Pulling Back Too Far On Trade Will Hurt American Workers
It is perfectly understandable why those who care about the well-being of American workers celebrated President Trump’s decision on Monday to pull out of the Trans-Pacific Partnership, the landmark trade deal between the U.S. and 11 other nations.
But they should be very wary about where his protectionist impulses go from here.
If the president pushes too hard, as is his wont, things are sure to backfire.
Trump’s action on the TPP immediately won plaudits from some on the right as well as a number of those on the left, including Sens. Bernie Sanders and Sherrod Brown. “I am glad the Trans-Pacific Partnership is dead and gone,” Sanders said. “If President Trump is serious about a new policy to help American workers, then I would be delighted to work with him.”
There is certainly a legitimate case to make that the TPP didn’t do nearly enough to guard workers’ health and safety, look after the environment, and ensure that the public’s broad interest would take precedence over corporate profits. Even experts who generally support free trade frowned on the TPP.
Yet no one should think for a second that Trump’s hard line against globalization will stop with the TPP or even with renegotiating the North American Free Trade Agreement, which the White House also vowed to do. China is in his crosshairs as well. And beyond that, who knows?
Indeed, Trump’s ultimate aim was made plain in his inaugural address, when he pledged that “we will follow two simple rules: Buy American and hire American.”
“We must protect our borders from the ravages of other countries making our products, stealing our companies, and destroying our jobs,” the new president said. “Protection will lead to great prosperity and strength.”
But at its extreme—and Trump is nothing if not extreme—such a stance is likely to have terrible consequences for the very working-class people that the president claims he wants to help.
Imposing huge tariffs, as Trump has promised, is bound to trigger a trade war. And that will significantly raise the price of consumer products that the U.S. imports from China and elsewhere. (You’d figure that a guy like Trump, whose own enterprise has manufactured all sorts of stuff in at least 12 countries around the world, would get this.)
“American workers who depend on low-cost Chinese goods would see their standard of living fall immediately,” Nobel Prize-winning economist Joseph Stiglitz, who opposed the TPP, has warned.
What’s more, as other nations retaliate, it will make it increasingly difficult for American companies to export their wares. In many cases, they’ll simply build factories abroad rather than try to supply those countries from plants inside the U.S.—accelerating a trend that has long been underway. American jobs will disappear.
“A localization strategy can’t be shut down by protectionist politics,” Jeff Immelt, General Electric’s CEO, has explained. “We will produce for the U.S. in the U.S., but our exports may decline. At the same time, we will localize production in big end-use markets.”
Finally, and most alarmingly, it is often a short step from protectionism to prejudice. “This can devolve really fast,” says Dana Frank, a historian at the University of California at Santa Cruz.
In Frank’s book, Buy American: The Untold Story of Economic Nationalism, she recounts how members of the United Auto Workers in the 1980s and ’90s easily fell into a trap where “foreigner bashing slid rapidly into racist attacks against all Asian peoples and their products.”
With Trump’s America so divided, it isn’t tough to imagine this sort of ugliness being taken to a whole new level.
What is called for, instead, is an approach to trade agreements where workers on all sides are guaranteed robust labor rights for the long term, so that everyone is in a position to see their wages rise as productivity improves. In addition, we need a much bigger social safety net to assist those who lose their jobs because of globalization and technology, affording them a real opportunity to retrain and transition into something new.
“Trade does not have to be a zero-sum game,” says Harley Shaiken, the chair of the Center for Latin American Studies at UC Berkeley. “Mexican autoworkers are not the enemy of their counterparts in Detroit or Toledo or Flint.”
What the past couple of decades have taught us is that trade is complex. It isn’t automatically good (as economists of all stripes blithely asserted in the past, but many have lately come to reconsider). Nor is it automatically bad.
To bring widely shared gains, it must be managed with a strong sense of balance—through an agenda that is sufficiently protective of workers without being overly protectionist. Unfortunately, balance is not this president’s strong suit.
Rick Wartzman is senior advisor to the Drucker Institute at Claremont Graduate University. He is also author of the forthcoming book, The End of Loyalty: The Rise and Fall of Good Jobs in America, due next spring.