they're going to do that anyway uh now we could try to figure out why they do that but but there's a i think a bunch of reasons but given that they're going to do that anyway i i agree they should be uh more supportive of trying to get their competition to do the same thing i do still worry though that if they succeed in that uh the result may actually be fewer jobs for workers in developing countries uh if you if you push the standards too high and that's well that's what i'm afraid might happen well part of raising the standards is about creating a middle class of workers in those countries too and then you create a better market so if you have workers who are not just disposable workers who you try to pay the least possible amount to and treat as badly as possible and assume that there's an army of other folks out there to take their jobs but rather you know you you give them the wherewithal to have a middle class lifestyle they become your consumers and that's that's a win-win well if that's a win-win if it works but it's not gonna the math can't possibly work uh to make that happen you've got to raise the productivity of the workers if you want to treat them better and give them better pay and and that's a struggle uh in developing countries because productivity for workers comes from all the things they have to work with they don't have much to work with but when a multinational corporation goes to a developing country they bring the technology they bring the capital they can do the training and so they have every possibility of raising the productivity that what they don't want uh they tend not to want is workers who can have a union have the protection of a union have um maybe a democratic vote and what about you know corporations who take advantage and the is that your last question that is my last question um so in terms of the the question that we were asked that the u.s should do free trade agreements with any willing country is there any country in the world with which the united states should not negotiate a free trade agreement and what would be the criteria that you would impose them you know democracy human rights um treatment of workers north korea i would say we shouldn't do one way is that it i don't i'd let me think a little bit more uh i guess cuba unless they become more of a market economy i think it would it doesn't need uh what about china um yes i think so i mean we're already trading massively we are with them and and having that trade be free trade i think would be better why for both sides well for all the reasons i talked about before well we have a 200 billion dollar trade depths with china and if we were to take the tariffs down to zero uh it's possible that china has more non tariff barriers in place that are not actually amenable to negotiation through a free trade agreement we've had this experience i think we're having it right now with korea where we negotiate these free trade agreements and i'm not saying that our negotiators are idiots but what i am saying is they're a little bit naive so that the kinds of provisions that we put into our free trade agreements don't do a good job in addressing non tariff barriers or state-owned enterprises for that matter so if we were to negotiate a free trade agreement with china do you think that the trade deficit would grow or shrink and do you care uh those are two questions i don't think it would be affected by what we did with the free trade agreement i don't think trade imbalances especially bilateral ones are about the trade barriers or their absence it's about levels of spending relative to income it's a macroeconomic phenomenon now do i care i've been struggling with that question for years as long as we can get away with it more power to us as long as they're willing to hold our useless paper and never try to cash it in which i don't think they dare do because they'll just destroy their own wealth then then we're we're living wonderfully off of them now because i care more about the world than about i do well i love the united states but but we're rich let's face it the idea that a rich country uh is living off the labor of a billion chinese uh that's just not appropriate so i i don't like the fact that we have that big trade imbalance but i don't think it has anything to do uh with trade barriers it has to do with the level of spending in this country and the level of savings in that country and and similar things in a lot of other countries doesn't have anything to do with currency manipulation but it does the currency manipulation is relevant and i would like to see uh something take place on that front i i appreciate you giving your opportunity for the rebuttal to pose another question and uh it was great because that was one of the concerns and questions was about china but we would like to have an opportunity for some of the people in the audience to pose some questions for you and this question will be for both of you we will allow alan to speak on it first and the question is given that there are winners and losers from free trade how realistic are the prospects for compensating the losers enough given u.s political institutions and policies um there's no chance that that uh we will ever compensate the losers enough so that they won't lose no chance uh what there is the chance of is that we can improve our policies both related to trade and not related to trade we have uh adjustment assistance policies that could be expanded and probably should be expanded uh we have a very minor piece of almost experimental wage insurance that applies and i'd like to see that expanded tremendously but none of that nothing we might do with that will ever prevent there from being losers from trade and so we also just need a society that provides better for those disadvantaged at the expense hopefully of those of us that are advantaged so i'm i'm all in favor of a more progressive income tax uh or what they sometimes call the negative income tax uh and various policies of those sorts of you know universal health care i mean i used to be a republican but not anymore so so i think we need to do a lot of things along those lines but we're