By Jomo Kwame Sundaram, former UN Assistant Secretary General for Economic Development. Originally published at Inter Press Service and cross posted from Triple Crisis
New American President Donald Trump has long insisted that the United States has been suffering from poor trade deals made by his predecessors. Renegotiating or withdrawing from these deals will be top priority for his administration which views trade policy as key to US economic revival under Trump. What will that mean?
The new administration promises ‘tough and fair agreements’ on trade, ostensibly to revive the US economy and to create millions of mainly manufacturing jobs. The POTUS is committed to renegotiating the North American Free Trade Agreement (NAFTA), signed in 1994 by the United States, Canada and Mexico. And if NAFTA partners refuse what the White House deems to be a ‘fair’ renegotiated agreement, “the President will give notice of the United States’ intent to withdraw from NAFTA”.
Constraints?
Presidential fiat may well be extended in radically new ways by the incoming president with, or perhaps even without the support of a Republican-controlled Senate and Congress. However, in terms of trade, Trump may be constrained by his own party’s ‘free trade’ preferences, while the minority Democratic Party is likely to remain generally hostile to him.
Many informed observers doubt the ability of the US President to unilaterally impose trade policies, as the POTUS is subject to many checks and balances, conditions and constraints. But a widely held contrary view is that existing legislation allows the president considerable leeway. But as such ambiguity can be interpreted to grant the president broad authority over trade policy, Trump is likely to use this to the fullest.
Worryingly, Trump and his appointees often appear to see trade as a zero -sum game, implying that the only way for the US to secure its interests would be at the expense of its trading partners. Their rhetoric also implies that the most powerful country in the world has previously negotiated trade deals to its own disadvantage – a view almost no one else agrees with.
Thus, Trump’s belligerent rhetoric threatens trade wars or acquiescence to the US as the only means to change the status quo. But future deals even more favourable to the US can only be achieved with weaker partners, e.g., through bilateral treaties, or those with ulterior motives for accepting even less favourable terms and conditions.
Unequal Effects
Of course, the real world is more complicated than one of competing national interests. For example, while US corporations and consumers may benefit from relocating production abroad, American workers who lose their jobs or experience poorer working conditions will be unhappy. Clearly, there is no singular national interest.
Trump’s rhetoric so far implies an opposition of American workers to the ‘globalist’ US elite with scant mention of consumer interests, the main source of support for the globalists. The unequal effects of freer trade have long been recognized by international trade economists except globalization cheerleaders who insist that freer trade lifts all boats – a myth belied by the experiences of increasing numbers of American workers and others in recent decades.
Meanwhile, US protectionists have been in denial about labour-displacing automation throughout the economy. They also fail to recognize how ‘laissez faire’ American capitalism has let the devil take the growing ranks of the hindmost. In contrast, ‘managed’ capitalism has often ensured less disruptive and painful transitions due to trade liberalization and automation, e.g., through government retraining schemes.
Trade Rules Biased
Nevertheless, it remains unclear how the Trump administration’s trade strategy will unfold. While trading system rules are skewed to favour the powerful, US relations with trading partners have sometimes become dysfunctional and perhaps less advantageous. Hence, a more aggressive Trump administration may well secure better deals for US interests. Some options favouring US companies would only involve minor disruptions, while others could disrupt the US as well as the world economy, possibly precipitating another global recession.
Besides renegotiating or rejecting bilateral and plurilateral deals, the US could also bring more cases before the World Trade Organization (WTO). After all, the US and Europe wrote most WTO rules after the Second World War, and the US has almost never revised its trade rules and practices, even after losing cases. The US has long used the WTO dispute settlement mechanism to great effect until it began disrupting its functioning recently after losing a case.
Trump has long threatened targeted duties to ensure compliance and more favourable deals. While trade lawyers debate the scope for and legality of such actions, most trade economists have argued that US consumers will pay much higher prices to save relatively few jobs.
Triggering Trade War
However, instead of imposing duties on specific products, as allowed for by WTO rules, emergency authority may be invoked to impose broad-based tariffs on exports from specific countries, as Trump has threatened to do.
Such an escalation risks causing significant economic damage all round, especially if it provokes retaliatory actions, with no guarantee of securing a more favourable deal. A relatively minor trade dispute can thus easily spin out of control to become a very disruptive global trade war.
After Trump’s inauguration, the White House announced US withdrawal from the Trans-Pacific Partnership (TPP) trade deal, effectively killing the agreement. Ironically, the Obama administration had claimed the TPP would enable the US to write economic rules for the region instead of China, Trump’s favourite bogey. Thus, even presidential one-upmanship can trigger the new world trade war.
Bullying as Global Trade Strategy?
In yet another irony, in Davos last week, a Goldman Sachs veteran announced the sale of a majority stake in his multibillion dollar business to a Chinese group before joining the Trump administration as senior trade adviser. Perhaps as a foretaste of what to expect, in response to Chinese President Xi’s reminder that “No one will emerge as a winner in a trade war”, he warned that China stands to lose ‘way more’ than the US if it retaliates when the new administration imposes selective tariffs on its exports.
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With such a huge trade deficit, depending on what Trump does, the US might actually come out stronger even if there is a trade war.
If Trump:
1. Makes a serious effort to get out of free trade deals and rebuilt US manufacturing
2. Makes a serious investment in US infrastructure that is clean (ex: no rip-offs)
3. Ends the looming cold war with Russia
4. Perhaps undermines the CIA and other “intelligence agencies”, while cancelling wasteful programs like the F-35
He will have been a better president than Clinton ever could have been.
That’s despite the other dirt that he has done.
Rebuilding US manufacturing takes capital and lead time — probably 5 to 10 years. If it’s done, goods prices will be higher, and sales volumes correspondingly lower.
USA is the world’s pre-eminent Shoppers Paradise. Cut out our Mexican manufacturing and farming hinterland, and the US turns into Europe, where consumer goods are dismayingly expensive. Deprived of their cheap stuff at Walmart, Deplorables ain’t gonna like what they voted for.
