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Globalism and its Discontents
Donald Trump yesterday made one aspect of his platform entirely unambiguous: He is against free trade. The full transcript of his speech is here. He draws a dichotomy between “globalism” and “Americanism,” and in his view, globalism — or free trade — is unAmerican.
This is how he understands recent American economic history:
America has lost nearly one-third of its manufacturing jobs since 1997 – even as the country has increased its population by 50 million people.
At the center of this catastrophe are two trade deals pushed by Bill and Hillary Clinton.
First, the North American Free Trade Agreement, or NAFTA. Second, China’s entry into the World Trade Organization.
NAFTA was the worst trade deal in history, and China’s entrance into the World Trade Organization has enabled the greatest jobs theft in history.
In his view, “massive trade deficits subtract directly from our Gross Domestic Product,” and the TPP would not only “undermine our economy, but it will undermine our independence,” because it “creates a new international commission that makes decisions the American people can’t veto.”
And here are his proposals to fix this:
One: I am going to withdraw the United States from the Trans-Pacific Partnership, which has not yet been ratified.
Two: I’m going to appoint the toughest and smartest trade negotiators to fight on behalf of American workers.
Three: I’m going to direct the Secretary of Commerce to identify every violation of trade agreements a foreign country is currently using to harm our workers. I will then direct all appropriate agencies to use every tool under American and international law to end these abuses.
Four: I’m going tell our NAFTA partners that I intend to immediately renegotiate the terms of that agreement to get a better deal for our workers. And I don’t mean just a little bit better, I mean a lot better. If they do not agree to a renegotiation, then I will submit notice under Article 2205 of the NAFTA agreement that America intends to withdraw from the deal.
Five: I am going to instruct my Treasury Secretary to label China a currency manipulator. Any country that devalues their currency in order to take advantage of the United States will be met with sharply
Six: I am going to instruct the U.S. Trade Representative to bring trade cases against China, both in this country and at the WTO. China’s unfair subsidy behavior is prohibited by the terms of its entrance to the WTO, and I intend to enforce those rules.
Seven: If China does not stop its illegal activities, including its theft of American trade secrets, I will use every lawful presidential power to remedy trade disputes, including the application of tariffs consistent with Section 201 and 301 of the Trade Act of 1974 and Section 232 of the Trade Expansion Act of 1962.
He calls for what sounds like central planning to boost and support the steel and energy industries, although it’s not clear that what mechanism he proposes to ensure we only use American steel; perhaps he thinks it will happen on its own:
A Trump Administration will also ensure that we start using American steel for American infrastructure.
Just like the American steel from Pennsylvania that built the Empire State building.
It will be American steel that will fortify America’s crumbling bridges.
It will be American steel that sends our skyscrapers soaring into the sky.
It will be American steel that rebuilds our inner cities.
It will be American hands that remake this country, and it will be American energy – mined from American resources – that powers this country.
Trump clearly doesn’t adhere to the neoliberal consensus.
The word “neoliberal” is almost always used disparagingly, but I use it here to refer to the policies introduced by Margaret Thatcher in the United Kingdom and Ronald Reagan in the United States. In Neoliberalism: The Genesis of a Political Swearword, Oliver Marc Hartwich describes the critics of neoliberalism thus:
In any case, it is a curious alliance that has committed to fighting neoliberalism: Religious leaders and artists, environmental activists and globalisation critics, politicians of the left and the right as well as trade unionists, commentators and academics. They all share a passion to unmask neoliberalism as an inhuman, antisocial, and potentially misanthropic ideology or as a cynical exercise by strangely anonymous forces that wish to exploit the world to their own advantage.
It’s unusual, to say the least, for a GOP presidential candidate to embrace these views.
At this point, experts will interrupt to say, “But these proposals are insane. They will cause a recession.” You can read what the experts have to say, for example, in the Washington Post:
An economic model of Trump’s proposals, prepared by Moody’s Analytics at the request of The Washington Post, suggests Trump is half-right about his plans. They would, in fact, sock it to China and Mexico. Both would fall into recession, the model suggests, if Trump levied his proposed tariffs and those countries retaliated with tariffs of their own.
