Let’s Talk About Free Trade
Thank goodness Jared Bernstein wrote this op-ed in the New York Times so I didn’t have to. An excerpt:
The defense of globalization rests on viewing Americans primarily as consumers, not workers, based on the assumption that we care more about low prices than about low wages.
When you hear someone talk about free trade, you can count on them to talk about cheaper products but to sidestep all the American jobs that have been lost through free trade agreements, and more generally the loss of power of workers and unions, which leads to worse jobs, fewer hours, shittier benefits, and lower salaries.
This topic is obviously a huge part of what appeals to Trump supporters (as well as Bernie supporters), and the faster we understand, discuss, and address this the better.
In other words, free trade agreements don’t only talk about taxing goods on their way to other places. Just that, alone, would likely be net bad for the world’s economies, although there are obvious exceptions, for example agricultural industries in poor countries that cannot compete with Monsanto.
Free trade agreements also relate directly to jobs being moved over borders. And that’s where America, by being a rich nation relative to others, will lose out, while countries like China and Bangladesh gain. Because if you’re a t-shirt company in the US, it’s cheaper to have your products made in Bangladesh than in the US, so that’s what happens when there are free trade agreements allowing it.
It’s also not true that this off-shoring is necessarily bad overall. It’s clearly true that the Chinese people working to make iPads are thankful for their jobs overall. But in this case it’s not a win-win situation; it’s more of a win-lose, where Chinese workers win huge and American workers lose medium.
Say it another way: imagine that the rest of the world consisted of a bunch of countries like Sweden, where the minimum wage is high and working conditions are good. In that case free trade agreements would attract jobs to the US, and American workers would be psyched, and would demand better conditions. That’s not the world we live in, though. Free trade means we enrich other countries with opportunities that they’d hungry for and are willing to do for less.
To be clear, I’m not saying this aspect of free trade is something we should necessarily stop altogether. I care about poor Chinese people as well as poor Americans. But I do think it’s time for people – especially economists – to acknowledge that the people who have been damaged or threatened by free trade in this country are many; possibly a majority.
They have a real gripe, and they don’t see, and possibly don’t care about the benefits to Chinese workers that their suffering represents, and they’re super pissed off. We need to start coming up with ways to mitigate the problems before Trump or someone like him becomes president.
mathbabe 
I think the concern about free trade is a red herring. The real problem isn’t trade per se. I think it’s the fact that workers and employees affected by trade have so little power or influence in their firms or the country as a whole. In countries with median wages higher than the United States, exports play a bigger role in their economy. Exports make up about 13.5 percent of GDP in the US. But in countries like Sweden, Denmark or Germany exports are north of 40 percent of their GDP. And these countries — with far fewer natural resources — have robust social safety nets as well as high wages. Why? Because workers have more of a say in how trade plays out in their countries. “Low-road industries” that compete based on exploiting their employees and destroying the environment are discouraged while “High-road industries” which compete based on producing high value-added products are encouraged through public policies. So it’s not like free trade somehow naturally leads to exploitation. The cause is elsewhere. Even with greater protectionism, employees in the US would still lose out because we make it so hard for them to receive any representation in their companies or in politics.
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See my comment below. The red herring is the label “free trade” on sweeping deregulation outside of normal quasi-democratic processes.
Otherwise your post is a valuable contribution, except that NAFTA, WTO, TPP et al, intentionally weaken the power of labor and the 99% against corporate oligarchs and pollutocrats.
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Cathy,
I am very happy that you’ve decided to address this issue in your blog. However, I’m also very disappointed you waited this late in the game to do it. I’m already a Trump supporter. Yes, I’m well aware that there are those on your blog who will flame me in the comments section here, but we are now talking about a topic where I truly don’t care what others think. Every day feels like a struggle to hold on to my job. I have been turned down opportunities because companies where able to get cheaper indian workers to do the same thing. Most of the time, not as well, but that is irrelevant. Managers care about sticker price, not total cost of ownership. Even now, I’m a completely disposable contractor and have been for two years. Companies don’t hire full time employees anymore. They hire contractors because getting rid of contractors is easy and does NOT count as a layoff. All the company has to do is just not renew the contract.
