Trump’s ‘America first’ trade policy will be bad for working Americans.
President Donald Trump‘s claim that his protectionist “America First” trade policy“will lead to great prosperity” flies in the face of two centuries of economic wisdom on the benefits of trade and the harm of protectionism. Worse, by exaggerating the role of trade deals, Trump offers false hope to workers and communities that, for some time, have suffered genuine harm from the forces of economic change. It also diverts attention from the policies of Trump and the Republican Congress, like repealing health care reform, that will inflict further harm.
No accurate account of U.S. participation in agreements to reduce tariffs and expand trade supports Trump’s inaugural address claims that “For many decades, we’ve enriched foreign industry at the expense of American industry” and “made other countries rich while the wealth, strength and confidence of our country has dissipated over the horizon.” Broadly speaking, we have benefited from having increasingly prosperous trading partners to buy our products and from the lower prices and greater choices afforded by opportunities to buy theirs.
Does this mean that everything’s been fine with U.S. trade policy? No. While agreements to lower trade barriers and expand trade almost certainly enlarge the total economic pie in each participating country, they almost certainly also produce winners and losers within each country. Moreover, the gains, while larger in aggregate, tend to be broadly diffused while the losses are more concentrated and visible. U.S. policymakers have to find better ways to address the economic costs borne by those on the losing end to share the benefits of trade more fully.
But we shouldn’t focus exclusively on disruptions due to trade, which are often conflated with a broader decline in good-paying jobs for workers without college degrees, especially in manufacturing. Berkeley economist Brad DeLong has a smart but long essay debunking the argument that trade agreements have had much to do with the decline in manufacturing jobs as a share of total U.S. employment since the 1940s. Mother Jones’ Kevin Drum has a “shorter Brad DeLong” here.
The chart below shows manufacturing employment as a share of total employment falling steadily from a third of all jobs 70 years ago to under a tenth now. Much of this decline reflects technological factors that have generated large increases in the productivity of manufacturing workers, which means fewer workers are needed to produce any given amount of output. The 1994 North American Free Trade Agreement and China’s entry into the World Trade Organization at the end of 2001 are hard to detect.
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Economic change, whether from trade, technology or other causes, is disruptive. Losing a job with no prospect of getting it back is always tough and sometimes tragic. Finding a new one takes time and it will more than likely pay less. Delong, however, points to research showing that losing one’s job in a weak economy has much more serious consequences for your future income than losing it in a strong economy.
Thus, maintaining a high-employment economy is the first, best policy to minimize the economic losses of workers whose jobs disappear. Losing one’s job is also less serious economically if one has adequate unemployment insurance to tide one over while looking for a suitable new job and not forced to just take the first available one. It’s also less serious if it doesn’t cost one access to affordable health care, or drain resources intended for one’s retirement or one’s kids’ education. Republican budget plans would do the opposite, starting with repealing the Affordable Care Act without providing an adequate substitute. The election probably also ends any likelihood that Congress will consider policies to modernize the unemployment insurance system, even though the current system is protecting an historically low number of unemployed workers.
Trump has tapped into real concerns that American workers face in the 21st century. But talking about renegotiating trade deals and bullying companies into restoring a few thousand jobs are symbolic gestures, not real solutions. Provoking trade wars with other countries is even worse.