Unfortunately, the United States would fall into recession, too. Up to 4 million American workers would lose their jobs. Another 3 million jobs would not be created that otherwise would have been, had the country not fallen into a trade-induced downturn.
It’s safe to say that Trump’s response would be much like Michael Gove’s: “People in this country have had enough of experts.” After all, what else could he say?
We actually know what happens when we try to protect the steel industry. Bush tried it in 2002. His administration levied tariffs on imported steel. It saved 1,700 steelworkers’ jobs. But as Walter E. Williams puts it in Investor’s Business Daily, it would have been cheaper to tax ourselves and give each of those 1,700 steelworkers a $100,000 annual check:
[S]teel-users — such as the U.S. auto industry, its suppliers, heavy construction equipment manufacturers and others — were harmed by higher steel prices.
It is estimated that the steel tariffs caused at least 4,500 job losses in no fewer than 16 states, with more than 19,000 jobs lost in California, 16,000 in Texas and about 10,000 each in Ohio, Michigan and Illinois.
In other words, industries that use steel were forced to pay higher prices, causing them to have to raise prices on what they produced. As a result, they became less competitive in both domestic and international markets and thus had to lay off workers.
Within three years, Trump’s proposals would — in both the expert and my inexpert view — cause the US economy to shrink by 4.6 percent and the unemployment rate to double. Insofar as they’d also cause a recession in our trading partners, they’d further destabilize whatever fragile world order is left.
Was NAFTA “the worst trade deal in history?” Hardly. It’s true that unskilled American workers have received an increasingly raw deal since the 1970s. But NAFTA’s not to blame. After NAFTA entered into force, trade with Canada and Mexico nearly quadrupled. Canada and Mexico buy more than a third of US merchandise exports. It’s actually been the most beneficial trade agreement in US history, apart from the Uruguay Round agreement that created the World Trade Organization. According to the Peterson Institute for International Economics, NAFTA’s been worth a gain in annual income of about $10,000 per household.
But they’re experts, and we’re sick of experts.
Waving the trade deficit around as if it means something is absurd. The United States has registered trade surpluses with its NAFTA partners in manufactured goods and services. The deficit is owed to our petroleum imports from Canada and Mexico, which stem from geology, not NAFTA.
The gold-standard model used by economists to measure the employment effects of trade agreements is a computable general equilibrium model called Global Trade Analysis Project. Developed in the early 1990s, it’s maintained by a consortium of more than 30 American and international organizations, including the US International Trade Commission, the World Trade Organization, the World Bank, and half a dozen US government agencies. Joseph Francois and Laura M. Baughman used the model to assess the impact of our Free Trade Agreements in a paper called Opening Markets, Creating Jobs: Estimated U.S. Employment Effects of Trade with FTA Partners. Among their findings:
- We find that in recent years the services provisions of the NAFTA have translated into a 13.3 percent reduction in cost savings for U.S. services exporters. This means that, where it would have cost $100 to sell a service to NAFTA partners before the agreement went in effect, it now costs $86.70 to sell the same service at the same price. For other FTA partners, we estimate an average cost saving of 8.5 percent.
- We find that because of this trade, U.S. GDP was 7.2 percent higher than it would have been otherwise — $1.0 trillion. In other words, goods and services trade with the 14 FTA countries generated net U.S. output gains worth $1 trillion in 2008. Furthermore, total U.S. exports of goods and services to the world are $462.7 billion higher than they otherwise would be because we trade with these countries. Finally, out of the total number of jobs in the U.S. economy in 2008 and the wages they paid to workers, trade with the FTA partners supported 17.7 million of those U.S. jobs. These jobs are spread across the range of U.S. industries. These higher levels of output, trade, and employment were made possible by the benefits of trading with the 14 FTA partner countries.
