Had a rousing debate at AEI last week on international trade policy with Claude Barfield and Grant Aldonas. I said I’d post my slides, so here they are. (H/t: Rob Scott, Josh Bivens, Thea Lee).
I structured my talk around an unduly harsh WaPo editorial that showed up just a day or two before the discussion. A few annotations for clarity’s sake:
Slide 1: A lot of what follows is from the new State of Working America (SWA) published by the Economic Policy Institute. I haven’t read the whole thing yet, but the wages chapter, on which my first few slides are based, is an exceptional piece of work, a collection of all of the important arguments and evidence around wage issues, including trade, technology, inequality, and a lot more.
The slide points out the various channels through which we’d expect expanded trade, particularly with less-developed countries, to put downward pressure on the wages of production workers and upward pressure on the college wage premium, as shown in the second slide.
The rest is pretty self-explanatory, or you can watch the video from the first link above if you want to hear me clarify any of the points. The key arguments against the WaPo editorial are:
–Trade has benefits and costs, and our national trade debate is not helped by arguments that deny the reality of the cost side of the equation.
–Imbalanced trade in general and with China in particular (our goods trade deficit with China has grown from 0.8% in 2000 to 2% in 2011) has led to the loss of wages and manufacturing jobs.
–Currency management by countries to boost their exports and suppress their imports is leading to large imbalances and distortions in global markets. Economist Joe Gagnon argues that such tactics are responsible for a large part of the output gap here and thus significant job losses (see slide #7).
–Yet, the WaPo—and many in the multinational business community—argue that to go after the currency manipulators is to engage in “protectionism.” The opposite is true. To pushback against currency management is to pursue freer trade.
–In this regard, I support the bipartisan currency bill stuck in Congress along with other measures you see in slide #12 (“no reciprocity” means that country that tightly control their own capital, like China, won’t get to by currency from countries without such controls, like us).
“Build what we buy, build what we build” should be our default general policy. If there has to be an exception, let the industry make the case to the public. And yes, it means pulling out of the NAFTA, WTO and the like. Renegotiation is the key here.
Tariffs to reignite and expand domestic industry. Target the growth in the mid west and south, where populations left due to automation in agriculture. People will repopulate with that growth industry, and balance the politics of those states in ways that mess up the whole Red/Blue axis.
$1 Trillion or more in infrastructure improvements that will last for at least a decade and a half. Great investment in the USA, which even the Chinese foreign minister said a couple of years ago made sense, plus the “percolator effect” on overall wages and demand.
A real grand bargain includes passage of the ECA to ensure labor unions redevelop in the private sector to put the squeeze on the inevitable business profits that government intervention does with tariffs and infrastructure rebuilding.
Medicare for All lowers business’ costs, raises taxes on the wealthy in financing and workers themselves don’t mind the taxes if they are working again, making money and sharing in the wealth of their productivity and developing of our nation again.
Why is this so difficult for so many policy wonks, from Obama to Clinton to Matt Yglesias and Ezra Klein, to grasp?
And yes, you are right that Krugman was an initial booster and bought the garbage that it was better to live in a maquiladora than a subsistence farmer. No way, no how. And he thought that since 3-5% of the job losses came from the NAFTA, no big deal, when he had not, at the time, understood how the NAFTA codified the trends destroying American jobs and the middle class. He has a better sense today, but sometimes gets confused when dealing with something clear as noted above…:-)