Britain may be the 7th largest trade partner of the US, as Trump and May discuss a trade deal today. But the trade ranking follows Zipf’s Law. US trade with Canada (no.1) is six times larger than with the UK. US trade with Mexico (no. 3) is five times larger than with the UK.
By reducing the gap in standard of living between the US and Mexico, Nafta actually succeeded in cutting net migration from Mexico to zero. Now the migrants are coming from Central America, wrecked by the Reagan administration’s support of death squads, and now by gang-bangers being deported from US prisons.
A nation that can’t even get along with the two other countries which share the peaceful North American continent is a monumental failure. I look forward to tagging The Wall with “F@CK TRUMP!” It took but one week for him to morph into a standard-issue a$$hole Repugnican.
US wealth was historically based on the American System of protecting manufacturing. Since we adopted a “free” trade model our national prosperity has dropped.
https://en.wikipedia.org/wiki/American_System_(economic_plan)
With a huge trade deficit, the US consumes too much and/or produces too little. This must be brought into balance.
The cost of labor is but a small part of the price of many finished products. What moving production overseas does is simply increase the profit margin. Prices will probably go up to some extent as Trump’s economic nationalist policies start to work. But salaries and the labor utilization rate will go up as well. As will tax receipts.
Most Deplorables hate the fact that Walmart is full of cheap Chinese-made trinkets. They want to go back 40 years to when a good number of products were made in America. Back then the prices were not so outrageous and they don’t need to be in the future. In fact the whole idea of technological advance, of the rise of the robots, argues against prices rising as production moves back to the US. Why would robots in the US be any less efficient that robots in Mexico.
And while we are discussing robots, why don’t cheerleaders of mass 3rd world immigration into the US ever mention the robots when telling us of the great economic wonders these 3rd world peasants are going to bring to the US. If robots are replacing working then the last thing in the world the US or Europe needs is more unskilled labor. And since the US has plenty of domestic low-skill labor looking to move up in life, we don’t need mid or high-skill imported labor either.
Ya, well. If we want to nit pick American production costs, we’d better focus on “healthcare”.
That is 100% true. And so the effort by Trump to bring back jobs has to address the ridiculous cost of health care in the US.
One thing Trump has going for him is that he is not bought and owned by the Health Care industry. Sadly most of Congress is — in both parties. So this is going to an interesting struggle…
Dream on. Those American System – a British term, actual Americans called it the “armory system” – manufacturing jobs ain’t coming back. Even today’s dumbed down ex-industrial worker just has too many overhead costs: the incredibly wasteful systems of consumption here in the USA. Healthcare is just the start, there’s transport, housing, education and the lifestyle disease promoting food system. Too many enterprises are entrenched in consumer sector profiteering to promote healthy and efficient resource use. Take the US auto industry for starters. Cars are the most costly way to transport people, and US made cars are the most wasteful form of such transport. But alas US auto manufacturing is an “anchor industry”.
Trump’s not going to be able to do anything about that. Historically after WW2 the high cost of US labor was sustained by even higher productivity growth – the “Ford system” aka *automation* – but now productivity growth has stalled since 2008.
Trump would have to jump start a big leap in productivity to overcome the labor cost barriers in the USA.
https://en.wikipedia.org/wiki/American_system_of_manufacturing
Notice that the armory system is a system of *automation*. Notice also that Henry Ford’s production techniques emerged directly out of the armory system.
The purpose of automation is precisely to employ *unskilled* labor at dumbed down tasks. The purpose of the armory system was to employ *immigrants* from Eastern and Southern Europe. Owners didn’t want to pay high wages for relatively scarce native born wage labor in the 19th C. Now they don’t want to pay the costs of wastefully produced and maintained US wage labor.
Good points. I was Union unskilled labor in the 1960’s and at $4.00 per hour I was earning something like $40 dollars per hour in today’s money. Our Mexican laborers are getting $10 per hour if they are lucky. Of course, we did not build McMansions and if we did no one could afford them because of labor costs.
“This must be brought into balance.”
Balance for balance sake? Isn’t that Neoliberalism?
Define “balance” first.
“Why would robots in the US be any less efficient that robots in Mexico.”
Actually, one of the side effects of increasing renewable energy is a rise in energy costs, and therefore the cost of running plants. I became aware of this after reading that an American solar cell manufacturer was moving overseas because of the cost of the power it needed to run its furnaces.
Considerations like this make a good argument for performing CO2 reduction ONLY on a global level. Done on a national level, it’s the political equivalent of self-immolation, having indeterminate symbolic impact but little concrete result: even the models predict that totally nullifying US CO2 emissions will have a minor effect on climate change.
Walmart shoppers will pay more but honestly how many flat screen tvs and fad appliances do Americans need? Much of what is sold at Walmart these days–food, things like toilet paper–does not come from China. Clothing for the most part does not come from China but from the same place as the fancy department stores–i.e. third world sweatshops.
Also the author of the above seems to see TPP as a “free trade” agreement which, as Dean Baker has pointed out, it most certainly is not. And as for the wall, anyone who has spent time in the Southwest knows that our southern border is already highly militarized and you can see the existing fence while driving along sections of I-10 in Texas and from roads in Arizona. Trump’s proposed wall is a stupid thing but it remains to be seen whether it will actually be built given the cost. If I’m not mistaken the California/Mexico border already has a wall which the drug dealers tunnel under when not smuggling through border entry points.
The wall is pointless, and imo, if it’s built it will inure mainly to the financial grifting gain of Trump family industries, whom I’m so sure will have their fingers in that pie.
Yes, there’s various sections of walls and double or triple fencing across much of the border already, and yes, the Mexicans just build tunnels – some of them very elaborate – under them. Anyone who lives on or near the border knows this very well.
The Border patrol, for the most part, is not intersted in a wall for that very reason. A wall won’t make much difference. The Border patrol, fwiw, wants to see immigration laws tightened up, and they’d like more support (in what way, I’m not sure).
