DUBLIN Free trade, while much maligned this political season, delivers benefits that far outweigh the harm, contributing among other things to a drop in global poverty, a top Federal Reserve official said on Thursday.
But to those it hurts, the effects of job and wage loss can be catastrophic, and lawmakers and government had better do something about it because the central bank is in no position to, Federal Reserve Bank of Philadelphia President Patrick Harker said in remarks prepared for delivery to the Global Interdependence Center in Dublin, Ireland. He did not comment on the stance of monetary policy or the outlook for the economy.
"The American economy has reached a point where monetary policy has done what it can," Harker said. "As everyone in this room knows, the reach and arsenal of monetary policymakers is limited... Addressing issues of unemployment from the decline in American manufacturing requires fiscal policy and legislative action."
Harker made his remarks on trade against the background of a U.S. election season in which free trade agreements have been maligned by both candidates for president.
Harker's home state of Pennsylvania is considered up for grabs by either party in large part because manufacturing jobs have dried up amid trade with China and other countries, leaving would-be-workers there behind even as much of the U.S. economy is growing and generating jobs.
Trade, Harker said, allows people to buy stuff they don't make themselves, like wool or pineapples; it makes things cheaper; it can boost technological progress and economic growth and income.
At the same time, though, it means jobs lost for less-skilled U.S. workers as they lose out to competition from abroad, he noted.
"What makes the subject so heated, and so impassioned on one side, is that the many who benefit don’t do so in a life-altering way; we aren’t moved by a price change of a few dollars or cents in our everyday purchases," Harker said. "Those who suffer do so on a catastrophic level—it affects entire industries and the populations that depended on them. Its effects are felt in depth, shouldered by a small fraction of America."
Policies like wage insurance or retraining can help displaced workers adjust to a world altered by trade, he said.
So while trade is good, "we just need to find a way for everyone to benefit from that free exchange."
(Writing by Ann Saphir; editing by Diane Craft)