U.S. banks, insurers and other financial companies released two separate reports touting the benefits of lower trade barriers last Tuesday, aiming to counter a growing uneasiness in the country about the costs of global integration.
Over the past year, Americans’ support for globalization fell 5 percentage points to 49 percent, while the share of those unsure about its benefits rose to 28 percent from 11 percent, according to a poll by the Financial Services Forum, which represents chief executives of companies such as Citigroup Inc. and UBS AG.
“Globalization creates anxieties in some parts of our country, and creates some difficult political issues,” former Commerce Secretary Donald Evans, the chief executive of the group, said last week.
To counter that anxiety, the report called for cutting Social Security taxes on the poor and raising them for the rich and creating new tax credits so that workers and companies can train to adapt to competition. It also called for new measures to try to raise labor standards in U.S. trading partners.
Both reports are part of efforts by business groups to shore up support for pending free-trade agreements, negotiations in the World Trade Organization and open investment policies as they face growing opposition led by labor unions and many newly elected Democrats in Congress.
President Bush’s trade promotion authority was set to expire at the end of last week, and there was no momentum in Congress to extend it. The banks called for its permanent extension.
Financial companies and other services firms such as express delivery and telecommunications companies have been trying to open up new markets to investment and have resisted moves in the United States to restrict foreign investment or government contracting by overseas firms.
The value of global services trade is likely to exceed that of merchandise trade by 2020, according to Gary Hufbauer, a fellow at the Peterson Institute for International Economics in Washington.
The companies want to ensure there is no “backsliding” by the U.S. Congress, Hufbauer said: “Congress can do a lot of mischief in this area.”
The Washington-based Financial Services Forum, which Treasury Secretary Henry Paulson led before joining the administration, said in its report that moves to cut barriers to trade and investment over the past 60 years have led to a $1 trillion gain in living standards in the United States, though those benefits have not been “evenly shared.”
“A majority of American workers have had poor real income growth over the past several years,” said Matthew Slaughter, an author of the study, former member of the White House Council of Economic Advisers and professor at Dartmouth College in New Hampshire.
A series of tax breaks, changes to unemployment insurance and revising global trade negotiations would help workers, the study said. In particular, Slaughter recommends eliminating the Social Security and Medicare tax for workers making below the median income of $32,140. The study also proposed rolling the payroll tax into the overall income tax or raising the income cap on Social Security and Medicare taxes so that high-income employers pay more.
Also last week, the Coalition of Service Industries, a Washington group that represents many of the same companies, released a study of the benefits to each U.S. state from the services sector.
The study, available for download at www.uscsi.org, says Rhode Island exported $1.3 billion in services in 2005, including business, professional, technical and travel services; royalties and license fees; transportation, and financial services.
It also says 82.9 percent of Rhode Island’s gross domestic product is generated by the service sector, as well as 82 percent of Rhode Island’s employment. And it says 22,000 jobs in the state “are supported by” foreign investment in services.
To help that sector, which advocates say is getting brushed aside in global trade negotiations, 59 lawmakers from both political parties have launched a new Congressional Services Caucus.
“If we fail to open up new markets for U.S. services, then the U.S. service sector will lose market share, will lose revenue and ultimately will lose jobs,” said Robert Vastine, the group’s president.
