Who Wins From ‘Free’ Trade? (Hint: It’s Probably Not You)

In his State of the Union Address, President Obama said that because “ninety-eight percent of our exporters are small businesses, new trade partnerships with Europe and the Asia-Pacific will help them create more jobs.” This suggests that small businesses will benefit most from trade, but that is not the case. In fact, two-thirds of U.S. exports are generated by multinational companies (domestic and foreign) operating in this country, as shown in the figure below. These massive firms also generated more than two-thirds of U.S. imports and an even larger share of the job-destroying U.S. goods trade deficits.

And therein lies the not-so-hidden underbelly of international trade and investment deals that the president has consistently refused to discuss: job-displacing imports. A surge of imports from low-wage countries has driven down wages for working people in the United States. In fact, imports are responsible for 90% of the growth in the college/noncollege wage gap since 1995.

Those same multinational companies were the biggest supporters of trade and investment deals with Mexico, Korea and China, deals that have cost U.S. workers nearly four million jobs in the past two decades. Now, the multinationals are demanding that the president complete trade deals with nearly a dozen countries in Asia and Latin America (the Trans-Pacific Partnership), and a new trade and investment deal with Europe (the Transatlantic Trade and Investment Partnership) that will open our markets to goods made by millions of low-wage workers in Eastern Europe.

Multinational businesses, their executives and the billionaires who own them, and their financiers on Wall Street, also pour massive amounts of cash into the campaign coffers of both parties, and of many members of Congress. They don’t just pay for access; they expect results for their money. Trade and investment deals like the North American Free Trade Agreement, the Korean and Central American free trade agreements, and China’s entry into the World Trade Organization were at the top of their wish lists.

So, the next time the president starts whispering sweet nothings about exports and jobs and small business, perhaps mixed with a few dashes of freedom, democracy and the American way, remember to ask a few questions. What about imports? What about my job? Why haven’t my wages gone up? And where does all that campaign cash come from? What are they buying?


Robert E. Scott is a scholar at the Economic Policy Institute. This post originally appeared on the EPI Working Economics blog.

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