It’s Not About FTA’s (Free Trade Agreements) – A Letter to Labor

Dear Labor Unions,

Please know that I support you and I see the tremendous value in an organized, highly skilled workforce.   Labor’s focus on technical education is exactly what the US need.  We NEED a larger segment of workers that are technical experts; that is the only way that our economic development in advanced industries like biotech, alternative energies, and construction using new architectural engineering will be successful.

In a recent conversation with a labor representative whom I respect greatly, I mentioned that a new free trade agreement (FTA) was on the horizon.  The labor rep responded heatedly that FTA’s are a terrible evil working against unions.  Now, I am not an expert on organized labor, but I do know my way around FTA’s.

FTA’s are about opening foreign markets to US exports – goods that are manufactured by US workers that hopefully include members of organized labor.  “The reduction of trade barriers and the creation of a more stable and transparent trading and investment environment make it easier and cheaper for U.S. companies to export their products and services to trading partner markets. Forty-one percent of U.S. goods exports went to FTA partner countries in 2010, with exports to those countries growing at a faster rate than exports to the rest of the world from 2009 to 2010, 23% vs. 20%.” (International Trade Administration website:

Yes, FTA’s also eliminate customs duties on goods imported to the US, which may make production in other countries appear to be a good business decision.  But I guarantee that US import duties, which average roughly 4% of an item’s value, is nowhere near to the savings in labor.  If a business can save 4% on import duties, but 80% on labor, where will they go?

We have no FTA’s with China, however production in China is so attractive because Chinese labor costs a tenth of US labor, and Chinese workers they typically work longer hours.  Chinese workers are, however, more than three times more likely to be killed on the job (Huffington Post, March 8, 2012).  Also, contrast the types of items produced in China (low cost apparel, electronics, furniture) with the higher value items produced in the US, like airplanes.  The outcome is that US workers are more productive because the durable goods produced are more sophisticated, better made and therefore more expensive.  That’s where the strength of organized labor comes in.  When our skilled workforce grows and amasses more technical knowledge the US can be confident as a global economic leader because quality wins every time.

 So it’s not about FTA’s. It’s about labor and more importantly, it’s about what we make here in the US and how we make it.  Raw materials can and should come from lesser developed economies.  Same for products that are the result of less sophisticated manufacturing (cut and sew, simple assembly processes, etc.)  THAT is the natural evolution of economies.  And a more highly evolved economy will make products for aerospace, nanotech, and green tech industries.

So in closing, I would say to my labor friend and his colleagues shoot for the moon and the green…..technologies.