Thea Lee & Alan Deardorff: Pros and cons of free trade

[ Inaudible Conversations ] 
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>> Susan Collins: 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 have been here before know, you are in for a very kind of 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 [assumed spelling], 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 to welcome our two guests.  Let me start to my far right with, well-known to all of us, my colleague, Alan Deardorff, 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 face 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 extents 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 is the frst, 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 an lively interaction.  And with that, I will turn the floor over to Katie.  Katie, welcome.
>> Katie Goddard: Thank you.  Good evening.  My name is Katie Goddard.  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 School -- the Ford Policy Meeting 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 policymakers of the future.  I would just like to reiterate was Dean Collins said and welcome Thea Lee and Professor Alan Deardorff.  And before explaining the mechanics of the debate, just a formal introduction.  Alan Deardorff is a 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.
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Professor Deardorff, a noted international trade scholar, will argue that the U.S. 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 -- rather than on other issues sought by domestic interests in the U.S.  Ms. Thea Lee, an expert trade economist, will argue that the current U.S. trade policy and so-called free trade agreements reinforce corporate power structures and exacerbate inequality in the U.S. and abroad.  In all rounds of the debate, Alan Deardorff, 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 them 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-FordPolicyUnion.  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.
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Finally, both Professor Deardorff and Ms. 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 these same opinions remain or we've successfully persuaded people one direction or the other.  So once again, 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.
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So, with your iClicker, please turn it on, and the debate the 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.
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[ Pause ]
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All right, I'm going to stop it.  So, we have 52% saying that, affirmative, the United States federal government should pursue free trade agreements with willing countries.  16% negative, and there's an undecided 32%.
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So, the pressure is off me, and I'll turn it on to you.
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[ Pause ]
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>> Alan Deardorff: So, it's time for me to start, right?
>> Katie Goddard: Correct.
>> Alan Deardorff: Okay.  Is my microphone on as it's supposed to be?  Okay, well, first, let me just say thank you to Thea for accepting our invitation to come and do this.  From the introductions, you might have guessed the reason that she came is that she's a pal of Susan Collins, but in fact, I've known Thea probably longer than Susan has, because she was a student here, and she took trade from me.  And I've also known her more recently, because we both serve on a board of directors of the NBER.  So, I would like to say it was my idea.  I may regret that now but that was the [laughter] -- 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 what we mean [inaudible] 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, practically speaking, we're certainly never going to get there anytime soon.  And so, free trade has 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 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 country's gained from trade that Smith and Ricardo didn't know about.  So, we are convinced, on the basis of all of the theory that trade is beneficial, as 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 of 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.
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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 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 both winners and losers from just about any policy you could imagine.  And this is true in trade, but it's also true at every 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 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 -- could 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, of course, doing nothing at all is a policy as well, but it would be hopeless.  So, we have -- that's the criterion that we use.
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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 World War II on.  Round after round of trade liberalization was negotiated internationally and then implemented, initially, amongst the rich countries, mainly.  But it gradually spread to include more and more of the developing countries.  And trade barriers -- tariffs, specifically -- fell dramatically over that 50-year period.  The U.S. average tariff was about 1/10 today what it was in the mid-1940s.  And the same is true for the Europeans and the Japanese and so forth.  So, 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, it's 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 or 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's 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 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 them, and then we're getting more of them 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 real world, as some people do, favor the objective of free trade.  Thank you.
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[ Applause ]
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>> Thea Lee: Thank you very much.  And it's a particular pleasure and an honor for me to be here tonight in Ann Arbor at the University of Michigan and sharing a podium with Professor Alan Deardorff, who taught me both international trade and international finance.  And despite what you might think, he did an excellent job [laughter], and he should not be held responsible for any disappointments I may have caused him over the many years since then or tonight.  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 tremendously useful to me as -- engaged in those debates, but I would say, when you're in the rough-and-tumble of Washington, and Susan knows this, watching the sausage get made, watching the policies get hashed out between the business lobbyists and the government folks and everybody else, 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. 
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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 and other places.  I've debated the Chamber of Commerce, the National Association of 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 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, 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 employ our population and that we also have a healthy macroeconomy.  And I would submit to you that our current trade policy does none of that.  That it is a shallow vision of what free trade is, whether it's the -- two words, free trade, in 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 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 competing industrial strengths?  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 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 right 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 and FTA and we developed during NAFTA, and now we should just make minor changes and keep on negotiating with any country that the USTR took a plane to and people came up and said, "Let's do an FTA."