never going to prevent uh losers from trade from some of them turning out to be losers thank you i agree with allen that it's totally unrealistic to think that there will be compensation of losers from trade policy but i also think that that should lead us to another question which is do we need to barrel ahead with more free trade agreements that are going to exacerbate inequality in the united states when we already have inequality at what i would consider totally unacceptable levels if you actually look at the real median wage of a full-time equivalent male worker there's been no gain in income since 1975 for the median male full-time worker that is an extraordinary indictment of something wrong with our economy that is not delivering benefits to average working people and trade is one part of what's happened over the last couple of decades you've had a lot of other um a lot of other things happening at the same time the attack on unions and other ways of undermining the bargaining power of working people but i would argue that trade and globalization and the way that the united states government has engaged in trade policy has exacerbated inequality and undermined workers bargaining power in a way that should be unacceptable that we should think twice that it's an important question about if we want to enter into infinite numbers of new free trade agreements we need to think about the distributional impact and think about something more than hopefully we'll have more progressive income tax policy in the future i think that's inadequate can i say a little bit more responding to that or not i'll allow you uh we'll go with 30 seconds for both of you if you'd like okay well the the studies that i'm aware of that have been done about this uh increasing inequality do indeed say the trade is a part of the cause uh something like 30 percent of the increase uh issues of unions not haven't shown up from what i've read uh as part of it the real other cause that has been pointed to as as more important than trade has been technology technology has evolved in a way uh that favors the high skilled highly educated workers at the expense of of the low skilled and thea would you like to respond to that yeah and just to say one thing which is i agree with you that that's what the studies show but a lot of times technology is also induced by globalization and by trade and by outsourcing in the sense that uh companies adopt more capital intensive and skill intensive production processes in response to import competitive um pressures and that was one of the things in that paper that i was telling you about that um is there so technology can be actually be related to trade and this question will be for thea uh there's been a lot written over the past few years about the race to the bottom in the us michigan is currently losing scores of jobs to other states and why is free trade between states acceptable but not between countries do you think that michigan should erect trade barriers with the rest of the us very interesting well there are a couple of things that are different about competition between states and one of them uh certainly we share the same currency and we have the same basic labor and environment laws there's differences between states some have you know better different minimum wage and so on but i think that that is one difference when we talk about one of the the challenges of globalization is how competing regulatory regimes uh survive in a global economy you know if one country wants to have more stringent environmental or consumer or worker protections than another country should that be a competitive disadvantage within the the united states of america we do have different labor laws between states but it's it's a minor there's a floor um and that's part of what we're talking about we're talking about changing the rules of international trade is to create some kind of minimum standards across nations thank you this question will be for alan how have the owners of capital fared compared to laborers in the age of trade liberalization and globalization and on a related note is there a link between the specific factors trade theory and the increased income inequality between capital owners and laborers how can we better share the gains to capital owners with laborers hmm okay uh how have the the owners of capital fared i think they by and large have fared well uh although it's not by any means uh monotonic or always going in the same direction i mean in in the uh in the global recession the owners of capital lost a lot but then they came back uh gangbusters in fact so uh so so they are subject to greater fluctuations i think um now i'm supposed to relate that this to the specific factors model and how can we better share the gains to capital owners with laborers uh right that but those are two different things the thing with the specific factors model i don't think you really mean because or whoever wrote it uh because the specific factors model has different capitalists in different industries all getting different returns and so or maybe that's what i'm supposed to say but anyway i otherwise i don't see the connection with that uh but then how can we redress this or or improve the distribution of income between um oh this is probably stupid but the best i can say is it would try to make sure that labor owns some capital in other words don't don't try to reduce the return to capital but try to share the ownership of capital more broadly in the population so that uh it's not such a clear division between those who who own no capital and those who get most of their income from capital then then it wouldn't matter so much if uh those balances changed thank you this question is for the uh what would an ideal fta look like from the perspective of afl cio oh what a fun question um well what we we would like to see um first of all i actually agree with alan also that in an ideal world we would have multilateral trade liberalization that would incorporate very different sets of protections and so maybe i'll answer the question that the ideal trade agreement would be a multilateral agreement that would protect