Keep Trade Subsidies at Home to Pay for Local Economic Development

Hanjin-Blog-Photo-150x150The Port of Portland recently approved another round of subsidies for Hanjin Shipping and other ocean carriers $20 per container up to $4 million in order to keep the ships coming to our ports.  The Port’s decision continues a long, dubious era of free trade policies that have opened new markets for some Oregon businesses, but have done so at a steep price for most Oregonians.  Studies using economic well-being metrics like the Genuine Progress Indicator – first published in Oregon by Portland State University (PSU) in 2012 – show that, up to a point, more liberalized trade regimes may help the local economy, but past that point, costs to taxpayers and the local economy as a whole begin to cancel out any benefits to particular industries. Oregon exemplifies this trend.

Free trade isn’t “free” at all if we taxpayers have to pay for it with subsidies. But taxpayer subsidies aren’t the only costs we face. Job losses, chronically low wages, income inequality, worsening air and water pollution and the loss of our ability to make a diversity of quality manufactured goods here are among other costs well documented in Oregon and the U.S.

Job losses are particularly troubling. In 2012, Oregon ranked fourth in the nation in terms of free-trade-related jobs losses.  According to the Department of Labor, 55,085 jobs have been lost since NAFTA was ratified. Our high tech sector continues to bleed jobs overseas. A third of Oregon’s annual timber harvest and the timber processing jobs that go with it is now outsourced to other countries, along with thousands of domestic manufacturing jobs.

The Port’s trade subsidies will be used, in part, to incentivize the import of more cars, high tech equipment, and processed lumber from overseas. Yet these are items we can make and process here if we spend the time and resources to modernize and incentivize local production and to invest in our workforce. And that’s what we should be doing.

Rather than subsidizing international shipping firms, the Port’s $4 million taxpayer subsidy should be invested in programs with a high return for the City’s economy. Mayor Charles Hales’ mantra for business is “smart, local and growing, no matter what it makes” and programs like Portland Development Commission’sneighborhood economic development strategy helps incubate and grow such enterprises. The PDC program costs roughly $3 million per year and, if scaled up, would help establish thriving commercial areas, successful neighborhood businesses and equitable access to quality jobs for Portland residents.

But businesses shouldn’t be the only target of our investment. Good schools are the foundation for a healthy economy, yet Oregon ranks 3rd in the nation in the number of students per teacher, one of the leading indicators of poor educational quality. Port subsidies could be redirected to help meet striking teachers’ requests for $15 million to cover 176 new positions, reduce caseloads of overworked staff, and help reduce class sizes by 5 to 10 percent.

Greater self-reliance in all sectors and a well-educated and skilled workforce will diversify the State’s economy and make it more resilient and sustainable. Redirecting trade subsidies to promote goods and services for Oregonians made by Oregonians will help buffer the State’s economy against the risks of overdependence on distant supply chains or a few key exporters to fuel growth.

Given the worrisome condition of Oregon’s economy, it is the Mayor and City Council’s duty to weigh in on matters of such major economic importance and halt any additional trade subsidies for international shipping giants and instead redirect these subsidies to the local level where they are likely to have the biggest payoff.

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