Many border towns also do not want a wall, nor do many who own properties and farms along the border.
The money would be better spent on infrastructure, as well as possibly on improvements for the border patrol. These would create better, possibly longer lasting jobs, which inure to the benefit of most citizens, while also causing less damage to our neighbors in Meixco.
Don’t forget the sections of the border that are Native American reservations. That would be a whole ‘nother can of worms to work out.
Clearly Trump nostalgia dreams of stomping all over Native Americans in the good’ole American way of genocide.
You are being logical when this decision is based on ideology.
Logic is useless at this point in time.
The Benito Trump Wall is stupid for Why?
Here is at least my explanation of Why the Wall Is Stupid: It makes more sense to just give Mexicans in the US who have jobs work papers, & withhold taxes same as they do all others of the labor force. Those taxes ought be divvied between Mexico & the US.
I know that when I worked with young Mexicans and I got a check and the Mexicans got cash, I didn’t like it.
Mexican Leadership has supported the Drug War since it put the pot growing peasants out of business. They were forced to go to work in the coke factories, and then the heroin factories.
At least local to the poppy they don’t stop breathing from chemist Fentanyl. No natural ingredients required.
Spanish so felt aristocrats run Mexico. They said all along the only problem with Mexico was Mexicans.
We in the US are not the only bunch of fools who thought honest work was good enough.
Goldman Sachs has been given the keys to the US Treasury because they hang out and handed out “donations”.
I read that they even got a dispensation for the currency trading conflict that is their own currency the SETLcoin. Crypto currencies were invented for criminals.
It will be a cold day in hell before Benito and the minions of the US Congress rip the hands off the donors stuck into the US Treasury won’t it?
A nation has a duty to protect & educate its citizens. The US is the most powerful, but in aggregate there are others out to sell their people out as much as the US “elites” want to sell US labor out.
History is replete with surprises. The ignorant know more than the smart think they do.
When the water runs out, all of the system gets changed.
Benito signed an executive order that will contribute to bad water. Pipes leak, all Fracking wrecks aquifers.
4 years is 10 now, if not 50 when the Antarctic ice falls into the Ocean.
We may well not have the time to discuss man made systems really.
Nice to think so.
Thanks.
Many already have taxes withheld. There are SSNs that are known by Treasury to be reused many times. Why no one cracks down on that is beyond me.
You claim that “By reducing the gap in standard of living between the US and Mexico, Nafta actually succeeded in cutting net migration from Mexico to zero.”
???
https://www.thenation.com/article/how-us-policies-fueled-mexicos-great-migration/
Haygood gets most of his facts from Cato Institute, Heritage Foundation, and Council on Foreign Relations.
Pew Research:
This is completely consistent with nonsense factory’s quote stating that the Mexican born population peaked in 2008.
But the post-2008 change is caused by things that can hardly be attributed to NAFTA (to name but a few, the economic collapse on this side, which cut down motivation to come seek work that wasn’t there, a massive militarization of the border, wall and fence construction, and a deportation effort on steroids.)
“By reducing the gap in standard of living between the US and Mexico, Nafta actually succeeded in cutting net migration from Mexico to zero.”
So NAFTA had the “agency” in 1994 to have the Great Recession in 2008 create unemployment thereby equalizing the standard of living in the US and Mexico, stabilizing or even slightly reducing net Mexican total immigration. (legal plus the other kind)
pfew.
>where consumer goods are dismayingly expensive
Not been my experience??? Except for cars which are heavily taxed no matter where they are built.
At the moment our trade deficit with the Eurozone is about 4X larger than Mexico. $140B vs $35B per wiki.
Yep, essentials (especially food) are higher quality and cheaper in Europe. Clothing same or cheaper.
Going after consumer goods is a waste of time. Who cares about shoes, clothes, trinkets, etc?
Tariffs are a tax. A regressive one, at that, as they hit lower income consumers harder. That doesn’t mean we can’t have them, as we have taxes, but Dems are really not even bothering to fight back. Reframe the tariff as a tax on *Americans*, not a tariff on Mexicans.
And punishing Mexico is so typically short sighted and foolish of America. A stronger Mexico would do wonders for the USA. Yes, let’s raise taxes by $20 billion and hurt our southern neighbors’ economy, thereby pushing *more* migrants to the US, and spend it on a wall trying to keep them out, when a strong MX economy does that on its own. Not to mention the opportunity cost of wasting that $20 billion on a wall rather than other much needed domestic areas.
Will it actually happen? Probably not. Trump’s playing the media.
I’m not sure if you are aware how ancient and pre-fabricated your arguments are, but they were concocted well before 1994. I believe Ross Perot shredded them without the benefit of hindsight. And they just didn’t pan out since. Not the least reason is corporations don’t pay workers much in Mexico, so Mexico does not get stronger and the workers don’t stay there.
The thing about taxes. Guess what. Corporations always try and recast taxes on corporations as taxes on “consumers” when coming up for reasons why they don’t wanna pay taxes. However, a tariff really is a tax on a particular company’s product, and the whole idea here is to create some jobs in America. Believe it or not, our governments could use the tax revenue too.
That is not what I hear from middle class Germans. But they have cheap housing, so it probably nets out.
[Deprived of their cheap stuff at Walmart] They didn’t lower the price of anything. They moved those jobs to Mexico and Asia for a single digit bump in margins. They cut the cost of labor and kept the difference It’s a business not UNICEF. They call that single digit bump in margins ”GDP growth” in order to bring back the middle class you would have to pay less than 10% more to maintain those same margins.
[By reducing the gap in standard of living between the US and Mexico] NAFTA put millions of farmers out of work due the US now being able to dump it’s tax payer subsidized agriculture on Mexico, causing one of the biggest mass migrations in history.
“[By reducing the gap in standard of living between the US and Mexico] NAFTA put millions of farmers out of work due the US now being able to dump it’s tax payer subsidized agriculture on Mexico, causing one of the biggest mass migrations in history.”