core workers rights and environmental standards uh as a starting point it's not the only thing and it's you know in some ways it's kind of a minor thing but the idea of using trade agreements to protect workers rights is that we have an international consensus through the ilo the international labor organization about what the core uh fundamental human rights that every worker deserves are freedom of association the right to bargain collectively and protections against child labor forced labor and discrimination and employment and if you take those as fundamental human rights and you think about harnessing the power of the trading system to protect those rights that is talking about giving every worker in the world the right to have a voice at the workplace and a voice in the political system so that they can fight for their fair share of the wealth that they create without getting thrown in jail or beaten up by company thugs and that happens every day pretty much and it happens with the goods that you buy in the in the united states of america you buy goods that are made by workers who don't have that right they don't have the right to form a union they don't have the right to get together with their co-workers and say hey instead of each of us going to the boss by ourselves and asking for a bathroom break or safety goggles or a raise or health care let's go together and use the collective power to to ask for basic protections at the workplace and that is i think that would change the global economy in a way that would really help workers build their own democracy build their own power and fight unfair terms for for wealth and the same with environmental standards and the reason i would say that is that you know if you look at the challenge of climate change that we all should be looking at we all should be concerned about it's actually hard to see how you're going to address climate change where you need international coordinated action if you don't use trade agreements to make sure that that countries are not disadvantaged by imposing higher environmental standards or carbon controls and raising the costs of production and they're in a global economy so if if you don't do that what's going to happen is that the countries that act first are disadvantaged because they've raised their own costs and then a lot of production will move to the countries that act slower and you'll actually end up with more carbon emissions from a free trade system if you don't address it explicitly through global trading rules thank you another question for you yeah okay are you worried that restricting trade might protect old economy jobs at the expense of slower innovation and the example here given was the raising the price of electronic components the trade restrictions could have slowed the internet revolution thereby doing the establishment of companies like google I'm not really worried about because I'm not arguing for trade restrictions I'm not arguing for cutting off trade and I'm not even sure how you know the electronic commerce is impacted through through trade I'm all for I think innovation is a wonderful thing and I actually think that if you had a different kinds of trade policy that was maybe more deliberate more strategic part of what I'd like to see for the United States is more of a comprehensive economic strategy around trade and investment in education and infrastructure and I think those things could be very good for innovation and for for technology but I think that actually the system that we have now in some ways disadvantages US inventors and there's sort of there's issues around patents and differing patent regimes in different countries that are not very good for US inventors even though a lot of research happens here in the United States sometimes the fruits of that research end up going going elsewhere and that that's a problem because I think it's important to reward innovators thank you this question is for you Alan I think this is someone in the statistics class currently you said free trade raises the average welfare and by average in this case if you're meaning the mean that means that a few positive outliers would skew the average positively including things such as corporations profits is that really the type of average you want to look at and should we focus on the median yes the point is a very well taken point yes what what I was describing was the mean because all we know from theory is that the aggregate the sum is going to go up and that certainly means that when you divide it by n if you don't change n it's going to raise the the mean furthermore and and I will shoot myself in the foot by going further to say that basic trade theory does suggest for a country like the united states that freer trade is going to lower wages and raise returns to capital and it's pretty darn obvious that more people earn their living from wages than from capital so yeah the median goes down and that is a problem I don't deny that that's a problem that's why I would like to see other policies used to try to address that sort of thing but I don't want to to reduce the aggregate in order to accomplish that thank you and we'll go with the last question for both of you and this is going back to China and the discussion we're having previously the US has been criticizing China for currency manipulation and illegal subsidies lack of labor standards at the same time we should also be aware that the US does not have a free trade agreement with China so the question is would free trade agreement be a better and more effective venue for the US to level the playing field and hold China accountable and we'll start with Alan yeah it can't be worse I mean we have no leverage over China right now with regard to their currency there's there's no international rules that allow us to to really take action there's domestic rules I mean if we declared them a currency manipulator our congress could could respond but then I think that WTO would strike it down so we'd lose that fight and on the other areas that you've mentioned if we really want to change what goes on there the multilateral system doesn't give us any leverage for