The Foreign Service Journal, December 2008

ers, a sum greater than the total exports of more efficient sugar producers in developing coun- tries such as Kenya, Malawi, Sudan and Zimbabwe. Political leaders should make it a priority to educate Americans about such facts. Business lead- ers, universities, think-tanks and knowledgeable citizens must do more, as well. Just think of the impact if the chief executive of every U.S. compa- ny with any international activity would explain to his or her company’s employees how open markets contribute to the company’s revenues and what percent of the employee’s paycheck came from international activities. They could spread the word through wall postings, closed-circuit TV, Web sites, meetings in the cafeteria, messages in pay envelopes, and notices with W-2 forms. In addition, colleges and universities could offer more classes on international economics and trade, and think- tanks could publish more articles on those subjects. Combating Job Anxiety While educating Americans about the benefits of open trade is necessary, it will not be sufficient to turn the polit- ical tide. Making the case that open markets expand choice, lower costs and create economic opportunity will not convince the textile worker in South Carolina who has lost his job and blames Chinese imports, or the telephone operator in Ohio who learns that her job has been trans- ferred to a call center in India. Nor will we win support for trade from a laid-off manufacturing worker by point- ing out that technology, not trade, has transformed the manufacturing sector over the past decade — enabling us to produce 30 percent more goods with 20 percent fewer workers. To be credible, we must admit that the gains from trade do not make every citizen a winner. We also need to do a better job of helping workers dis- placed by the rapid changes driven by technology and globalization, through allocating some of the very sub- stantial yearly gains we derive from trade to fund responses like wage insurance. This program supple- ments the income of a displaced worker who takes an entry-level job in a new sector at lower pay. Insuring the income gap encourages the worker to stay in the labor force, obviating the need to pay unemployment insur- ance. Making health care benefits portable and provid- ing a health coverage tax credit to help fund health premiums dur- ing the period of unemployment would also help reduce worker anxiety. The same studies that calcu- late the U.S. economic gain from foreign trade to be $1 trillion per year estimate the annual cost of funding wage insurance and transitional health care assis- tance at $12 billion to $15 billion annually. Our govern- ment currently spends less than $5 billion on programs to help displaced workers adjust. To rebuild public confi- dence in open markets, we need to do more. Growing income inequality is another factor con- tributing to Americans’ anxiety about trade. They worry that the shift in earnings away from unskilled workers to the more highly skilled will enable countries with large pools of unskilled labor to destroy the American dream. And it is true that the pay gap is widening between those who are educated and those who are not. As Nobel Prize-winning economist Gary Becker has pointed out, the earnings differential of those with a college degree over those with a high school diploma has jumped from 30 percent in 1980 to 70 percent today — while the pre- mium for graduate degrees has risen from 50 percent to well over 100 percent over the same period. If the United States is to remain super-competitive in the 21st century, we will need a work force that is the best trained and most productive in the world. That will require us to improve education at the kindergarten through 12th-grade levels. It is unacceptable that more than 30 percent of our current high school students fail to graduate. And if we are to be a leader in today’s techno- logically driven world, we will need to encourage more of our young people to become better educated in the hard sciences. Some have called for incentives for college stu- dents to study math and science. Others believe that we should finance college education in exchange for public service. For years we have given tax incentives to encourage businesses to invest in capital equipment to enhance our nation’s productivity. Now we need to focus on how to create effective incentives to encourage investment in our human capital. In creating programs that will cushion the costs of dis- placement and help build the skills needed to adjust to F O C U S 50 F O R E I G N S E R V I C E J O U R N A L / D E C E M B E R 2 0 0 8 The current round of trade talks should correct gross inequities in the global trading system.