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So, our priorities and our outcomes need to shift in favor of working people, take into account the job impact.  And let me just say one thing about jobs.  I know it's -- that's one of the things economists hate 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 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 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 pre-trade agreements 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, the U.S. government's negotiating priorities require both Canada and Mexico to change their own intellectual property rights laws to raise prices of pharmaceutical products for consumers.  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 -- 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.
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When we ask -- so, free trade -- neoclassical trade theory essentially is based on some very powerful assumptions.  And, you know, I haven't kept up with all the free trade theory in the 30 years since I left graduate school, but I know, 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 values, which we assume are determined by market forces.  And yet -- and yet, the -- and I know that, within trade theory, there are ways of relaxing one assumption at a time -- I still remember that -- the imperfect competition, 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 model acknowledges, 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 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 wash each other out.  I don't think that's the empirical result when we look at the incredible growth in inequality in the U.S. economy over the last couple of decades.
>> Katie Goddard: Thank you, Thea.
>> Thea Lee: And I'll stop now and look forward to the rest of the discussion in the Q and A.  Thank you so much, and I look forward to your questions.
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[ Applause ]
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>> Katie Goddard: 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 apiece.
>> Alan Deardorff: Okay.  The format, I realize now, is kind of odd, because, of course, she's just said a whole bunch of thing that I could imagine responding to right now, but no, I'm supposed to ask her a question.  So, I will.  I will ask a question [laughter].  Sort of.  In the position that I took, that was read at the start here, I said I was in favor of negotiating FTAs with all willing partners, and I said -- and I didn't get to this in what I was able to say earlier -- try to limit those agreements to just the trade barrier removal and not bring in lots of other issues that domestic might want.  And Thea's touched on a couple of the ones that I have also shared with her tremendous concern about -- the investment provision of the NAFTA, I've been unhappy with ever since I heard about it, although now I understand it is common, not only in other FTAs but in our bilateral investment treaties as well.  So, I don't suppose we're ever going to get away from it.  The things on intellectual property, I've actually written and published my skepticism on some of that.  So, it's precisely because, when you open these -- I am not asking a question, am I [laughter]?  When you -- when you open these agreements to other issues coming in, the domestic interests push for a bunch of things that I think are solely for them and are not going to benefit the world.  And that worries me a lot.  But let's get back to the question of the effect on jobs.  You're right that we economists quite often assume away jobs as an issue.  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.  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 on the issue of jobs, I know from our conversation at lunch, and a little bit from my memory, you were very critical of NAFTA and the effect that it was going to have on jobs.  And I understand, when it hadn't gone into place, that we -- there were lots of things to consider, and we who did an 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 at around 2001, and of course, a big dip lately.  But you surely can't blame -- certainly this latest thing, and I don't think the one in 2001, on NAFTA.  So, is there any way that you could argue that NAFTA, in fact, hurt jobs in the United States?
>> Thea Lee: Well, yes [chuckles].
>> Alan Deardorff: Oh, okay.
>> Thea Lee: 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 where we can run counter-factual 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 Hofbauer-Schatten 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 run a trade surplus with Mexico for nine to 12 years, 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, 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 snap-back measures and any countervailing measures to deal with currency movements, and obviously, 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 hard.  As you say, the economy's growing for other reasons.  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, you know, keeping the economy going.  But if you look at the U.S.-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, 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 American workers who hate poor Mexican workers, and if we care about Mexico and we care about development, we have to be for NAFTA.  You look at the results of NAFTA, and you actually had some pretty rough years in Mexico for working people.  You didn't have any strengthening of worker right 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 lopsidedness 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 a result of trade agreements as opposed to just the lowering of tariff barriers.
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>> Alan Deardorff: So, now I respond to that?  Is that right?
>> Katie Goddard: You're welcome to.
>> Alan Deardorff: Okay.  Well, there's a reason why I asked you about jobs in the U.S. -- not in Mexico.  I agree.  It turns out to be very bad in Mexico.  I blame that more on the peso crisis, not on NAFTA, but that's a separate issue.  But you're doing exactly the same thing that analysts at the Economic Policy Institute, where you were, at that time I think -- 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 and 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, 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 all those...
>> Thea Lee: I think we could.
>> Alan Deardorff: What?
>> Thea Lee: I think we could have.
>> Alan Deardorff: You're kidding.