Almost monthly I see some article about a company laying off hundreds of IT workers, people just like me, and replacing them with H1B visa workers from india.
Suntrust
Disney
Hertz
Do some searches on those company names and see what you find. And there are many more. No, I don’t care about Chinese or indian workers in their respective countries. And right now, I hate free trade. I don’t want these problems mitigated, I want them solved. I want to get up and go to work in security without fear that I will be forced to train my foreign replacement that I can barely understand when he or she speaks. I want to be appreciated for the insane amount of knowledge I have to have about things such as Exchange, SharePoint, Clustering and High Availability, Active Directory Services, SQL Server, C#, Visual Basic, Integration Services, Analysis Services, Reporting Services, Virtualization, Network Security, etc., etc., etc. just to do my job. And all that technology changes every year. You should see my bookshelf. My Kindle is practically out of memory.
So, yes, it’s too late. Too many people like me are already pissed and have been for YEARS. We are already planning on voting for Trump. Yes, the man is crazy. However, that is no more the trade-off a lot of gays are willing to make voting for someone just to get more gay rights regardless of what that someone may do the economy or to other aspects of being president. Just like a lot of religious people are willing to forget a lot of other things about a candidate just so they can get abortion back on the table. Or, women voting for Hillary so they can see a female president in their life time with no regard to her policies. In other words, we all, to a point at least, are willing to take the good with the bad.
No, this comment will not make me popular here. Not by a long shot. But before anyone decides to hang me out behind the barn and beat me with a stick, ask yourself what you would do in my shoes when you suddenly realize you could be laid off at any time but you are expected to be up on the bleeding edge daily?
JamesNT
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I’ll get out of the boat.
You should vote for Sanders then since the message is the same minus the misplaced blame and the same chance of actually getting elected president.
Even if you don’t believe Trump’s xenophobic and is just lying to get votes he is still placing the blame on the wrong people. The workers are not the problem. The laws were changed at the request of the capitalists. Even if you change the politicians the capitalists will still exist and they will continue to bend the laws to their needs. Trump does not have the power or the plan to fix the problem he’s just spouting rhetoric.
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Thank you, Cat, for that very measured and calm reply. You’ll be happy to know that I have been looking at Sanders. At this point, even though I am presently in the Trump camp, there are some issues I’m up in the air about. I may have questions as time moves on.
JamesNT
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JamesNT, beyond reform of the H1-B visa program, what other kinds of legislation would affect your situation? What would prevent companies from hiring people in India to do IT instead of here, is there some kind of intellectual property tariff the US could impose? Cathy, I think economists do admit that globalization hasn’t lived up to expectations, see e.g. http://www.nber.org/papers/w21906.
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You might want to review Mark Cassell’s very astute remark, above. Maybe now your boss will toss you in favor of the Indian H1-B, but next year s/he will toss you for the 22-year-old who’ll work for less. The common element here is The Boss — he has a lot more power than you, no? The avenues you have for redress are — what, exactly? Probably a lot fewer and a lot weaker than they were a decade or two ago.
Which is one more reason why you **really** want to vote for Sanders. The man’s built a lengthy record working effectively for precisely these issues. There’s consistency, substance, there. What can you possibly expect from Trump? How does “billionaire real estate speculator and casino operator” translate into “champion of working people who wants to help ME”?!?! It just doesn’t add up.
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Interestingly, here’s Kugman’s OpEd from the same day (popped up at the bottom as “suggested reading”) giving a compare/contrast of the two parties’ respective dark horse candidates, and yet nary a mention of the free-trade similarities, despite this being his area of expertise. Hmmm….
FoW
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I honestly can’t read that guy.
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Well said!
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Industrial development in a less-developed nation isn’t necessarily a slam-dunk. Consider which you’d rather have:
1) A job making automobiles that you can’t afford to buy
2) A job making rubber flip-flop sandals that you can’t afford to buy ?
