Bridging the Divide on Trade

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.