doing that so yeah a free trade agreement with addressing all these other issues if we could get them to sign on to it could certainly allow us to accomplish more now I may have some doubts about how many of those things I I think we'd be wise to accomplish or that are desirable to accomplish but some of them certainly yeah I think it's very unlikely that we'll be able to negotiate a free trade agreement with China that would address any of those issues effectively and we've never negotiated a currency manipulation provision in any of our FTAs even though we ought to have because there's you know the currency swings can really swamp any changes in tariffs so we negotiate for these dinky little changes in tariffs and yet the year after a trade agreement goes into effect as with NAFTA you know the country can devalue its currency massively or experience a devaluation and and I think it's unlikely that you know we've never done it up until now with respect to worker rights I think the issues in China frankly are too deep to address through a free trade agreement because if you talk about freedom of association the right to organize and bargain collectively and forced labor and child labor this is a clause in a free trade agreement and I think it's very I mean the whole for China China is not a democracy and China has no independent unions today and so you're not going to change that by signing a free trade agreement getting China to change you need to have that dialogue with China today the US government should be using its negotiating power and its influence on China to begin moving towards democracy and better protection of worker rights and better human rights we need to use the WTO mechanisms to counter the illegal subsidies and I think it's a real indictment of our international trading system that we don't have any provisions through the WTO or the IMF that address currency manipulation it's ridiculous so and I think that doing an FTA with China would be very unlikely unless we're negotiating something massively different than what we've ever had in place to address those concerns and if we did negotiate it China wouldn't sign it thank you now both of you will have an opportunity to provide a closing argument or persuasive peace and we'll start with Alan oh we're doing that already somehow I thought I would have time to think about it and you have five minutes oh boy okay well let's see what are some of the things I was thinking about that I didn't never get a chance to say I mean I have not changed my view I doubt you have either I still think that trade is is broadly beneficial for the world and for the United States and has been hugely beneficial for the United States in fact over over the the decades so so I certainly would like us to continue moving in the direction of freer trade the only way I see to do that these days is through free trade agreements so I'd like to see us negotiate more and more of them and I'm still skeptical that adding extra things other than just plain old trade barriers to these agreements is a desirable thing to do unfortunately I do agree that that it gets done more when the corporations push forth and when the unions do my preference would be to get the corporations out the is would be to get the labor unions in I'm a pragmatist yeah but but that that would be the ideal that I would like to to look towards I guess I'll just say finally something that the trade economists have been saying this isn't going to fill my five minutes I don't think for for years but the way trade economists look at freer trade is that it even though it's something that happens in the world of the economy through the markets and the exchange of goods the effect that it has is to allow countries to convert things that they can produce cheaply into things they can't produce as cheaply it's it's like a technology that you put something in one side and out comes something else on the other side that turns out to be more valuable than what you put in that's what trade does and freer trade frees up the use of of that technology most of us I think I mean there have been people in the past who might disagree with this but generally speaking most of us see technological progress as something that's good even though it quite often has a lot of the adverse effects on labor and on inequality I think it's been having that that the trade does but I don't think we mostly hear people say let's stop the technology maybe we will I don't know how many of you saw 60 minutes on Sunday but they had a segment on robots and in fact one of the things that looks like it's going to happen is happening is manufacturing is coming back to the United States at least in small ways Apple's going to do it and I think I heard the general electric has done it and and one of the reasons some of it's coming there's a lot of reasons but one of the reasons is that you can make things more cheaply with a robot than you can with an asian worker okay so that technology is taking us in the direction the manufacturing is going to come home but is it going to employ people not directly should we therefore say ban the robots I think that's maybe it's been tried and it didn't work now we're not going in the direction of Hal I don't think that was the computer that killed the guy in 2001 but but we are probably going in that direction and it's going to have a lot of the same effects I think that trade is is having and that we are concerned about if we don't want to stop the technology I don't think we ought to want to stop the trade okay well let me let me start by just saying I think there's a difference between technology and trade in the sense that you know when I was a kid our teachers told us oh you know robots and technology and we're not going to everybody's going to have long vacations and everyone's going to be rich you know that you don't have to work as hard which ideally the idea of technology in principle is that if everybody shares in the fruits of higher productivity growth and new technology then we could be very wealthy as a society we wouldn't have to feel so poor and yet what we see with globalization the kind and I don't