Bridging the Divide on Trade

How could a handful of common-sense, independent Senators defuse the partisanship around trade? By changing the way we talk about the whole issue.

Most American say they believe in markets. Why? Because markets reward hard work and innovation. They deliver us better products at lower prices. They allow us to specialize in what we do best and use that income to buy the other things we need or want.

Markets have delivered America 250 years of unprecedented growth and prosperity. Sure, there are losers along the way. The telegraph wiped out the Pony Express. Railroads replaced steamboats. Digital photography was brutal for Kodak. Uber and Lyft are tough on taxi drivers.

Does anyone own an electric typewriter anymore?

For all the bumps and bruises, we—the consumers—get better goods and richer lives: cars that are safer; electronics that are cheaper; drugs that tackle new diseases. Besides, we can always use our government safety net to take care of the losers (like the workers at the typewriter plant), which enables us to get all the benefits of competition while dulling the pain.

Here is the curious thing: Everything I just described also applies to international trade, which is nothing more than markets that happen to cross political boundaries. Apple gave us cool electronics. Toyota gave us more dependable cars. Economists do not see a meaningful difference.

Politicians and voters obviously do. The current backlash against trade is rooted in real fears and economic concerns. The problem is that a protectionist backlash can do a tremendous amount of damage to our economy and the global order without making the Americans who feel vulnerable appreciably better off.

The Economist recently concluded that tariffs on steel and aluminum might actually destroy more jobs than they save, since the domestic industries that will be harmed (construction, oil and gas, and car manufacturing) employ more people than steel and aluminum production.

The way we need to find common ground on this issue is by thinking about trade like any other kind of market-driven competition that creates winners and losers. For example, technology displaces far more workers than trade. Just think about the “job-destroyers” that have emerged in recent decades: ATMs, voice recognition software, automated ticket kiosks, self-checkouts, automated assembly lines, and so on.

We cannot turn the clock back on such technology. In fact, Artificial Intelligence is getting better every day. That economic monsoon is going to make trade with China feel like a gentle breeze.

A handful of common-sense, independents in the U.S. Senate could reframe trade as a market issue. It is just one more kind of competition—with lots of winners and some losers. We can find common ground by reminding Americans that any kind of competition creates enormous benefits and significant dislocation—whether it is set in motion by the ATM machine or Chinese solar panels.

Most important, the policy solutions for strengthening American workers are the same, regardless of what economic forces put them at risk:

  1. “Upskill” the American workforce. Highly skilled workers are better positioned to deal with both technology and trade. They are more versatile and therefore more resilient in the face of economic changes. We need more effective K-12 education; more resources for early childhood education to help erase the deficits of the birth lottery; more access to higher education and specialized training; and so on.

    None of this is easy; most of it is not cheap. (Hey, I did not promise miracle solutions, only the beginning of a fruitful, nonpartisan conversation.) The objective is to make American workers more successful in a market economy in which technology and trade will continue to nibble away at low-skill jobs.

  2. Take care of the losers. “If you build a better mousetrap, the world will beat a path to your door.” True. But it feels like that aphorism needs a postscript: “And the workers at the old mousetrap factory will get laid off.” No taxi driver thinks Uber and Lyft are positive developments. We can respond to that challenge by banning ride sharing, or we can respond by helping displaced taxi drivers find something else to do.

    If you think banning Uber is the right answer, how would that have worked with the personal computer (saving jobs at typewriter factories). How about the Internet? Using government regulation to protect goods and services that consumers no longer prefer is a fool’s errand, whether those products are invented in Silicon Valley or manufactured in Shanghai.

  3. Spread the word that restricting trade is not going to bring back 1950s Detroit. When the Booth School of Business at the University of Chicago asked an ideologically diverse panel of economists if tougher trade negotiations could have saved auto jobs in Michigan and Ohio, 86 percent said no. (Ten percent were uncertain and only three percent said yes.)

    In a related poll, 96 percent of economists said the benefits of free trade outweigh any employment effects; 98 percent said America is better off with the North American Free Trade Agreement than without it. Common-sense independents can make this crucial economic point without using trade as a partisan weapon.

  4. Recognize a significant geographic shift that is underway. Highly skilled workers are most productive when they are around other highly productive workers. This is causing growth (in population and income) in major metropolitan areas and a relative hollowing out in more rural parts of the country. (This is a long term trend, first set in motion by huge gains in agricultural productivity that pushed workers off of farms.)

    I remember writing an article for The Economist way back when the 2000 Census were released. Half of the counties in Iowa had more people in 1900 than they had in 2000. That has almost nothing to do with trade and everything to do with larger economic forces, most of which are not going away.

    We need a plan for rural America. I don’t know exactly what that plan will involve, but I know that it’s not an inherently Republican or Democratic issue. This rural out-migration is happening in states as blue as Vermont and as red as Wyoming.

American workers are feeling insecure, particularly low-skilled workers. Trying to help them by slapping tariffs on imported goods or killing trade agreements is like trying to bring back bank tellers by banning ATMs. It won’t work, and it distracts from what we should be talking about. Our common-sense independents can be the anchor for those important discussions.


Showing 8 reactions

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  • China has built it’s economy off the backs of Americans. The only people who do not want trade barriers are the ones who have something to lose.
    Alma Co-owner – http://www.cesspoolservicelongisland.org
  • When it comes to trade, especially international trade, there are no easy answers. It is very complex and there will be no silver bullet that will fix this issue. As stated in the article it will take very smart people, a population ready and able to retrain and retool so they may be ready for the ever changing economy and very specialized workforce.