- We find that the FTAs in 2008 generated $304.5 billion in U.S. output, or 2.1 percent of U.S. GDP. They expanded total U.S. exports of goods and services to the world by $462.7 billion. Finally, they supported 5.4 million U.S. jobs. This is output, exports and employment that would not exist in the absence of the 2008 FTAs (fully implemented in some cases, partially implemented in others).
- FTA-induced trade with Canada, an important U.S. trading partner and an integral part of the North American manufacturing based, is estimated to have brought roughly 60 percent of overall FTA labor market and output gains from trade … Mexican trade brings with it an additional one-third of the overall gains. The fact that much of the NAFTA trade involves trade at intermediate stages of processing also means that the gains from NAFTA trade are larger, relative to the impact on trade itself, than is the case with other FTA partners.
But they’re experts and we’re sick of experts.
I’m open to the argument that our social stability has been jeopardized by the loss of unskilled jobs, and the federal government must therefore step in to create them artificially. Something is obviously very wrong, after all: If it weren’t, Trump would not be the presumptive GOP nominee. But if we want the government to do create unskilled jobs, this is not the way to do it. The US is in need of upgraded infrastructure. The jobs required to rebuild our infrastructure can’t be exported. A massive state-run program to rebuild that infrastructure would be less damaging than a trade war. Or just redistribute income, full stop: Buy off the underclass in exchange for social harmony. It would cost less than a trade war.
Anything but this — this plan is advanced insanity.
Published in General
The face of Globalism ….
The face of its ‘Discontents’ ….
Before you choose which side you’re on … listen to Nigel’s first address to this most auspicious body of globalists ….
Nigel Farage – First speech in the new European parliament
#JeSuisNigel
Well, it’s a good thing this guy isn’t the Republican nominee.
Oh, wait…
Thanks for marshaling all the data, Claire. This should be a wake up call to the protectionists.
This is a better way to attack Trump, real information and data. Of his proposed policies, his trade and anti-globalism are the most dangerous and uncertain. I have however learned to respect Trump’s craft. He plays a deeper game than people believe. Is he really intending to do all this or simply positioning to a position of power (via threat) with foreign traders. Sort of a mutually assured destruction policy that in reality will never be used.
Now you’ve done it Claire. Now you are going to hear repeated the vast litany of reasons to vote for Donnie.
Ready?
He’s not Hillary.
That’s it. That is the sum total. Oh, they’ll list the reasons why Donnie must do a better job than Hillary, but if the Democrats had even a fraction of an ounce of brains, they would wait until the Republicans nominated Donnie, dropkick Hillary at their convention, and nominate another biped. A shaved ape would take an overnight fifteen point lead* over Donnie, as long as the shaved ape isn’t Hillary.
Even if the Democrats do keep Hillary, it’s still a race between a lying opportunist and an opportunistic liar.
*That’s a fifteen point popularity lead. The ape’s IQ lead would be thirty or more.
Just yesterday Nigel Farage gave a speech to the European Parliament on the wonder and benefit of Free Trade. One of the problems the Brexiters identified was that Europe was preventing Britain from entering into FTAs with natural trading partners like India and Australia.
Try again.
Try again.
I ask that you listen to the Nigel Farage speech to the EU in 2014 at the link above, or just at a minimum from 5:30 to the end. Mr. Farage’s response to the question “What Are You Doing Here?” is not only spot on, but prophetic. The globalist experiment has failed. That doesn’t mean that “a modern Europe can’t still trade together, operate together and have a mutual respect for each other” (Nigel Farage).
How does any of that invalidate the Free Trade point made by Claire in the OP? Is it that you just like throwing around the term globalism? Nigel Farage is a staunch proponent of free trade.
Here you go, listen to this:
http://www.independent.co.uk/news/uk/politics/nigel-farage-brexit-speech-european-parliament-full-transcript-text-a7107036.html
The data the experts compiled shows pretty clearly that they weren’t wrong on the benefits of Free Trade. Do you have any data to counter that presented in the OP?
“Globalism” can be a misleading term because it implies something more than support for free trade. Globalists may support open borders, the ceding of authority to supranational governing bodies, disdain for patriotism, etc.. Support for free trade implies none of that.