Bravo!
Most Americans know very little about the damage we have done to the poor Mexican Compesino….we just don’t give a damn.
Then we want to build a wall so that they can’t come here to work.
We are so shameful; we are so greedy!
The best thing we could do is eliminate the Mexican border and develop some sort of federation with Mexico. If Mexico became part of the US can you imagine the prosperity? And the people of Mexico are the demographic future of the US, not dying, baby boomer, disabled manufacturing workers in Michigan and Ohio. If we look at our current Armed Forces a huge proportion come from Mexico as well as the third world.
I spend a third of my time in the EU and I find consumer goods there are very affordable…absolutely not ‘dismayingly expensive’ as Jim Haygood claims. Try, for instance, shopping at Primark stores…
The one thing in Europe is is dismayingly expensive is American branded clothing. Levi’s jeans are like 90 Euros a pair! And they don’t go on sale.
One major difference between Europe and the States is that in Europe there is a Value Added Tax (VAT) that is included in the price of the item. Often this VAT is around 20%. In the US sales tax is not included in the items shelf price.
But more and more the stuff in European stores is made in China so beyond the VAT there is not much reason for a huge difference in prices between the US and Europe.
Notice that the Goldman man sold to China. This panel, particularly the Information Tech and Innovation Foundation panelist, Robert Atkinson, suggests the real trade threat is an outright takeover by economic means of food and cuuting edge technologies, all enabled by the interaction of our laissez faire system, companies’ short term thinking and greed with a longterm thinking, protectionist, managed and centrally planned Chinese government.
Everyone interested in trade should watch this. Here is Part 2 from yesterday. The other parts are below the video;
https://www.c-span.org/video/?422783-2/chinese-investment-us-part-2
The one Congresswoman suggested a book, The Windup Doll, which reminded her of what is afoot here.
One final point, cheap,poorly made goods from China which fill our landfills, are not tested for toxins, and perpetuate the throw away hyper consumer economy are unsustainable. It would be better to base our economy on fine craftmanship of long lasting and/or fixable consumer goods and move our society to hyper learning, hypermusic making, hyper socializing and hypergardening/tree planting
“The Windup Doll” had “economic hit men” employed by a [near] future Big BioAg industry. They did little nasty missions in target countries to topple the last remaining resistance to bioAg-monopoly corporations.
So I guess maybe the Chinese read it and will try and take over economic control of the US. Like it wasn’t obvious already.
Are you really that dumm? NAFTA increased illegal immigration from Mexico by millions through the simple expedient of de-protectionizing Mexican agricultural, thereby exposing it to drowning in a wave of Midwestern PetroChemical ShitCorn, thereby bankrupting several million small-scale corn growers in Mexico and forcing them into economic exile in the United States.
“Deprived of their cheap stuff at Walmart, Deplorables ain’t gonna like what they voted for.”
So you think Americans would prefer to have $20 sneakers and $200 Flat Screens as opposed to jobs, pensions, and decent healthcare?
I would take the other side of that bet and I hope that we get a chance to see it play out. I’m not all that old, but I’m old enough to remember pre-NAFTA, pre-Walmart America when living in a small town in the middle of the country wasn’t a death sentence. I was born in 1975 and I still remember buying computers and consumer goods that were made in America. They were vastly more expensive, but they were damn well made, they didn’t end up in landfills in less than a year and people just didn’t feel the need to buy and own so much stuff. Both of my grandfathers were born into poor southern farming families during the Depression. Neither one made it to college but both were successful business men who started their own small retail businesses in their respective communities that were kinder, gentler and more responsive to their local customers, communities and employees than Walmart will ever be. Both of their stories seem impossible to replicate now, in fact it seems so implausible it might as well be science fiction. One had a chain of eight grocery stores and the other sold furniture and appliances. The furniture store is long gone, and everything else in that tiny town is gone just like the American made Zeniths and Barcaloungers in the old store. Last I checked the building housed a taqueria/bait and tackle shop that caters to the new population of central American farm workers that predominate the aging and formerly Anglo area. People in the town have to drive thirty minutes to reach the Walmart over in the county seat to shop for their basic goods. The mere idea of attempting to open a furniture or appliance store in that little town is laugh-out-loud crazy. No one really has much money to buy anything, but if they did you can damn well guarantee it will be always be purchased from Walmart, because not only are they the only game in town for 9 out of every 10 purchases, but also because everybody knows you just can’t beat the behemoth on price. Size, scale, monopoly power and dirt cheap Chinese made goods- it’s brutish. All of the old Mom and Pops- pharmacies, appliances, hardware stores, groceries – you name it are either gone or almost gone as Walmart has brutally undercut them on prices and driven them out of business. The other grandfather’s grocery store chain has dwindled from 8 profitable to 3 wounded stores that do a fraction of their former business because again, Walmart. Walmart hovers up the money from these small communities and then ships it up to Bentonville and then off to the accounts of it’s international share holders dooming the communities where they do business to eternal poverty. The money stops circulating once Walmart opens its doors.
You think the “deplorables” would rather have cheap sneakers and TV’s? I don’t think they’re so stupid, I think this is exactly why they voted for Trump. My friends and neighbors here in Los Angeles? Now they would much rather have the cheap sneakers and TV’s- The hell with the deplorables in the heartland. Haven’t you heard? They’re all stupid, racist, homophobes that don’t like Obama and would see gay couples denied the wedding cakes of their dreams?
Running large trade deficits is supposedly sustainable for the United States due to the petrodollar’s reserve currency status. However, how much longer will this last?
http://www.investopedia.com/articles/forex/072915/how-petrodollars-affect-us-dollar.asp
One of the problems with with the F-35 is that as bad as it is, it still performed better in the Rand war game simulation against China than the F/A-18. Which basically means it got slaughtered to a less embarrassing degree. Our existing stock of combat aircraft are mostly of 1970s and 80s vintage for the core airframes. They simply *need* to be replaced. Some air force general or other said that if he was given unlimited money to completely upgrade and overhaul all existing designs, it would still only keep them competitive for about another decade.