    There will always be winners and losers and technology keeps changing the way we work or live. The technology of today will go the way of the typewriter tomorrow. Businesses, both large and small, must be able to adapt, update and change or they will go the way of the Dodo. Technology is changing the way we do things at a every accelerating rate. We must keep up or we will be obsolete

    Thomas: Owner of https://www.springfieldpavingco.com
  • When it comes to trade, especially international trade, there are no easy answers. It is very complex and there will be no silver bullet that will fix this issue. As stated in the article it will take very smart people, a population ready and able to retrain and retool so they may be ready for the ever changing economy.

    There will always be winners and losers and technology keeps changing the way we work or live. The technology of today will go the way of the typewriter tomorrow. Businesses, both large and small, must be able to adapt, update and change or they will go the way of the Dodo. Technology is changing the way we do things at a every accelerating rate. We must keep up or we will be obsolete

    Thomas : Owner of <a href=“”https://www.springfieldpavingco.com/html/" rel="nofollow">https://www.springfieldpavingco.com/html/">asphalt paving </a> service
  • This is a well reasoned analysis, however it is also a very one sided analysis. Trade involves much more than mere markets and economics. For trade to benefit all parties involved, it does need to be fair, and free of extortion. That has not bee fully realized with our association with China. Besides economics, we also must consider national security issues with trade. I think that there is a minimum amount of production in certain industries, particularly of raw material and essential commodities, which needs to reside within a country, as a matter of national security, as a precaution against wars and natural disasters, as competitive leverage in trade, and to continue to develop industry expertise. Our policies should reflect these needs, but also be broad enough to not serve as crutches for obsolete technologies.
  • To understand Trump’s trade policy strategy and approach, please read the book co-authored by Peter Navarro, “SEEDS OF DESTRUCTION” Why the Path to Economic Ruin Runs Through Washington, And How to Reclaim American Prosperity. Then one needs to understand this ‘New World Order’ and the push for globalization that benefits the elite establishment at the expense of all others. The books and movies, “The Hunger Games” gives one a view ahead if we do not make a radical change from our current path. We must continue this responsible revolution to reform our political system so that the Constitutional checks and balances are made to function again. Then we can break the duopoly’s stranglehold on our political system and begin to create policy that will deal with the significant challenges we face.
  • I believe you can put much of the blame on our trade situation to the influence of money/lobbying. And with the Supreme Court decision allowing corporations to give unlimited amounts of money to PACs and the like it has exasperated the situation.

    Let me give a couple of examples of bad trade policies influenced by big money.
    In the mid-1990s, China was having a problem controlling its missiles and sought technology from Loral Corp. The Defense and State Departments were against the deal, while Pres. Clinton and the Commerce Dept. (Ron Brown) were pushing it. The latter won out and it was reported that it saved China 10 years in developing its missile/weapons systems. Subsequently Clinton received a $1 million donation for his re-election bid from a Chinese national (which was illegal). Clinton was also behind China getting into the World Trade Organization, allowing it access to almost all markets.

    The other example was Wal-Mart (so-called “Buy America” company) that actively lobbied its suppliers in the 1990s to move their manufacturing operations to China so it could get the price point it wanted to make bigger profits. This was part of the hollowing out of our country’s manufacturing base faster than it might have happened. Not so coincidentally Wal-Mart is based in Clinton’s home state of Arkansas.
    These decisions led me to not vote for a major party for president for the first time in my life.
    So what do we do now? The world has changed dramatically and the U.S. has a much smaller manufacturing base and is dependent on a service-based economy.
    I don’t agree with Trump’s policy of negotiating single-country trade deals, which will make it more complicated for our industries to adapt. On the other hand, we have to be able to enforce trade deals that put us on equal footing with other countries. Most countries charge an import tariff so we either have to match that or come up with a way to equal out those offsets. And we have to protect our intellectual property (IP) from countries like China. Trump will be imposing strong tariffs on China for IP theft. That may be a strategy to get them to listen, but we also have to have ways to secure our technology going forward.
  • I agree in principle with your argument but the reality is the current trade framework was setup to benefit companies seeking low cost labor, increased margins, with no repercussions (import or value added tax) for offshoring. Sensata was a case study. Multiply that by thousands. Why would anyone in their right mind attempt to start a manufacturing company in the US when the country you are exporting to places penalties on your product while going the other way (exporting into US) there is no penalty. Add in cheap labor and a non-existent regulatory environment and you see why US is in effect encouraging off shoring of it’s entire manufacturing sector. What is the trade deficit now? Up to a Trillion dollars yet? Not sure how national security or the health and welfare of Americans factor into trade policy but I am convinced the opioid epidemic is strongly correlated to the economic plight of Americans and the lack of diverse opportunity for their children. Not everyone can be a highly skilled engineer!!! Some need to use their hands or other skills that are not compatible with sitting at a desk on a computer for 8 hours a day. Economic systems exist for the benefit of society not the other way around. As a former Marine I am all about a strong America that provides ample opportunity for future generations. The US is really the only kid in the free trade sandbox. The others play along because they are benefitting from the relationship currently. They are looking out for the interest of their people and have a strong nationalistic streak (Germany, China). At some point there will be no benefit to playing I’m the sandbox. Have to wonder what will happen then.
  • I agree with the overall point of this article, as long as we have “fair” trade. If countries are giving govt. support to businesses and allowing dumping of goods into our markets, then the U.S. has have some measures to deal with that.
    Also, if countries such as China and N. Korea are stealing our companies’ technology, we have to punish those countries to make them change their ways; or, in the case of China, have them booted out of the World Trade Organization.
    We can’t try to bring back the 1950s by propping up industries that went by the wayside, but we must “protect” companies that are not allowed to win fair competition. The Internet has allowed bad actors to take advantage of our country and our businesses and there must be rules to deal with that.