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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
Except our current economic organization (which is decisively not “free trade”) is also resulting in massive socio-economic convulsions, dislocations, disparate economic impacts and widening gulfs of opportunities. All the Milton Friedman’s in the world are irrelevant when its pretty clear that real life people are looking at it and saying this isn’t working for them.
They aren’t all dumb or being misled. They are telling us something that the academics and experts cannot quantify or analyze.
From Dictionary.com:
noun
1.
the attitude or policy of placing the interests of the entire world above those of individual nations.
From Merriam-Webster:
: a national policy of treating the whole world as a proper sphere for political influence
No. I am simply not willing to apply them in the current situation as determinitive, as you seem to be. They inform decisions, but are limited in today’s application. That’s a reasoned judgment.
I would call what is described above “globalization” rather than “globalism.” The terms are sometimes used interchangeably, but I believe they mean different things. “Globalism” tends to imply the weakening of nations and the strengthening of supranational bodies. This has economic, political, and military ramifications. “Globalization” tends to describe the effects of free-market economies on the world. Only free-market economies can “globalize.” Non-free-market economies, on the other hand, tend toward globalism: the dissolution of distinct nations in favor of massive centralization.
I’m certainly no expert, though, and I may be understanding the terms incorrectly.
I was gonna say. Isn’t this the Bernie argument?
Yay for collectivism!
But not everyone is saying that it isn’t working for them. And if you think the voters are pissed off now, wait until everything they buy costs 20% more.
I ask you again – who are these angels that you think can centrally plan our “nationalist” trade policy?
I agree. They both lead to centralization.
Not according to the dictionary :)
As I see it the question argued at Ricochet about globalization between free traders and protectionists boils down to what importance, if any, should national governments place on privileging national industries or workers over free movement of goods and capital and if the lowered cost of goods brought on by free trade offsets or outweighs the loss of employment at local levels.
Austin,
If I take the Dictionary.com meaning as correct, then this shows why I refer to modern interpretations of Globalism as a soft cultural Marxism. If the needs, even the identity of Nations must always take a back seat to a Global overview than the abuse of National Right is inevitable. If the needs & identities of individual Nations are unimportant then it is likely that the needs & identities of individual citizens will also be seen as unimportant. So much for Private Right.
Regards,
Jim
As it has since the industrial revolution.
If “real life people” can’t tell us something that the experts and academics can understand, the prospect of turning it into any coherent policy to be implemented or law to be passed remains limited.
Liz is on to something here and perhaps both sides are guilty of a little goalpost shifting when it comes to terms. Still, if those that rail about globalism confined their ire to supranational political institutions we wouldn’t have this problem. Conflating Free Trade, supranational government and immigration under one term just creates needless confusion and division. You will not find anyone here at Ricochet that is pro supranational government. You will find few that are truly open borders.
It’s pretty close in my opinion. In the globalist worldview the individual or minority group doesn’t matter as long as there is a net benefit. The end game in theory is a better life for all. In practice you get pogroms.
Strawman alert. Of course not everyone is saying it isn’t working for them. The problem is, the bloc who say it isn’t has gotten too big.
No one is suggesting central planning. Using trade leverage and access to our market to get China to stop currency manipulation is just a trade policy. Sometimes, it sounds like you all think the right trade policy is do nothing, particularly when someone else is cheating. That’s not even how we operate today.
Even opening up a trade zone requires a negotiation over terms. Otherwise, NAFTA would have been one line long.
What Trump is saying is that when we make decisions about which issues to press and which to drop, we should not automatically assume that “free” trade is better for Americans. Sometimes, using restrictive trade as leverage to end a practice of a foreign nation that is causing more harm than the restrictive trade does is a net benefit. If slapping a tariff on China that ratchets up until they cease their currency manipulation and begin taking IP seriously works, then in the end that is much better trade policy than continuing to open up our markets and allowing them to cheat.
“I thought I had heard every objection to my views imaginable, but you are the first one who has ever accused me of putting the interests of society as a whole ahead of the interests of individuals. If there is one element in my social philosophy, in my ethical philosophy that’s predominant, it is that the ultimate unit is the human being, the individual, and that society is a means whereby we jointly achieve our objectives. I would argue that the social and moral issues are all on the side of free trade, that it is you, and people like you, who introduce protection, who are the ones who are violating fundamental social and moral issues. Tell me, what trade union represents the workers who are displaced because high tariffs reduce exports from this country? Because high tariffs make steel, for example, or other goods, more expensive, as a result, those industries which use steel have fewer __ have to charge higher prices, they have fewer employees, the export industries that would grow up to balance the imports __ tell me, what union represents them? What moral and ethical view do you have about their interests?” – Uncle Milton.
Even the invention of fire did this. That does not mean that the impact is the same each time it happens, or necessarily beneficial in the moment in which it occurs.
And why do you think central planners will be able to organize the economy this time?
Unless the experts hold a worldview that prevents them from understanding. As it seems, free trade appears to be a rigid ideology that is preventing experts from understanding what is going on.
I suspect there were a lot of true blue communists who could not understand why productivity was falling when industries were nationalized and private property rights eliminated.
I don’t. Not sure how you concluded that.
An impressive block quote that has nothing whatsoever to do with the term globalism as James and I were discussing it.
You, and Claire, are using the term “globalism” in a way that is not correct according to the literal definition.
What do you think protectionism is?
I will take “experts” seriously when they suffer consequences for being wrong. Since the prosperity of public intellectuals is outcome independent they can be safely ignored. They aren’t a credible communication mechanism. Their interests aren’t aligned with being accurate, instead aligned with zeitgeist passions.
Just like I will believe politicians care about the income of the working class when the government acquires significant discretionary income form the working class (flat or regressive taxation). Given progressive taxation, politicians profit from every dollar of income that shifts from poor to rich. Therefor politicians will enact policies which shift the distribution of income towards the wealthy and higher tax brackets.
Historically, most people who advocate similar economic policies do. Bernie Sanders, for instance.
Every government manipulates currency.
This depends on how you define “cheating”. Most government schemes to “protect industries” end up protecting a few industries while impoverishing the country overall. We should not follow suit when other countries do this.
As usual, Trump’s explainers make a far more compelling case than Trump himself. I’m on board with this paragraph. It would be nice if our next President was.
Claire was using it in the way the Republican candidate for President was using it and focused her analysis on that. Perhaps we should all do the same?
It is easily argued that the US government manipulates its currency more than anyone on the planet.
No thanks, I’ll use the correct terminology regardless of what words Trump uses. If you’d like to have Trump tell you what words mean however, I’m sure the Trump Dictionary will be forthcoming for 3 easy payments of $39.95
Centrally planned economic activity and protectionism are not the same thing. Great Britain of the 18th century had a protectionist trade policy, and no one ever assumed that was central planning.
Central planning includes the establishment of local and national industry wide and factory specific targets for production that get adjusted from a central committee of some sort. Those requirements are distributed from the central point in order to control internal production results in all supply points in the chain, ultimately producing a set number of finished goods to supply the internal and external markets. Those numbers are then adjusted as population changes occur and (in the case of the Ukranian famine in the 1930s) as a tool for political repression.
That is centrally planned economic activity. Slapping a tariff on China in an effort to protect local workers and force a change in their trade policy is not central planning by any means.
I agree. But we are not Chinese. We are Americans. I want my government to have ultimate freedom in these matters. I want my government to use that power to give us an advantage.
So in a post whose content is discussing Trumps trade policy which he called opposition to globalism you would rather discuss the dictionary.
I have another thing for you to look up while you’re there: bad faith arguments.