>> Thea Lee: No [laughter].
>> Alan Deardorff: Not without inflation.  I mean, we were at historically -- there was very big concerns that we were way below the natural rate of unemployment, and...
>> Thea Lee: Well, we never did see that inflation, did we?
>> Alan Deardorff: No, we didn't.  That's true.
>> Thea Lee: So, we were obviously not below the natural rate of unemployment.
>> Alan Deardorff: Well, but there -- we were -- we were closer than we'd ever been to full employment.
>> Thea Lee: Why don't we wait until we get the influence before we start worry about the natural rate of unemployment.
>> Alan Deardorff: Did you really think we could have...
>> Thea Lee: Yes.
>> Alan Deardorff: ...employed that many people?  I...
>> Thea Lee: I think we could.  I really do.
>> Alan Deardorff: Okay, well, I don't [laughter].  Now, it's her turn to ask a question.  Is that right?
>> Katie Goddard: It is.
>> Alan Deardorff: Okay.
>> Thea Lee: Okay, so I think this is an interesting about, you know, the ancillary provisions of trade agreements, and you know -- so, and I know a lot of economists don't like the investment provisions or the intellectual property rights provisions, but the truth is, you support them even though they have those -- I mean, you support NAFTA.
>> Alan Deardorff: Oh, support NAFTA -- yes, yes.
>> Thea Lee: Yes, 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 try to change the balance 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 people who make trade policy, and business interests are sort of internalized in the way the U.S. Trade Representative's office or the White House does trade policy.  And I'll just give one example, which is the Jordan free trade agreement, which was towards the end of the Clinton administration, where we worked with the Clinton administration, and they strengthen 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..
>> Katie Goddard: Thea, I'd love for you to pose a question.
>> Thea Lee: The question for you is, given that you can't change the fact that the FTAs include these investment, IPR, should they also have binding labor and environmental protections?
^M00:36:53
[ Pause ]
^M00:36:58
>> Alan Deardorff: I think I want to say no.  But I admit, it's a -- it'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, domestic companies -- corporations, in fact, will 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 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 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 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.
>> Thea Lee: I can put your worries at rest.
>> Alan Deardorff: Oh, I'm so...
>> Thea Lee: 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 companies scream and yell and kick and scream.  They can't stand the labor and environment protections.  So, I don't think you need to worry about them being used as disguised protectionism.  And when the -- when the AFL-CIO brings them, we bring them in conjunction with our union counterparts in those countries to make sure that their interests are being taken care of as well.  So, you don't need to worry about this, this misusing the labor and environment chapter, because they hate it.
>> Alan Deardorff: Well, I'm glad you have such trust in business [chuckles].
>> Thea Lee: I have such experience with business.
>> Alan Deardorff: Okay.  Well, speaking of that, so you see the benefits of free trade primarily -- and free trade agreements, primarily going to corporations and at the expense of labor.  And I certainly don't entirely disagree with that.  I totally agree that corporations have played -- have had way excessive influence in the drafting of these things and the things that they say.  But I'm wondering how far you'd go with that concern about corporations.  My impression is that Ralph Nader -- I'm guessing you know him.
>> Thea Lee: I do.
>> Alan Deardorff: I don't [laughter].  That he views anything that's good for corporations as simply bad because it's good for corporations.  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 freer trade to that purpose?
^M00:40:00
>> Thea Lee: That's a really interesting question, and absolutely.
>> Alan Deardorff: Okay.
>> Thea Lee: 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 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 intellectual property rights abroad and move the risk 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 U.S. 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 lobbying Congress or the White House on this behalf.  But the reason is that U.S. corporations are operating in the global economy.  They producing other countries.  And even those companies that have good, high standards that want to treat their workers well and protect the environment are then undercut by bottom feeders -- by unscrupulous companies that violate those provisions.  And then, they have a choice, which is that, in order to compete, they also need to violate workers' right -- you know, hire children or forced labor or violate the environment and have unsafe production methods 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 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.  But you get ahead by having the best product, getting it to market quickly and treating your workers well and operating in a good 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 demanding that our government negotiate a different kind of trade agreement.
^M00:42:27
>> Alan Deardorff: 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...
>> Thea Lee: That's right.