mean just globalization but I mean the current set of globalization related policies is that it has exacerbated the inequalities to an extraordinary extent and that it's very little is being shared it's fine to say you know workers should own the corporations you know but they don't and and you know short of you you know more redistributive policies I think we have to think before we move forward with more trade liberalization what the options are in terms of of of doing this differently some academic economists have pledged allegiance to the flag of free trade and they put their reputations and their prestige on the line in its defense and this is something that I think is frustrating in the in the real world because it's there is no such thing as free trade there's managed trade and there's investment policies that change the terms and we have tax policies and we have infrastructure policies and to the extent that we use the rhetoric of free trade just to say everybody do whatever the heck you want whether you're moving production and you know using sweatshop labor and trashing the environment and making a ton of money it's all going to work out because it's called free trade and I think the real world that we live in and the kinds of challenges that we're facing both in the United States and in the global economy should lead us to a more thoughtful and strategic set of policies both for the United States and globally so the and I think the weakness of labor markets in the United States the 2001 so-called jobless recovery there's a paper by Justin Pierce and Peter Schott from that nber just published that talks about how granting permanent normal trade relations to China in 2000 in 2000 taking effect in 2001 had an enormous impact on increasing imports and decimating manufacturing employment manufacturing employment is crucial to the health of the u.s economy and I think and they they calculate and this is nber it's not the aflco it's not the economic policy institute they calculate four million fewer manufacturing jobs in the united states in the year since pntr went into effect as a result of offshoring essentially of companies u.s companies taking advantage of that trade policy but i think that if we look at the issues that we're facing slow emergence from a long deep recession without the kind of job creation that we need and i i don't think we can abstract away from the trade deficit and the current account deficit that is undermining our employment possibilities in the united states and one of the things it does is weaken our economic recovery so when the economy begins to recover if we spend all of our consumer dollars on imports then you don't see the kind of cyclical upturn that we used to see in the past and i think there are a lot of people who would say too that the the kind of global economic imbalances that the u.s runs and and china contributed to the financial crisis in the sense that there was so much excess money sloshing around in the united states that it contributed to the the housing bubble but you look at climate change the urgent need to take coordinated international action global poverty and unemployment and i would argue to you that that our current trade policies and the kind of globalization policies that we have at the world trade organization are not just not helping but that they are exacerbating the power of imbalance between multinational corporations and average working people and that that is the challenge that we need to take on is how do you create the countervailing power for working people whether they're in a sweatshop in vietnam or in a auto factory in michigan that global corporations have become so enormous economically and so politically powerful that they are writing the rules they are deregulating economies and they're using trade policy as a tool to undermine workers bargaining power and to deregulate in ways that are detrimental to the environment and consumer safety and workers so we need a trade policy that is strategic that recognizes and counters the bad actions of some of our trading partners that recognize that we live to some extent in a mercantilist world and we need to counter that with policies other than naive free trade we need to negotiate deals that benefit workers in both the united states and in developing countries and that protect the environment consumer safety and worker rights and with that i thank you all for your attention i thank alan for his thoughtful engagement it was just as much fun to be here oh it's actually a little more fun than to sit in the classroom because i got sort of equal time here and that was that was a real pleasure thank you too thank you and with that rousing debate thank you both very much that was exceptional and we'd love to hear the opinion of the audience now so if you take out your i-clickers once again wish i we're going to do a final poll on the question the united states federal government should pursue free trade agreements with willing countries please choose now a b or c i'll stop it so this is at the end of the debate we have 55 percent with a 36 percent with b and nine percent with c and just going from the beginning with question one it looks like a few more of the undecideds were decided a lot more yeah actually certainly quite a few more one could say we both won it was a win-win yeah and with this debate yes you both turn out winners i'd like to thank all of you for coming we really appreciate having you here and it's been incredibly thoughtful and engaging debate and thank you audience for the questions you've posed please remember to collect your m cards when turning in your i-clickers and we do hope to see you again the next forward policy union debate will be on february 20th which is wednesday it will feature dr steven bucci who's the director of the douglas and sarah allison center for foreign policy studies and he's at the heritage foundation and john steinbrunner who is a professor of public policy at university of maryland and the director of the center for international and security studies and they will be debating cyber security so we hope to see you february 20th thank you very much