In a practical sense none of this matters, since a shooting war with Russia or China would inevitably go nuclear and kill us all, so who wins the initial dogfights isn’t important. But it is illustrative of how our bloated, profit driven military-industrial complex has driven us into a cul-de-sac. It takes decades to develop a modern combat jet. Even if they completely scrapped the F-35 they wouldn’t have anything to replace it with anytime soon, unless they want to restart F-22 production (or buy foreign designs, which will never happen).
It would be crazy for the US and all its subject allies and other preferred customers to all throw so much money away on a super-plane that will potentially be facing battle environments positively bristling with anti-aircraft and anti-missile missile systems capable of doing enough damage to US forces in the event of a US attack as to act as a conventional deterrent.
What Chinese fighter plane has the range to fly to the US and then dogfight with an F-22? None of them.
We should stop trying to rule the world, instead of arming ourselves to the teeth to fight imagined enemies.
Why’s everybody buying “1984” from Amazon (just try WORKING there!) when we should all be reading “Homage to Catalonia” “The Man That Corrupted Hadleyburg” “Red Harvest” or “Where the MONEY is,” maybe watching, “Never Give a Sucker an Even Break?” Trump’s folks will be setting up the yuppies, forcing them into vehemently opposing up-front, obvious grifts meant to bamboozle his voters, while lining the pockets of his real constituents. Looking at the infrastructure shell-game, shuck & jive, the projects in my home town were, of course, delayed by Republican obstructionism… and will be outrageously overpriced, once divvied-up by the usual ALEC kleptocratic thugs. Maybe Robert Reich might just add Niccolò Machiavelli to his short list? What would Il Duce do right now?
Hey, there are NO projects in my state, even though we were key to Trump’s win, because our idiot governor put the kibosh on exactly the kind of rail project (moderate-speed passenger rail ultimately connecting Chicago and Twin Cities via Milwaukee and Madison) that other states, including TEXAS, are getting funded. Rail in Texas. Better to have obstructionist delayers than full-out idiots.
I’m assuming, that until they prod us into cattle cars, only to realize all the power units are pulling coal & bitumen crammed DOT-111 cars, politicians use the word “rail” at their own risk? Once Manhattan Island becomes inaccessible to Melania’s help and the Acela kleptocracy… any rail infrastructure projects will still be labeled as Agenda 21 Sharia law, as tunnels flood, bridges collapse & freedom trumps complicit regulators. I’m wondering where they’d buy US made 151 rails nowadays?
If the anti-Walker vote was mainly concentrated in Milwaukee and Madison and perhaps a few other urban areas, was Walker being dumm to kill a rail-connections project between regions that voted against Walker? Or was Walker being vengeful?
Maybe one day Americans will understand that centralization and economies of scale guarantee the existence of flyover states.
It’s probably going to get worse… infra dollars going to big cities.
Maybe one day the big city urbanites will understand that the existence of food production and etc. in the flyover states is what guarantees the existence of the big cities.
Or maybe they won’t recognize it. Until the flyover states collapse finalistically and comprehensively enough that no more food exists there to even be able to be shipped into the cities. Then the big city urbanites can all starve to death and die. Hopefully they will be able to kill and eat all the One Per Centers in their midst first, though.
Are we not currently in a trade war already? We’ve got stuff like China’s Silk Road Initiative, the South China Sea dispute, Iran harassing ships in the Strait of Hormuz, the Nicaragua canal project, the invasion of Yemen, and the suspiciously well-timed destabilizations of the governments in Brazil and Venezuela. Remind me of how the WTO lawsuit about the US response to China’s dumping of solar panels turned out, too.
Exactly. You can fight it or lose by attrition
I have an open question for the commentariat that’s related to this:
I’ve heard that during the 1950s, which is supposedly the American economic golden age, that foreign trade was actually a relatively small part of GDP, which would suggest that if we properly structured things, an actual trade war wouldn’t necessarily be that bad for the US. I’ve also heard some similar arguments made using a historical analysis of protectionism in Europe during the very late 1800s in response to that era’s globalization. Unfortunately, I haven’t been able to find the actual hard statistics that these arguments used. Can anyone familiar with these arguments point me in the right direction? Or, if you’ve read these papers yourself, provide some context on whether there’s some merit to the argument?
You’re right, but the neolibs-globalists own all the think tanks and will continue to scream {and publish] otherwise.
So, ya just gotta break a few rice bowls to make the omelet great again. Not to say there won’t be some dislocation and pain that takes time, effort and wise investment to mend. Some safety net would help that too.
http://www.econdataus.com/tradeall.html
Much obliged, sir and/or madam.
The analysis of trade between nations that people like Adam Smith (1776) and David Ricardo (1817) presented assumed that nation-states were the dominant entities – but what we call “trade” todays is more like economic integration, a system run by multinational corporations based not on the theory of competitive advantage, but on downward leveling. For example, a particularly polluting manufacturing process can be moved to a country with no environmental regulations; a labor-intensive process can be moved to another country with a surplus of cheap labor; and the final product can be sold in a wealthy nation with high wages and strict pollution controls. The corporation banks the profit, often in offshore tax havens, and rewards its shareholders and executives with large dividends and bonuses. This all relies, however, on the free flow of capital and material across nation-state boundaries without any restrictions. The assumption of modern “free trade” enthusiasts is that what is good for the multinational is good for the US; this is often not the case.
Consider for example agricultural trade with Mexico. A protectionist policy would place tariffs on manufactured goods from Mexico; Mexico could respond with tariffs on U.S. corn. This could make life better for Mexican small farmers and America blue-collar workers, while damaging corporate profits.