>> Alan Deardorff: ...have better working conditions, just across the board, everything is better than their local competitors in developing countries.  And you would think that, given that they're going to do that anyway, now we could try to figure out why they do that, but there's, I think, a bunch of reasons.  But given that they're going to do that anyway, I agree.  They should be more supportive of trying to get their competition to do the same thing.  I do still worry, though, that if they succeed in that, the result may actually be fewer jobs for workers in developing countries if you push the standards too high.  And that's what I'm afraid might happen.
>> Thea Lee: 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 give them the wherewithal to have a middle-class lifestyle, they become your consumers, and that's a win-win.
>> Alan Deardorff: Well, that's a win-win if it works, but it's not going to -- the math can't possibly work to make that happen.  You've got to raise the productivity of the workers...
>> Thea Lee: Well, of course.
>> Alan Deardorff: ...of you want to treat them better and give them better pay.  And that's a struggle in developing countries, because productivity for workers comes from all the things they have to work with, and they don't have much to work with.
>> Thea Lee: But when a multinational corporation goes to a developing country, they bring the technology...
>> Alan Deardorff: They do.  They...
>> Thea Lee: 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, they tend not to want, is workers who can have a union, have the protection of a union, have maybe a democratic vote.  I mean, what about, you know, corporations who take advantage?
>> Katie Goddard: And Thea, is that your last question?  Will that be the question you pose?
>> Thea Lee: That isn't my -- here's my last question.  So, in terms of 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 -- you know, democracy, human rights, treatment of workers?
>> Alan Deardorff: Well, North Korea, I would say, we couldn't do one with [laughter].
>> Thea Lee: Is that it?
^M00:44:47
>> Alan Deardorff: I don't -- let me think a little bit more [laughter].  I guess Cuba, unless they become more a market economy.  I think...
>> Thea Lee: What about China?
>> Alan Deardorff: It does -- what about China?  Yes, I think so.
>> Thea Lee: China's...
>> Alan Deardorff: I mean, we're already trading massively...
>> Thea Lee: We are.
>> Alan Deardorff: ...with them.  And having that trade be free trade, I think, would be better.
>> Thea Lee: Why?
>> Alan Deardorff: For both sides.  Well, for all the reasons I talked about before.
>> Thea Lee: Well, we have a $200 billion trade deficit with China.  And if we were to take the tariffs down to zero, 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?
^M00:46:01
>> Alan Deardorff: 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 we're living wonderfully off of them.  Now, because I care more about the world than I do about -- well, I love the United States, but [laughter] -- but we're rich.  Let's face it.  The idea that a rich country is living off the labor of a billion Chinese, that's just not appropriate.  So, I don't like the fact that we have that big trade imbalance, but I don't think it has anything to do with trade barriers.  It has to do with the level of spending in this country and the level of savings in that country and similar things in a lot of other countries.
>> Thea Lee: Does it have anything to do with currency manipulation?
>> Katie Goddard: Thea, now...
>> Alan Deardorff: It does -- the currency manipulation is relevant, and I would like to see something take place on that front.
>> Katie Goddard: I appreciate you giving your opportunity for the rebuttal to pose another question.  And 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...
>> Alan Deardorff: Sure.
>> Thea Lee: Okay.
>> Katie Goddard: ...to pose their 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?"
^M00:47:51
>> Alan Deardorff: There's no chance that we will ever compensate the losers enough so that they won't lose.  There's no chance.  What there is the chance of is that we can improve our policies, both related to trade and not related to trade.  We have adjustment assistance policies that could be expanded, and probably should be expanded.  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 the -- 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 all in favor of a more progressive income tax, or what they sometimes call the negative income tax, and various policies of those sorts.  You know, universal health care -- I mean, I used to be a Republican, but [laughter] not anymore.  So, I think we need to do a lot of things along those lines.  But we're never going to prevent losers from trade from some of them turning out to be losers.
>> Katie Goddard: Thank you.  Thea?
>> Thea Lee: I agree with Alan 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 looked at the real median wage of a full-time equivalent male worker, there's been no gain 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 -- 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.  Now, 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.
>> Alan Deardorff: Could I say a little bit more?  Responding to that or not?
>> Katie Goddard: I'll allow you -- we'll go with 30 seconds for both of you if you'd like.
>> Alan Deardorff: Okay, well, the studies that I am aware of that have been done about this increasing inequality do, indeed, say that trade is a part of the cost -- something like 30% of the increase.  Issue of the unions, not -- haven't shown up from what I've read as part of it.  The real other cause that has been pointed to as more important than trade has been technology.  Technology has evolved in a way that favors the high-skilled, highly educated workers at the expense of the low-skilled.
