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President Clinton has asked Congress to renew his fast track authority to negotiate international trade agreements. Fast track itself is innocuous enough. Congress has the constitutional authority to set tariffs and regulate trade while the President has the responsibility to negotiate international agreements. Fast track gives the President the authority to negotiate international trade agreements, which must then be approved by Congress as submitted by the President. Congress is not allowed to amend the treaty. Fast track gives the President credibility to negotiate treaties our trading partners know we will adhere to.

Nonetheless, protectionist interests led by organized labor and House Minority Leader Richard Gephardt have begun a passionate campaign of opposition to both fast track renewal and the expected free trade agreement with Chile. They claim that hundreds of thousands of jobs have been lost as a result of NAFTA and other free trade agreements. Supporters of fast track can be counted on to point to all the new export jobs that have been created.

The fact is, however, that international trade does not create or destroy jobs. Trade merely shifts resources including workers into more productive uses. Employment in the U.S. is basically determined by supply not demand. Trade barriers destoy no more jobs than does the trade deficit. The real harm from the protectionist policies supported by big labor is that it reduces the efficiency of the world economy and makes us poorer than we could otherwise be. The logic of the protectionist position is th at the United States would be richer if we produced everything ourselves and did not import anything from outside the country. If that is true for the country as a whole, it also should be true for the state of Pennsylvania. Pennsylvanians would be better off if we did not import any goods produced outside of Pennsylvania. The residents of Luzerne County should then be richer if everything we consumed was produced inside the county. To continue the protectionsist logic, Wilkes-Barre citizens would have a higher standard of living if no goods or services were imported from outside the city limits and we produced ourselves everything we consume. If that strikes you as absurd, then you understand the rationale behind free trade. The gains from trade do not stop at national borders.

The tariffs and import quotas supported by trade opponents will save jobs in the protected industries, but at a cost. Besides making the economy less efficient and reducing our national income, higher tariffs would hurt consumers. The prices we pay for protected products would go up. A useful way of gaining perspective on consumer losses from protectionism is to express these losses on a per-job-saved basis. Some examples: motorcycles, $150,000; color televisions, $420,000; nonrubber footwear, $55,000.

Trade opponents point to the low wages paid in Third World countries. If all that mattered, though, were wages, all production would take place in Bangladesh. American workers receive high wages because they are more productive. U.S. manufacturing compensation was 4.7 times higher than in Mexico in 1991, but U.S. manufacturing productivity was 4.6 times higher than in Mexico. Proposals to raise our trade barriers ignore the likely effect on our exports. If we buy less from them, they will not be able to buy as much from us. Exports of goods and services supported 11 million jobs in 1995.

Trade opponents argue that Third World countries including Mexico and Chile have lax environmental laws and that American companies will move operations and jobs south to take advantage. That's debatable. What is not debatable is that the surest remedy for environmental degradation is economic growth. Rich countries invariably have cleaner environments than poor counties. Environmental protection is a luxury good. The demand for it rises faster than income. The economic growth promoted by free trade will increase the demand for stricter enforcement of environmental laws in the Third World. Not trading with poor countries will keep their economies poor and their environments dirty.

David A. Latzko, Assistant Professor of Economics, Wilkes University

David A. Latzko Business and Economics Division Pennsylvania State University, York Campus office: 13 Main Classroom Building phone: (717) 771-4115 fax: (717) 771-4062 DXL31@psu.edu www.yk.psu.edu/~dxl31