What difference would development really make in such a case?
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I would prefer 1)
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Wait, are you saying sweatshop labor isn’t necessarily a good thing? “Free trade” advocates would disagree.
It’s almost like capitalism deliberately pits worker against worker, resulting in social conflict and alienation. But that can’t be right, because Marx said it, and who even reads him these days?
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Hard to talk about Free Trade without mentioning Canada and Mexico.
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So called “Free Trade” agreements on the NAFTA model are actually less about promoting trade than about eliminating “non-tariff barriers” which in non jargon means laws and regulations to protect the environment, public health, workers and consumers.
The WTO just forced the US to eliminate country of origin labelling on food, by threatening to impose billions of dollars in penalties; Congress caved. That happened right after authoritative reports that due to widespread use of antibiotics in animal feed, TOTALLY ANTIBIOTIC RESISTANT BACTERIA had entered the human food chain in China, and thousands of people had already been infected.
Also, benefits to workers in low wage countries are only real where workers have an effective right to organize, as the do not in China.
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The world we live in is one that contains a country that supposedly espouses the principle of freedom, but then regularly prohibits (or at least taxes) people and businesses from conducting open and peaceful commerce with others.
One can discuss the economic mechanics of what various policies will mean for this person, that country, or the other; but still lost from the incomprehensible fracas is the above fundamental point.
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Globalism came with a waning not to play it as a zero-sum game, but playing it as a zero-sum game is exactly what American managers and politicians did. Today, with tons of money in their hands, American managers cannot find the wealth creating, value-chain creating innovations they need to shift workers to better jobs. Instead, they stick with replication and minor continuous innovation, or worse managerial/business model innovation. We need discontinuous, not disruptive, innovation now. But, fear not, the managers and their teachers the b-schools don’t know how to do that. Christensen is not the way. Foster is the way, but he’s forgotten.
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https://en.wikipedia.org/wiki/Theory_of_the_second_best
Lancaster – Lipsey Theorem.
One might propose that minimum wage laws are a move away from the free market (I did not say they were bad) and therefore provailing tariffs in support of the minimum wage laws are an example of what the theorem says should be done.
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Trade issues are a red herring. If we had more protectionism, we would employ more robots in American factories, not more Americans.
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Cathy, I find the analogy been jobs moving from America to China due to free trade and jobs moving from men to women due to women entering the workforce quite compelling (and suspect that you might as well). As such I like to read articles about free trade by replacing it with the analogy. Here is what portions of your article would look like with that replacement.
It’s also not true that letting women enter the workforce is necessarily bad overall. It’s clearly true that the women working to make iPads are thankful for their jobs overall. But in this case it’s not a win-win situation; it’s more of a win-lose, where women workers win huge and male workers lose medium.
To be clear, I’m not saying this aspect of freer labor markets is something we should necessarily stop altogether. I care about poor women as well as poor men. But I do think it’s time for people – especially economists – to acknowledge that the people who have been damaged or threatened by freer labor markets in this country are many; possibly a majority.
What would you think of an article like the above. In particular, would you be comfortable with using so many qualifications like “not necessary bad overall” or “necessarily stop altogether”
If this analogy doesn’t float your boat, then maybe try replacing Americans with whites and Chinese with blacks.
If you do find this way of talking about this issue distasteful to put it mildly, would you be willing to reconsider how you talk about your views on free trade? Or do you thing there is something fundamentally different about gender and race as compared to country of birth that makes the analogy invalid.
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It’s interesting. I was listening to a moral philosopher this morning on the radio talk about how we tend to care more about people near us, although it’s not set in stone. I think it’s relevant. When I replace the words as you suggest, it does become distasteful, because I don’t think of “women” as “other.” I think of “women” and “men” and both “us.” Similarly with races. With respect to China, vs. domeestic jobs, there really is a well-defined other, and it’s clear to me that I care more, or at least am more aware, of what’s happening near me. Maybe that’s something I should overcome completely, but it also might be a rational response to the fact that I have more power over what happens domestically than how China treats its workers.
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