>> Thea Lee: And Thea, would you like to respond to that?
>> Thea Lee: 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 companies adopt more capital-intensive and skill-intensive production processes in response to import competitive pressures.  And that was one of the things in that paper that I was telling you about that [inaudible].  So, technology can actually be related to trade.
^M00:51:41
>> Katie Goddard: And this question will be for Thea.  "There's been a lot written over the past few years about the race to the bottom in the U.S.  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 U.S. [laughter]?"
^M00:52:01
>> Thea Lee: Very interesting.  Well, there are a couple of things that are different about competition between states, and one of them -- certainly we share the same currency, and we have the same basic labor and environment laws.  There is 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 challenges of globalization is how competing regulatory regimes 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 United States of America, we do have different labor laws between states, but it's a minor -- there's a floor.  And that's part of what we're talking about when we're talking about changing the rules of international trade is to create some kind of minimum standards across nations. 
>> Katie Goddard: 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 increased income inequality between capital owners and laborers?  How can we better share the gains to capital owners with laborers?"
^M00:53:17
>> Alan Deardorff: Okay.  How have the owners of capital fared?  I think they, by and large, have fared well, although it's not, by any means, monotonic or always going in the same direction.  I mean, in the -- in the global recession, the owners of capital lost a lot.  But then they came back, gangbusters, in fact.  So, they are subject to greater fluctuations, I think.  Now, I'm supposed to relate that to the specific factors model?
>> Katie Goddard: "And how can we better share the gains to capital owners with laborers?"
>> Alan Deardorff: 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, 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, otherwise, I don't see the connection with that.  But then, how can we redress this or improve the distribution of income between -- oh, this is probably stupid, but the best I can say is, it would -- you try to make sure that labor owns some capital.  In other words, don't try to reduce the return to capital, but try to share the ownership of capital more broadly in the population so that it's not such a clear division between those who own no capital and those who get most of their income from capital.  Then it wouldn't matter so much if those balances changed.
>> Katie Goddard: Thank you.
^M00:54:49
This question is for Thea.  What would an ideal FTA look like from the perspective of AFL-CIO?
>> Thea Lee: Oh, what a fun question [laughter].  Well, what we would like to see -- 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 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 fundamental human rights that a worker deserves are -- freedom of association -- the right to bargain collectively, and protections against child labor, forced labor and discrimination in 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 who 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 coworkers 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 collective power 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 on fair terms for wealth.  And the same with environmental standards.  And the reason I would say that is, 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 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 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.
^M00:57:39
>> Katie Goddard: Thank you.  Another question for you, Thea.
>> Thea Lee: Okay.
>> Katie Goddard: "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 could have -- the trade restrictions could have slowed the Internet revolution, thereby delaying the establishment of companies like Google.
^M00:58:02
>> Thea Lee: I'm not really worried about it, because I'm not arguing for trade restrictions.  You know, I'm not arguing for cutting off trade, and I'm not even sure how, you know, the electronic commerce is impacted through trade.  I'm all for -- I think innovation is a wonderful thing.  And I actually think that, if you had a different kind 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 and education and in infrastructure.  And I think those things could be very good for innovation and for technology.  But I think the -- actually, the system that we have now, in some ways, disadvantages U.S. inventors.  There's sort of -- there's issues around patents and differing patent regimes in different countries that are not very good for U.S. inventors.  Even though a lot of research happens here in the United States, sometimes the fruits of that research end up going elsewhere, and that's a problem.  Because I think it's important to reward innovators.
^M00:59:04
>> Katie Goddard: Thank you.  This question is for you, Alan.  I think this is someone in a statistics class currently, who 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?"
^M00:59:29
>> Alan Deardorff: Yes [laughter].  Okay.  The point is a very well-taken point.  Yes, what I was describing was the mean, because I -- 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 mean.  Furthermore, 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 reduce the aggregate in order to accomplish that.
^M01:00:28
>> Katie Goddard: Thank you.  And we'll go with the last question for both of you.  And this is going back to China and the discussion you were having previously.  "The U.S. 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 U.S. does not have a free trade agreement with China.  So, the question is, would a free trade agreement be a better and more effective venue for the U.S. to level the playing field and hold China accountable?"  And we'll start with Alan.