However, any attempt at analyzing the effects of protectionist policies on say, consumer prices and domestic employment and environmental pollution levels, hinges on this issue:
http://www.iatp.org/files/Political_Economy_of_NAFTA_Economics_Ideology_.htm
In particular see:
Spriggs, William E. and James Stanford. “Economists Assessments of the Likely Employment and Wage Effects of the North American Free Trade Agreement.” Hofstra Labor Law Journal, Vol.10, No.2 (Spring 1993)
Also, when Adam Smith was arguing for “liberalizing” trade, [yes, liberal_libertarian_robber-baron_neo-liberal] he meant “beneficial” trade, as in trading in things the other trading partner didn’t have or produce domestically.
Europe and Japan where still in ruins in the 50s. China was marching behind Mao and his stupid rule. No competition, in other words. Different world.
“’Ive heard that during the 1950s, which is supposedly the American economic golden age, that foreign trade was actually a relatively small part of GDP,……”
Most of the rest of the “productive” world was emerging from the crushing devastation of WW2; US sat in the catbird seat of all trade in most of the world.
It wasn’t until the 1980’s and forward that the rest of the world began catching up……
Imbalanced trade wouldn’t have been possible without the US going off the gold inter-exchange standard in 1971. Not that I’m a gold bug. But it did have the effect of concentrating the mind of countries, to make sure trade with their trading partners was balanced; the alternative was to give up one’s gold.
Pictboy3,
There is a book giving a very detailed history and careful point-by-point analysis of just what you cite. It is by Charles Walters Junior and is called Unforgiven. It is available from Amazon, of course, but also from the Acres USA Bookstore itself. Here is a link.
http://www.goodreads.com/book/show/2445566.Unforgiven
Charles Walters and others also wrote millions of words about this down through the years at the paper Acres USA itself. But there is no digital record of it anywhere. Anywhere. The only way I can think of to read all those words is to find someone who has copies of all the newspapers beginning with Issue Number One . . . or a complete set of the Acres USA Desk Referrence which is a set of hardback volumes reprinting everything in the papers from 1970 to 1990 . . . or making a personal visit to the offices of Acres USA and reading their own physical analog ink-on-paper files and copies . . . if they will let you do that.
The author states that
“Trump’s rhetoric so far implies an opposition of American workers to the ‘globalist’ US elite with scant mention of consumer interests, the main source of support for the globalists. ”
I sincerely doubt that neo-liberal markets first and globalization policies have anything to do with consumer interests.
That’s quite a logical stretch since its precisely American workers who are also the consumers, something usually overlooked in this type of rhetoric (the same applies to robotic automation).
And it highlights the neo-liberal bias of the author when discussing economic development because it explicitly frames the discussion around markets and consumption at the expense of everything else.
I have no idea if Trump actually has a coherent plan for anything that resemble sustainable economic development, but the historical trace of tariff’s and protectionism is pretty clear. It’s been good for the people of the United States.
Really? Why not ask people who’s job went to Mexico or China if they think the trade deals were good for America? My guess is “no one” means economists who drank the neoliberal kool-aide
I’m sure the American corporate masters made out better than the Mexican or Canadian ones. Workers from all three got the short end of the stick.
Why are you sure about that? Carlos Slim Helu made out very well. The new Chinese billionaires made out very well. The American masters of all the corporations which went extinct from Free Trade probably made out poorly relative to the few behemoth outsourcers who made out well and the new behemoth outsourcing-fulfillers in Mexico/China/etc. who made out well.
Agreed. It’s a rhetorical sleight of hand. Trump is assuming NAFTA was negotiated with America disadvantaged and Mexico advantaged, probably for the simple reason that manufacturing drained from America and flooded Mexico shortly after its passage.
But this isn’t a state to state sort of issue, but one of corporate dominance. Free Trade is NOT ABOUT TRADE! It’s about giving corporations power over there perspective hosting governments. Systematically stripping away the governments right to pass policy to protect the environment, manage resources, see to the health and welfare of the workers, insure safe products, and other such issues. Free trade is about power, not trade.
Sadly, Trump doesn’t have a clue.
& this:
Seriously? Which economists have publicly come out and recognised that? Did they also quantify the benefits/losses and the proportion of gains going to who?
The author made some good attempts there, did you ever have a car that’s msifiring but occasionally catches? That’s what reading this was like. But since I’m cruel, I’m going to fisk it anyway:
>as a zero -sum game, implying that the only way for the US to secure its interests would be at the expense of its trading partners
Economists are too stupid to be trusted with math. Say the net gain is (using an actual single-digit number so economists can follow) of some trading situation is 5. Now I can get to 5 by adding 1 and 4, 2.5 and 2.5 (the ideal), or -4 and +9. Going from the last case to even the first case is technically “at the expense” of the side that was originally at 9, but I’m still at a “net gain” and everybody is happy. Duh.
>Meanwhile, US protectionists have been in denial about labour-displacing automation throughout the economy.
Well, there are two ways to use “labor-displacing automation”. One that reduces how long Joe and I need to spend at our parallel jobs, another that makes Joe work just as long but makes me redundant. How come we always get type “B”? Another failure of economists to grok that basic math isn’t that basic, for crying out loud. Also, I would like some examples showing “US protectionists” claiming that the whole concept of advancing machinery doesn’t exist. Because I think we all get that, actually.
>a very disruptive global trade war.
Instead let’s keep importing oil from the worst areas of the world so we can have real wars! Much less disruptive except to the dismembered men, women and children involved.
The automation argument seems like a particularly egregious red herring. Companies don’t really invest in automation when they can simply offshore the work and use cheap labor. Automation is the last resort, after labor and regulatory arbitrage fails.
Why not just redevelop the entire border area from Caribbean to Pacific? 20 year plan…
Gotta be cheaper and a better investment than a wall or a war!
Jobs for everyone on both sides of the border.
The neocons can provide security while eradicating the drug cartels, then go die off…
Solar powered Desal plants for water from the unlimited Pacific ocean.
Pipelines everywhere! and plug in cars, buses and trolleys.
Adobe homes made from local dirt.
Alaska 2.0
Did I leave anything out?
