Unions, protectionism, and U.S. competitiveness.

• Author: Griswold, Daniel
• Position: Report

In the past three decades, labor union leaders have emerged as among the chief critics of trade liberalization, while the economic evidence has grown that labor unions compromise the ability of American companies to compete in global markets.

Organized labor has been politically vocal in the United States ever since the movement emerged in the late 1800s. A striking development since the 1970s, however, is its hardening opposition to trade liberalization. Labor leaders have opposed virtually all legislative initiatives since the 1980s to reduce barriers to trade, including the North American Free Trade Agreement, China's entry into the World Trade Organization, presidential Trade Promotion Authority, the Central American Free Trade Agreement, and pending trade agreements with South Korea, Panama, and Colombia.

In the past 30 years, labor unions have pushed for higher trade barriers in the form of "domestic content" requirements for autos sold in the United States, import quotas for textiles and steel, and the Gephardt amendments of 1986-87 that would have imposed sanctions on imports from nations that ran large bilateral trade surpluses with the United States (Destler and Balint 1999: 19). More recently, unions have lobbied for higher tariffs, quotas, or outright bans on imported steel, tires made in China, and Mexican-driven trucks on U.S. highways. Labor leaders lobbied hard for the "Buy American" provisions in the $800 billion stimulus package that Congress approved and President Obama signed in early 2009.

Labor leaders such as Richard Trumka of the AFL-CIO and James Hoffa of the Teamsters union express the fears of many of their members that free trade and globalization have reduced the scope and power of organized labor in the United States. They see import competition and the ability of U.S. companies to locate production abroad as direct threats to the living standards and bargaining leverage of the union members they represent.

Organized labor was not always uniformly hostile to trade liberalization. In the 1930s, labor leaders supported the Reciprocal Trade Agreements Act that allowed the Roosevelt administration to negotiate bilateral agreements to roll back high tariffs that had been enacted by President Hoover and a Republican Congress.

In fact, labor unions in most industrial countries resisted the rising protectionism of the interwar years. Back then, labor leaders and the left-of-center parties they supported understood trade policy more as a means for delivering lower prices to workers rather than protected markets to producers. In her book Who Adjusts?, Simmons (1994: 197) noted:

One of the prime effects of tariffs in the interwar years was that they improved the return to capital in import-competing industries while raising the price of imported consumer goods to the working classes. One left-wing party after another lowered tariffs when it came to power: the American Democrats reversed the high tariff policy of the Republicans after 1932, and the Front Populaire lowered tariffs in France in 1936. Even where they did not have the electoral power to block protection, parties of the Left were the voice of free trade. Hence, the British Labour party opposed the General Tariff of 1931; and Belgian Socialists inveighed against tariffs and quotas because of the effect these policies would have on the cost of living for workers. U.S. labor unions continued their support for trade after the war, endorsing the Trade Expansion Act of 1962, which authorized negotiations that led to the ambitions Kennedy Round agreement with members of the General Agreement on Tariffs and Trade in 1967 (Destler and Balint 1999: 15). In the first decades after World War II, U.S. organized labor was, in the words of trade historian I. M. Destler (1998: 389), "a consistent and reliable member of the free-trade coalition that found a comfortable home in the Democratic Party."

Labor leaders began to express disenchantment with trade in the early 1970s as U.S. industry faced increased competition from a resurgent Western Europe and Japan. Machine tools, automobiles, and consumer electronics such as radios and TVs were industries where U.S. producers had dominated after World War II but where import penetration grew. In the face of competition, a growing number of industries and their unions began to seek import relief by the 1970s.

The United Auto Workers union was conspicuous during the decade for its continued support for an open automobile market, but then turned against free trade as imports of smaller, more fuel-efficient Japanese imports rose sharply along with oil prices and a steep industrial recession gripped the nation in 1981-82. Job losses were especially steep in more unionized sectors such as steel and other heavy industry, and in more unionized regions of the country such as the upper Midwest. As the 1980s unfolded, private-sector labor unions in the United States had become monolithically skeptical of trade liberalization.

Trade Expands, Union Membership Contracts

Are union leaders and members justified in their opposition to trade liberalization? Has the recent growth of trade and globalization been detrimental to the labor movement? For a variety of reasons, the recent era of globalization has not been kind to the labor movement. In theory, increased competition in product markets can be expected to undermine the bargaining power of unions in labor markets. Circumstantial evidence would seem to reinforce the theory, although the story of unions and globalization has proven to be much more complicated.

Two broad trends are undeniable. In recent decades, the share of private-sector workers who belong to labor unions has been declining in most developed countries, while at the same time levels of trade, foreign investment, and other measures of globalization have been rising rapidly.

Union leaders who blame globalization for their declining membership and power can point to a lot of circumstantial evidence to support their fears. The share of private-sector American workers who belong to labor unions peaked at 36 percent in 1953-54, then declined slowly through the 1960s and more sharply beginning in the early 1970s. By 2006, private-sector union density had fallen below 8 percent (see Figure 1).

During that same time frame, cross-border trade in goods, services, and assets has expanded dramatically. The ratio of imports to gross domestic product (GDP) in the United States has nearly quadrupled in the past 40 years, from 6 to 23 percent; the ratio of exports to GDP has nearly tripled, from 6 to 17 percent. The ratio of foreign investment to GDP has grown even more rapidly. In 1976, the sum of U.S.-owned assets abroad and foreign-owned assets in the United States was equivalent to about 40 percent of our GDP; by the end of 2008, the sum total of cross-border assets was nearly three times our GDP (Griswold 2009: 4).

The phenomenon of declining union membership is not unique to the United States. Between 1990 and 2003, union densities declined in 21 of 24 industrialized nations surveyed by the U.S. Department of Labor. The decline was especially sharp in the United Kingdom, Australia, and Japan (Visser 2006: 45).

[FIGURE 1 OMITTED]

Union membership has not only shrunk during the era of globalization but unions have become less militant. After peaking in the 1970s, the number of days lost to strikes plummeted into the 1990s. In...