^M01:01:02
>> Alan Deardorff: Yeah.  It can't be worse.  I mean, we have no leverage over China right now with regard to their currency.  There's no international rules that allow us to really take action.  There's domestic rules.  I mean, if we declare them a currency manipulator, our Congress 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 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 some doubts about how many of those things I think we'd be wise to accomplish or that are desirable to accomplish.  But some of them, certainly, yeah.
>> Katie Goddard: Thank you.
^M01:01:57
>> Thea Lee: I think it's very unlikely...
>> Alan Deardorff: Well, yeah.
>> Thea Lee: ...that we would be able to negotiate a free trade agreement with China that would address any of those issues effectively.  And we've negotiated a currency manipulation provision in any of our FTAs, even though we ought to have, because there's -- you know, 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 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's 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 and getting China to -- you need to have that dialog with China today.  The U.S. 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.  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 negotiate it, China wouldn't sign it.
^M01:03:42
>> Katie Goddard: Thank you.  And both of you will have an opportunity to provide a closing argument, or persuasive piece.  And we'll start with Alan.
^M01:03:50
>> Alan Deardorff: Oh, we're doing that already?  So, now I thought I would have time to think about it [laughter].
>> Katie Goddard: And you have five minutes.
>> Alan Deardorff: Oh, boy.  Okay.  Well, let's see.  What are some of the things I was thinking about that I didn't ever get a chance to say?  I mean, I have not changed my view.
>> Thea Lee: Oh, darn.
>> Alan Deardorff: I doubt you have either.  I still think that trade is broadly beneficial for the world and for the U.S. and has been hugely beneficial for the United States, in fact, over the decades.  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 it gets done more when the corporations put forth than when the unions do.  My preference would be to get the corporations out.  Thea's would be to get the labor unions in.
>> Thea Lee: I'm a pragmatist.
>> Alan Deardorff: Yeah.  But that would be the ideal that I would like 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 years.  But the way trade economists look at freer trade is that it -- even though it's something that happens in the worlds 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 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 free trade frees up the use 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 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's coming back to the United States, at least in small ways.  Apple's going to do it.  And I think I heard that General Electric has done it.  And one of the reasons some of it's -- 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 that manufacturing's 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 has 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 we are probably going in that direction.  And it's going to have a lot of the same effects, I think, that trade 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.
^M01:07:45
>> Thea Lee: Okay.  Well, 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 won'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've seen with globalization, 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 you know, short of, 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 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 calculate -- and this is NBER.  It's not the AFL-CIO, and it's not the Economic Policy Institute.  The calculated 4 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 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, is we spend all of our consumer dollars on imports, then you don't see the kind of -- the 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 kind of global economic imbalances that the U.S. runs, 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 housing bubble.  But you look at climate change and the urgent need to take coordinated international action, global poverty and unemployment.  And I would argue, too, 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 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 are 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 recognizes 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 was actually a little more fun than to sit in the classroom [laughter], because I got sort of equal time here, and that was -- that was a real pleasure.
>> Alan Deardorff: Thank you, too.
>> Thea Lee: Thank you.
^M01:13:11
[ Applause ]
^M01:13:18
>> Katie Goddard: 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'd take out your iClickers once again.  We're going to do a final poll on the question.  The United States federal government should pursue free trade agreements with willing countries.
^M01:13:42
And please choose now, A, B or C.
^M01:13:46
[ Pause ]
^M01:13:57
I'll now stop it.
^M01:13:59
[ Pause ]
^M01:14:04
So, this is at the end of the debate.  We have 55% with A, 36% with B and 9% with C.  And just going from the beginning, with question one, it looks like a few more of the undecideds were decided.
>> Alan Deardorff: A lot more.  Yeah.
>> Katie Goddard: Yeah, actually, certainly quite a few more.
>> Alan Deardorff: One could say we both won [laughter].
>> Thea Lee: It was a win-win.
>> Alan Deardorff: Yeah.
>> Katie Goddard: And with this debate, yes, you both turn out winners.
>> Thea Lee: Thank you [laughter].
>> Katie Goddard: I'd like to thank all of you for coming.  We really appreciate having you here.  And it's been an 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 iClickers.  And we do hope to see you again.  The next Ford Policy Union debate will be on February 20th, which is a Wednesday.  It will feature Dr. Steven Bucci, who is the director of the Douglas and Sarah Allison Center for Foreign Policy Studies, and he's at the Heritage Foundation, and John Steinbruner, 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.
^M01:15:21
[ Applause ]