You wouldn’t know it from the behavior of leading Washington Democrats, but guess who benefits most from free-trade pacts? Workers in unionized, Democratic strongholds: America’s big cities. Labor-backed protectionists insist that America’s factory towns were devastated by the North American Free Trade Agreement.
Now, together with a contingent of Tea Party Republicans, they want to stop pending trade deals with Europe and Asia. But the numbers show that these same bastions of blue voters are thriving on exports—especially to NAFTA partners Mexico and Canada. Indeed, trade is what’s driving post-recession economic gains—and job growth—in big cities. In the first two years of recovery, exports grew at five times the rate of output in America’s 100 largest metro areas and were responsible for more than half of those cities’ economic recovery, according to data collected by J.P. Morgan Chase’s Global Cities Initiative.
Take Chicago. The Windy City’s exports to Mexico and Canada exploded from $12 billion in 2005 to $20 billion in 2012. And a substantial portion of that came from categories such as electronics, machinery, and vehicle parts that benefited from NAFTA’s elimination of tariffs and other trade barriers.
You’ll recall it was Chicago Mayor Rahm Emanuel who, as President Clinton’s senior adviser in 1993, helped squeeze NAFTA through a Congress packed with skeptical Democrats. Today Chicago and Mexico City are among the largest North American trading partners, with more than $1.7 billion in local products traded between them each year, according to J.P. Morgan. And last year Emanuel and Mexico City Mayor Miguel Ángel Mancera signed an economic partnership agreement strengthening that relationship.
Now two new pacts—one with Europe, the other with Asia—are on the table. They, too, would expand free-trade zones for cities like Chicago. But before those deals can pass, Congress needs to extend “fast track” so that carefully negotiated pacts with other countries are considered on an up or down vote rather than amended to death. Democrats, though, are standing in the way.
Senate Majority Leader Harry Reid has refused to bring free-trade legislation to the floor. The new Senate Finance Committee chair, Ron Wyden, is slow-walking it toward what he calls a “smart track.” Senators like Elizabeth Warren and Sherrod Brown are outspoken free-trade skeptics, while in the House, 150 Democrats have signed a letter opposing fast track. President Obama supports the legislation but shows few signs of making it a top priority. “There’s an interesting disconnect between Democratic mayors, who realize their economic growth is in large part tied to greater access to foreign markets, and many national Democrats who seem to be missing that,” says J.P. Morgan Chase executive vice president Peter Scher.
For Scher, that disconnect is especially sensitive. He’s a loyal Democrat who served President Clinton and Capitol Hill Democrats before joining the private sector. He managed John Edwards’s vice presidential campaign in 2004. Now as corporate responsibility chief at J.P. Morgan Chase, where he launched the Global Cities Initiative with the Brookings Institution, Scher is heartily making the case that free trade is boosting America’s old factory cities like Chicago, Detroit, and Cleveland. “What is driving the economic growth of these metro areas is trade,” says Scher.
Even in a hard-left political bastion like Portland, Ore., a quarter of the city’s GDP comes from exports—and the top destination is Mexico. “We’re seeing every day the benefits of NAFTA for jobs and the economy all over the U.S.,” says Scher, citing industry estimates that the controversial trade pact eventually created 5 million net new jobs.
And plenty of those jobs are well paid, with manufacturing exports at record highs. “Income inequality is one of the most critical challenges facing our country,” he tells me. “We’re not going to address it without creating a high-wage economy—and what’s clear is that higher-wage jobs are overwhelmingly tied to exports.”
Spoken like a true 21st-century liberal.
This story is from the September 22, 2014 issue of Coins2Day.
