Smart Trade Talk

Reframing the Trade Debate

Introduction

I ordered Italian artichokes in March. They came in July. There was a problem at the border. They were still good and I owed no money so it was cool.

When the media portrays trade in old-fashioned terms (protectionism helps workers (as per Trump and Fox News) and trade deals help only a small elite), they miss the ways we can address globalization. Both technological advances and globalization present new challenges and opportunities and trade deals are the way in which we negotiate advantages and disadvantages among countries. We need to re-frame the old arguments for and against trade and develop new approaches to understanding and explaining globalization, its benefits, its pitfalls and all of the ways to overcome them.

Globalization is a fact. It is happening and trade deals are merely tools to negotiate who wins and loses from globalization. Trade agreements are not the only tools. The losers can be whole countries or can be industries or low income workers but countries and even states can certainly use domestic public policy to combat the downsides of trade deals. The winners can be exporters and consumers but workers are not necessarily victims. Public policy shifts toward retraining, universal health benefits, infrastructure bills requiring hiring workers who lost jobs due to trade, support of clean energy sector jobs, better public education pushing workers’ children toward higher paid position later, among others would ease the trade woes.

1. Protectionism, Consumerism, and Income Inequality : What exactly are we protecting and who benefits?

Before we go sprinting backwards toward full protectionism, someone has to acknowledge that with high tariffs, consumers lose. Any loss of purchasing power is essentially the same as a loss of income. If the price of a shirt, shoes, and socks goes up, some families would not be able to buy back to school clothes for their kids. Do consumers have a right to an array of goods from all over the world? Our protected Big Pharma industry makes it nearly impossible for consumers to buy much needed medicine on a global market where it would be much cheaper (whether for them or for their insurer). Rather than helping workers, their government-issued protectionism helps CEOs, sales people, and executives. The consumer detriment (it is deeply personal to the poor struggling with sickness taking buses to Canada to buy medicine) may arguably far outweigh any lower to middle income jobs.

Some jobs have left the U.S. not because of trade but because some items are less desirable now that we weigh all of the options. Horse and buggies did not deserve protectionism, nor do gas guzzling automobiles. Coal is a dirty energy and an unhealthy industry and is produced for use here and exported but is that the best use of the American worker? The human side of labor (it isn’t just a commodity) suggests unhealthy industries should give way to cleaner energy industries where workers are safer.

We protect peanuts and tobacco so much. Do the people in those industries working in the fields reap the benefit of the protectionism? They do for sure if they are gainfully employed full-time with benefits. If they are migrant workers they tend not to make as much. Weighing the benefits requires deep analysis of their conditions and needs. If they work but need public assistance, then the job simply is not good enough. The protectionist policy would work best hand-in-hand with a lot of workers’ rights. If protectionism is corporate welfare allowing the CEO to make a lot while the cheap labor does the grueling work then something is amiss.

Tariffs can go into effect quite quickly as long as they are not in violation of international trade agreements. BUT, new companies still face start up costs and barriers of entry. To assume the private sector in the U.S. would immediately make up for lost purchasing power by producing old-school manufacturing jobs is flawed. Would we just ratchet up old defunct factories? Do we even want to manufacture more basics or are we more efficient and prosperous if we continue allowing clothing in and concentrate on producing more expensive, more complex items? And what other options are there to provide work for those wanting work? Our auto industry is having an uptick without special protection. Consumers have a lot to choose from but as U.S. auto companies revamp themselves, they have to create more fuel-efficient, inexpensive models to compete with international cars on our markets. The environment benefits, consumers benefit, and workers have jobs.

Protectionism is not the only nor the best route to American jobs. What happened to producing the best? The thing everyone needs? The things no other country thought of yet? Innovation is key at times of technological advancement. Get a good idea!

Protecting some key small industries probably makes sense but broad manufacturing protectionism very well might cause more harm than good by hurting purchasing power and if it brings jobs they may look a lot more like a low wage factory in China than American workers would like.

II. The Export Side of the Equation

Globalization suggests local economies will make more of what they make most efficiently even if they are able to make lots of things. Specialties inevitably follow: we make good airplanes and we export them. China efficiently makes electronics and clothing.

The U.S. has great opportunity to produce items for export. But trade deals requiring our goods to be allowed into other countries without huge tariffs is key. And they are a quid pro quo. We simply are not going to get the best of both. What countries would sign on to our raising tariffs while they must end tariffs?

We also can produce technology, ideas, services and other less tangible goods. Our real problem is that these are not labor-intensive. But that is a problem of technology and advancement, not free trade. The world is better off because of access to U.S. technology. Girls in Africa and Asia have learning access they never had before.

We are about to see more exports of higher-end services like legal services from Chinese law grads who studies American laws. They may not take our bar exams, but law firms here can use their research and writing if they become more efficient than we are.

We export everything from machines, cars, oil, aircraft and we are the world’s second largest exporter. Trade deals tend to improve this. They are the old-fashioned winner in the trade wars. But there are new winners too.

III. The Solution in How to Talk Trade

Here is some new rhetoric: Let’s talk jobs with trade as just one policy. Job growth relies on education, skills, retraining, infrastructure bills, home mortgage relief so workers can move about freely, environmental laws, some tax benefits and incentives to those who hire the most. Let’s not leave consumer rights out of the conversation. If someone wants a $5 t-shirt, a Toyota, a German motor or a Japanese sound system should the government obstruct them? Our consumers are not all so wealthy right now. A dip in purchasing power may make some poor become homeless. A huge policy mix can bring new better jobs. Sophisticated countries tend to drift toward the higher end work while developing countries are doing a lot of old school manufacturing. Government jobs often fill the gap of industrialization and they could make a big difference now. I would like high speed rail, fewer potholes on 95 and some air travel improvements. Government jobs are naturally protected and naturally occur here.

Conclusion

Smart trade is complex. It isn’t free trade but it isn’t walls and extremely high tariffs and non-sense. Trade policy can not be discussed in a vacuum. It has no business being full-on protectionist with globalization dangling opportunities to create more high end expensive consumer products. Trade must go hand in hand with a domestic agenda that provides good jobs. Smart trade=trade deal+domestic agenda+best consumer choices