{facepalm}
1) there is an essential difference between a corporation and a person (consumer, worker, etc.) — one is an actually existing living being, the other is a purely conceptual entity — treating them as existentially equal is one of the major theoretical problems for economics, imho.
2) separating people into groups like “consumer” and “worker,” and separating workers into those who are negatively effected and those who aren’t is arbitrary, logically indefensible, and only leads to confusion. 1) all workers are also consumers and most consumers are also workers, so dividing people into categories like makes no sense. 2) the point of free trade policies is to reach “factor price equalization” of all commodities, including labor. Just because you didn’t lose your job to outsourcing, doesn’t mean you aren’t effected by the labor market which is now characterized by job-insecurity. In short, we’re all connected.
And, as I’ve pointed out before, the standard econ theory on the benefits of trade is well aware that there will be some winners and some losers from removal of trade restrictions — the argument has always been that “free trade” is a net gain, that can work out well for everyone only if the “winners” reimburse the “losers.” The fact that economists, by-and-large, never mention the redistribution part of the “free-trade is an unmitigated good” argument when they speak in public says a lot, I think, about their intellectual integrity…just sayin’…
To your points:
“American workers who lose their jobs or experience poorer working conditions will be unhappy”
Really? Unhappy? How about desperate, poor and disenfranchised with no future to speak of.
What kind of reality is this author living in? There seems to be a complete avoidance of any human or ethical considerations. And, by the way, its not about redistribution to losers as if this were some sort of monopoly game. This is about human beings with a limited life span, trying to live authentic and fulfilling lives on this planet.
It’s part of an irrational belief system that assumes market outcomes are the result of rational choice and therefore the best of all possible worlds. Its no wonder these authors end up tying themselves into knots like free-trade (whatever that is) being an unmitigated good (without any ethical considerations or reference to social reproduction).
I would argue that a trade war would be a good thing, not because of things like issues with offshoring jobs, though I think that is a bad thing, but because they really are not about free trade.
They are about subsidizing monopolists, (expansion of copyright and patent) and increasing the power and reducing the regulation of heavily subsidized industries (Finance, insurance, etc.).
These are inimical to a prosperous and just society.
If a Trade War leads to Equal Protectionism for Every Country and no Forced Free Trade against Any country, then a Trade war would be a good thing. If it leads to the functional extermination of the Free Tradesters and their hasbarists from the face of the Earth.
Including, for example, Free Trade Hasbarist scum like Stephen “Cock” Roach.
It would be nice if the author pointed us to a study that clearly concluded that a Global Trade War would result from the US demanding changes to old trading treaties with Mexico. I see nothing but a bunch of take-it-or-leave-it assertions like “Their rhetoric also implies that the most powerful country in the world has previously negotiated trade deals to its own disadvantage – a view almost no one else agrees with.” We have seen a few economists mentioned in NC here that claim precisely the opposite including the recent observation that the 2011 US-Korea trade deal (KORUS) that was promised to result in the net gain of 70,000 jobs in the US actually resulted in the loss of 75,000 US jobs.
http://www.epi.org/blog/u-s-korea-trade-deal-resulted-in-growing-trade-deficits-and-more-than-75000-lost-u-s-jobs/
Regarding the wall, it may make more sense to start on the sea walls and surge barriers for the coastal cities and ports. We can talk about trade all we want, but Mother Nature gets to seal the deal.
Duh. Someone needs to mention this. Also too, our numerous and old seaside nuke power plants and their stockpiles of nuclear waste we haven’t found a place for yet. The replacement Yucca Mtn place. Plus decommissioning the very old ones.
“… while US corporations and consumers may benefit from relocating production abroad, American workers who lose their jobs or experience poorer working conditions will be unhappy. Clearly, there is no singular national interest.” This snippet tells too plainly what rationale moves this post. Corporations and consumers benefit while workers may suffer. This post’s accounting of National Interests is measured purely in terms of consumer expenditures (footnote Corporate profits) and workers losses in pay, benefits and security. But many/most consumers are workers. Does an unemployed worker benefit from a lower price for an item which that worker produced before “””free trade”””? And how can the National Interest be so simplily equated to the costs of manufactured goods corrected for the jobs lost in their manufacture as a result of “””free trade”””? [I would use many many more “”‘… to convey my skepticism but for economy of expression.] Further consideration of this post offers it more consideration than it deserves.
‘Worryingly, Trump and his appointees often appear to see trade as a zero -sum game, implying that the only way for the US to secure its interests would be at the expense of its trading partners. Their rhetoric also implies that the most powerful country in the world has previously negotiated trade deals to its own disadvantage – a view almost no one else agrees with.’
As some one said’ Globalization is another kind of colonization!
The only benefactors of this globalization are the Multinationals, their CEOs and their (Company) shareholders at the expense of American Workers. Entrenched Corporatocracy dictates policies irrespective of the parties or Who is at the white house
The CAPITAL is mobile and goes where it gets the best return but the LABOR is immobile. Workers got shafter but the elites becamw more rich!
‘Worryingly, Trump and his appointees often appear to see trade as a zero -sum game, implying that the only way for the US to secure its interests would be at the expense of its trading partners. Their rhetoric also implies that the most powerful country in the world has previously negotiated trade deals to its own disadvantage – a view almost no one else agrees with.’
As some one said’ Globalization is another kind of colonization!
The only benefactors of this globalization are the Multinationals, their CEOs and their (Company) shareholders at the expense of American Workers. Entrenched Corporatocracy dictates policies irrespective of the parties or Who is at the white house
The CAPITAL is mobile and goes where it gets the best return but the LABOR is immobile. Workers got shafter but the elites became more rich!
If it’s as you say, trade deals are for the 1%, then perhaps it’s ‘the most powerful country in the world has previously negotiated trade deals to its own (labor’s) disadvantage.’