Data.
In North Canton, Ohio, across from city hall, sits the real center of the town – a huge brick edifice that once held an industrial giant – the Hoover Company. A century ago, Boss Hoover changed the way the world cleaned their homes with the introduction of the vacuum sweeper.
In another corner of the square sits the IBEW local. Once bustling, it too sits moribund. Its membership has shrunk. People who payed their dues, both to the union and to life, are scattered to the wind. Some work for minimum wage, others went on disability, many more left for (hopefully) greener pastures.
The Hoover name endures. There’s Hoover High School, Hoover Park, the Hoover Bridge… And there’s a line of crappy, cheap Chinese made appliances that still bear the familiar red and white logo.
The data says the city is ok. The minimum wagers, the folks on Social Security, the people that left, they don’t show up in the data. But many have shown up in the voting booth.
Claire,
When countries like China consistently violate the intellectual property rights of Americans, in violation of treaty obligations, should the President sit by idly?
When countries like China consistently bar American exports such as in the motor vehicle and entertainment industries (to mention two of which I am familiar), in violation of treaty obligations (or via asserting loopholes), should the President sit by idly?
Trump may be wrong about some specific details (such as the relative significance of currency manipulation vs. tariffs and targeting iPhone assembly) but he is not wrong overall.
BTW, one of the problems of the statistics I’ve seen cited on trade deals is the baselines they used. If the baseline is one where the other country has an outright ban on importing US goods and the US has a moderate tariff on the other country’s goods, even a bad trade deal leaving many of the other country’s barriers will report gains.
Rather than focus Trump’s attention on the more significant problems and the better solutions, you mock him in ways even his illiterate supporters may intuitively find defective. They may regard this as reflecting more negatively on your character and motivations than on Trump’s.
To be clear, there was no attempt by me to “invalidate the Free Trade point made by Claire in the OP”.
My only point is that one can be a proponent of free trade without being a “globalist”. And focusing on Trump in the middle of Brexit and a globalism debate is sort of besides the point. Trump says stuff that he (or his staff) changes or corrects later all the time. To him, this is just a simplistic discussion of whether one is for Brexit or Remain. On that he’s with Nigel, but unfortunately he is not even close to being as articulate or humorous.
A shame that Nigel Farage isn’t running for POTUS.
So anecdote then.
Exactly.
Then I’m a bit confused as to why you would bring a discussion about globalism into a post about Free Trade. Given that most people around these parts conflate the two it only serves to muddy the waters.
Good. We must start answering protectionists with hard data and we must get some adults around Trump. It is always a difficult sell and if we lose the basic ideological battle that free trade under the rule of law is essential to freedom, and that free international trade is essential to domestic free trade, we will lose the battle against the centralizing progressives. Protectionism is their dream position. Protectionism is crony capitalism on steroids, increasing special interest leverage throughout the economy. Hillary and the Democrats are protectionists and have been since we lost our war and post war manufacturing monopolies to a rebuilt Europe, Japan and the Asian Tigers. We have a trade competitive problem which our political class does not understand, but protectionism is immunization by suicide.
Jaime is right, globalism, is a vague term that may or may not mean anything. Free trade has a couple hundred years of discussion, solid theory and abundant examples and data that make the case
I am, in theory, a proponent of free trade. After all, by what right does the state interfere in exchanges entered into by free individuals so as to shift benefits and burdens between favoured and disfavoured groups?
On the other hand, the state does, in fact, so interfere. And when taking the decision to interfere otherwise (is it always strictly less? I suspect not), does the state owe a duty — or even some consideration — to those who are negatively, and perhaps disastrously, affected? I’m not sure.
I am pretty sure that offering up “A massive state-run program to rebuild that infrastructure … Or just redistribut[ion of] income, full stop [, to] Buy off the underclass in exchange for social harmony” are not terribly serious, or terribly convincing, counter-proposals. At least, outside the world of fantasy economic aggregates, out there where real human beings, their families and their communities live. And die.
