Trade Wars Posted by David Shorr

I share Fareed Zakaria's concern about the potential international fallout of American protectionism:

For the rest of the world—particularly poorer countries—nice speeches about multilateralism are well and good. But what they really want is for the United States to continue its historic role in opening up the world economy. For a struggling farmer in Kenya, access to world markets is far more important than foreign aid or U.N. programs. If the candidates think they will charm the world while adopting protectionist policies, they are in for a surprise.

Actually, I made a similar point in response to Tom Friedman's argument that action on global warming would be the cure for what ails our international reputation. I don't want to underestimate the political temptation here, though. NAFTA seems to have lodged in the political consciousness as the symbol of economic insecurity. I fear we're in Framingland here, where public perceptions will follow the rule of 'if the facts don't fit the narrative frame, reject the facts.'

Don't get me wrong, I'm a good Calvinist and believe in resisting temptation. Zakaria is correct (and Matt seems to agree) that, temptation or no, the emphasis belongs on economic insecurity itself. We need to take a serious look at the social safety net to cushion the blow of dislocation. For one serious look, take a look at The Case for Wage Insurance by Robert LaLonde, published by CFR.

Comments

[Mike M.]

David,

You're right that the world wants and expects that we'll continue to lead the open markets charge. But, we could do it in a way that's better for people in the US while also treating our trading partners better.

One complaint that emerging economies have with the US and with the institutions we seem to control like the World Bank and IMF is that instead of demanding labor and environmental standards as part of our free trade agreements, we demand that our partners privatize industries like water, power and telecom -- services that these governments had been providing for their own people. Who benefits from that? First world multinationals. Certainly not the people who use the services and certainly not American workers. What if we stopped demanding that and started demanding labor and environmental standards? I think that our workers would be happier and so would the workers who make our imports.

We don't have to be protectionist. We need new priorities.

[David Shorr]

I know enough about trade and economics to be dangerous. The only things I can say with confidence are 1) reversal of liberalization and erection of trade barriers would be disastrous, not least for the world's poor and 2) the debate is in serious need of an update. Among the assumptions that need to be checked:

-- With the way that current views of development have discredited major elements of the Washington Consensus as severely limiting the public sector, are the IMF and World Bank still pushing the same conditionalities?

-- Yes, labor rights are critical, both at home and around the world. Strengthening workers rights makes a big difference in working conditions and wages. But are trade agreements the right lever on that problem?

-- Related question, are we sure that globalization lowers living standards for producers of exports? A lot of research seems to debunk the idea of a race to the bottom. That doesn't mean that we don't keep pushing for labor rights; we absolutely should. But it does undercut the idea that trade should be slowed to improve the plight of workers.

Echoing the line of my post, if you want a populist economic agenda, let's talk about the stagnating wages of American workers, the obstruction of labor organizing, and un-American levels of income inequality (see Krugman, 'Conscience of a Liberal'). So however complicated these things are, I'm pretty sure trade is being scapegoated.