I predict this headline soon. Ahem. BIG THREE ANNOUNCE PLANT CLOSINGS DUE TO DISRUPTIONS IN SUPPLY CHAINS. Yup, that’s going to make the GDP zoom to 4% and put Youngstown back into a nice house and two cars in the driveway. Sure.
We are in thrall of an idiocracy. Sure glad I’m not 25 and starting life with this happening.
I think the worry is ‘Big Three’s 20% more expensive supply chains,’ and not running short of parts.
In that case, if the Russians could do it (when the Wehrmacht invaded), relocating plants thousands of miles east, we can do it too (moving them north).
(Trade) war time emergency.
For gods sake. We’re just eight years out from one of capitalism’s worst crashes. Europe is still on life support, close to disintegration. China has probably reached its Minsky moment, and about to enter a period of stagnation that will make the Japanese feel like Bush 43 watching Trump get inaugurated with a big smile on his face. Let’s not even mention the fact that China will be billions of really old people real soon because of one child. That economy will be toast, soon. Limp, cold toast. And, if it wasn’t for them, I’m pretty sure we (the world) would be in quite the pickle of a depression right now. We’re doing ok, considering, but certainly not swimmingly, but, we’re the best the world has at the moment, unfortunately. The whole world is swimming in a swamp of debt, both public and private. And our demographics aren’t encouraging, either, with 73 million boomers pretty much one step into the grave with zero to minimal savings and still getting thrown off the side of the good ship work force daily. In other words, these aren’t the healthiest of times, economically.
So, along comes some narcissistic bigoted madman who, with the stroke of a pen, I guess, wants to throw a huge wrench into the heart of the auto industry just to satisfy his ignorant beliefs that an entire nation of color is attacking our way of life. An auto industry, btw, that was saved from severe damage with billions of sovereign, taxpayer funds just eight years ago. Employs millions, worldwide. Finally, sort of, coming out of its pre recession incompetence and finding a solid financial footing. An industry that has established a very delicate chain of supply, worldwide, that could crumble overnight if violent, stupid, emotional politics are allowed to interfere with it. I know, I know, jobs went south, jobs went here, jobs went there, whatever, what’s past is past, but, please, stop with the snark here and accept that, in order to reverse course, or, whatever, will take a tad more intelligence and subtlety than what’s coming out of this fools head. We’re talking about decades of supply chains established. He can just freeze all of that up overnight, and then where are we? In the state of anarchy that Leninist Bannon always wanted, his own little Catholic apocalypse fantasy. Great for him, I guess, but, imagine, you know, the Carnage. You think it’s bad now? Just wait. How about Venezuela on the border of Texas, to start.
I figure if we are gonna start talking free trade, trade wars and what we are fighting for, a chart of what the numbers are would be useful.
Here’s a handy one for from wiki – wiki lists sources at the bottom.
List of the largest trading partners of the United States – 2015 data – imports, exports, balances by country
https://en.wikipedia.org/wiki/List_of_the_largest_trading_partners_of_the_United_States
Also note that financial products are a major US export nowadays – so if there is a trade war, Americans may have to consume all of these ourselves. Yikes.
Can they just park all the excess financial products they can’t sell anymore to foreigners in empty oil tankers?
Sure, but we may really need to consume them. Calories!
What bugs me is how the article seems to consider “consumers” who stand to lose from Trump’s protectionism as some separate, distinct group from potential “winners”. Who are these consumers? I’d say they are blue-collar workers who have either lost their jobs or seen their paychecks and working conditions decrease. They are squeezed service employees in McJobs. They are small business owners unable to compete with large conglomerates using low cost foreign labor. How exactly do these deplorables finance their spending? I’m no economist, but I think balooning household debt may have something to do with it. So basically the “free trade” economy means the majority is supposed to buy cheap foreign goods on borrowed money, then pay it back with interest in a system that resembles serfdom more than capitalism.
Of course, this pseudo-analysis is incomplete without pointing out the difference between the “deplorables” and “consumers”. The difference consists of highly-paid, credentialed professionals. These are people who reap all the rewards of free trade without suffering any of its costs. These are the people who opposed Trump. These are the people who write and read such articles and honestly fail to comprehend why anyone could oppose globalization.
In a world that provides well being for all people, that’s today’s world, we must address inequality – which is only aggravated by denying wealth differences between countries. Trying to force globalism on top of all these unaddressed differences is a sure fire way to wind up with social gangrene. That’s what we are beginning to have. Unfortunately.
and to this end: trade is not the solution. we don’t even need trade because it only aggravates the situation and takes too long a time to resolve – we need raw materials in order to do our own manufacturing but that’s it.
In the 19th Century they repealed the Corn Laws to keep the cost of living down so the UK could engage in free trade.
The minimum wage must cover the cost of living, it’s all very obvious but totally absent from today’s thinking.
The US has probably been the most successful in making its labour force internationally uncompetitive with soaring costs of housing, healthcare and student loan repayments.
These all have to be covered by wages and US businesses are now squealing about the high minimum wage.
US (and all Western) labour has been priced out of global labour markets by the high cost of living.
What did Milton Freidman miss?
The cost of full price services actually has to be paid by businesses in wages.
Milton Freidman took costs off the wealthy and placed them on business.
The West then let massive housing booms roar away raising housing costs through mortgage payments and rent, these costs have to covered by business in wages.
Student loan costs are rising and again these costs have to covered by business in wages.
2017 – Richest 8 people as wealthy as half of world’s population
It is important not to tax the wealthy to provide subsidised housing, education and healthcare that result in lower wage costs because?
I don’t know, you tell me, is it to maintain ridiculous levels of inequality?
Why does the middle class disappear?
The high costs of living in the West necessitates high wages and everything gets off-shored to maximise profits.
Low paying service sector jobs that cannot be off-shored and highly paid executive and technical jobs are all that’s left, the rest was off-shored, it’s the way neo-liberalism works
The middle class disappears and the Western neo-liberal economies become hollowed out shells.
The populists rise and with a neoliberal left they turn right.
Protectionism, it’s the only option, we’ve made such a mess of it all.