The Economy

Editor's Page -- Take The Demon Out Of The Debate

Dec. 21, 2004

Questions on free trade deserve to be answered, not scorned.

Many smart people -- economists, politicians and business executives -- are perplexed. They just don't understand why so many people risk calling for "protectionist" measures when the results of free trade are so obviously good for the economy. Economic theory and historical statistical evidence, they argue, prove, unequivocally, that free trade is the ticket to generally wider prosperity for the nation and the world. The disconnect, they conclude, must be ignorance, sheer stupidity or, in at least one oft-repeated claim, a clear case of demonic possession. And there are some, they assert, who are so frightened of healthy global competition that they want to hide under protectionism's blanket and selfishly throw away opportunities for the greater economic good. So these smart leaders who believe fervently in the Bush Administration's free-trade policy, which promotes faster, freer industrial globalization, have gone on the offensive. Their plan: Educate the unknowing public and exorcise the demons twisting the minds of their otherwise well-educated peers. Their tactics: Attack with equal parts solid information about the benefits of free trade and hyperbolic ridicule of those who question free trade's benefits (this includes labeling as protectionist any proposal that purports to address concerns about the current free-trade policy). But it's the unabashed free-trade believers who need to be educated because they're on the right side of the wrong argument. Most of their opponents agree that free trade will eventually grow the nation's and the world's economies and that the job churn caused by globalization will ultimately provide fertile ground in which new higher-value jobs will grow. They don't dispute free trade's benefits; they are concerned about free trade's costs. They are not against free trade in principle; they disagree with the free trade policy of the Bush Administration. They're asking tough questions about, among other important issues:

The growing disparity between those who enjoy free trade's benefits and those who bear its costs. A recently released study from the International Labor Organization found that globalization has contributed to a widening gap between the economic fortunes of rich and poor countries, as well as between the rich and poor people within rich countries. Within countries, the report notes, the U.S. posted the greatest gap, with the top 1% earning 17% of the income, "a level last seen in the 1920s."

Whether we're forceful enough in our response to blatant disregard of trade rules. A contemplated trade petition by the National Association of Manufacturers-led Coalition for a Sound Dollar, for example, remains in limbo since the Bush Administration said it would reject the effort to force China to stop pegging its currency to the dollar. Instead, the administration will continue its "cooperative approach" of pressuring China.

Whether the U.S. as a nation can remain an economic and military powerhouse with a smaller manufacturing sector or with no manufacturing capacity in certain sectors. As U.S. industry outsources manufacturing capacity overseas, critics say, it is transferring -- and might lose -- important intellectual property and operations expertise. Evidence of this fear is found in the decision by the Department of Defense and the National Security Agency (NSA) to partner with IBM to guarantee an "on-shore" supply of leading-edge semiconductors. Further, critics correctly point out that by ignoring these and other costs of free trade, we're eroding public support for free trade -- a fact borne out by many national polls -- and helping to create the protectionist backlash that we're trying to quell. These are valid concerns brought up by intelligent people. They deserve serious attention, not scorn and derision. Patricia Panchak is IW's editor-in-chief. She is based in Cleveland.

About the Author

Patricia Panchak | Patricia Panchak, Former Editor-in-Chief

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In her commentary and reporting for IndustryWeek, Editor-in-Chief Patricia Panchak covers world-class manufacturing industry strategies, best practices and public policy issues that affect manufacturers’ competitiveness. She delivers news and analysis—and reports the trends--in tax, trade and labor policy; federal, state and local government agencies and programs; and judicial, executive and legislative actions. As well, she shares case studies about how manufacturing executives can capitalize on the latest best practices to cut costs, boost productivity and increase profits.

As editor, she directs the strategic development of all IW editorial products, including the magazine, IndustryWeek.com, research and information products, and executive conferences.

An award-winning editor, Panchak received the 2004 Jesse H. Neal Business Journalism Award for Signed Commentary and helped her staff earn the 2004 Neal Award for Subject-Related Series. She also has earned the American Business Media’s Midwest Award for Editorial Courage and Integrity.

Patricia holds bachelor’s degrees in Journalism and English from Bowling Green State University and a master’s degree in Journalism from Ohio University’s E.W. Scripps School of Journalism. She lives in Cleveland Hts., Ohio, with her family.