I’m not saying a trade war (whatever that means) is a good thing. I am saying that eye-rolling and deep sighs are not going to cut through the bombast to reach those to whom general equilibrium models are not as useful as a job.
This. A lot could be done to fix our “trade problem” through regulatory reform.
HTH.
It might have had a little something to do with the title of the thread …..
Yes, but the content as you admit is about Free Trade, and you further admit that they are not really same thing. There is a vast difference between political globalism and Free Trade. That Donald Trump conflates the two is an error that you also admit he makes. I think we should be clear when discussing these topics as demagoguery so easily obfuscates things.
Demagoguery. Donald Trump. Obfuscate.
Yes indeed. Those words do very much summarize the thread.
Claire,
First, since we have been relentlessly lied to about employment statistics through the use of misleading models, one must ask what kind of jobs this guy is actually talking about. Minimum wage, temporary, seasonal?
Second, this guy Tankersley is no expert. He is a left-wing Economic Policy Correspondent for a left-wing newspaper the Washington Post.
I will agree that blaming all loss of industrial jobs on trade deals is an exaggeration. However, what isn’t an exaggeration is the distruction of the American Auto Industry and Steel Industry by a combination of hyper-unionization and hyper-environmental claims. I was running around in the rust belt while it was being destroyed selling analytical instruments to the largest industrial corporations. The combination of ridiculous environmental claims later completely refuted plus the total intransigence of the labor unions destroyed the best jobs in the country pronto.
These were left-wing policies supported by left-wing experts. Maybe that is the lingering resentment that Trump is tapping into. The smug yuppie greed that has evidenced itself every since probably hasn’t helped either. Migrants are not refugees, a small perturbation in temperature is not a global catastrophe requiring draconian action, and when an acorn hits you on top of your head the sky is not falling. The experts should be horse whipped as they have done very great damage.
Regards,
Jim
The outcome of this debate over “globalism” that has now boiled up to the surface of American politics will shape our country’s future. Yet to my knowledge, neither the proponents of globalism nor its adversaries have bothered to actually define it.
Those who support globalism blather on about its benefits, while those who oppose it cite the harm it does. It’s a classic case of debate-by-anecdote.
But what IS globalism?
Globalism is the process through which products become available all over the world at the lowest possible price.
As with any process, this one creates winners and losers. The losers are visible — a factory in Ohio closes and American workers lose their jobs. But the winners aren’t so visible. For instance, Wal-Mart sells a lot of products that are made in China, and these products cost so little that Americans who hadn’t previously been able to afford these products now can buy them. Incidentally, Wal-Mart is now the largest private-sector employer in the US. These jobs were created — here in America, by an American company — because of globalism.
This debate over globalism is so crucial to our future that we need to re-boot it; to define what it is and then to launch a serious but non-partisan conversation about how globalism actually works and what actually happens.
Let’s start with this: Can anyone improve upon the one-sentence definition of “globalism” that I’ve provided?
Improve, no. Expand? I think we need to address the rise of supranational political institutions that have gone hand in hand with the rise of globalism under your definition. There is now a difference between economic globalism and political globalism.
Ripped from the headlines: more lost North American jobs due to Chinese barriers. Bombardier today; Boeing tomorrow.
Herb,
That is how Globalism would have been defined by the Nation State Democratic Capitalistic World. However, Global Governance as practiced by the EU is very different. It is a soft Marxist mentality that is anti-democratic. It quotes massaged statistics to get its way the same way Stalin always had a five-year plan that was going to outstrip the West.
The zero growth hyper-regulated world that has been the hallmark of the both Europe and America recently is the end result. The last aspect of this Global Governance is its Orwellian attitude to all free expression. By this constant distortion of reality the EU has morphed from a trade agreement (a good thing) into a hideous grey ever expanding Bureaucratic Autocracy. The European Parliament is a rubber stamp. There is no democratic mechanism for reigning in its ever-increasing stranglehold on European life. Over 50% of Britain’s laws were coming from the EU.
If I were the last man in Europe I’d oppose the EU.
Regards,
Jim