The trade debate (continued): but where to gofrom here?

Author:Katz, Richard

I admit it. I'm confused. I'm not surprised that, in his rejoinder to me in the Fall 2016 issue of TIE, Adams Nager once again insisted that U.S. trade with China alone is responsible for a full two-thirds of the 5.7 million decline in manufacturing jobs during the 2000s. (By the way, it's hard to understand how that number is even possible, since the period includes the 2008-2009 recession, which accounted for 40 percent of entire decade's job loss. That doesn't leave any room for a single job lost either to automation or to trade with any country such as Canada, Mexico, or Japan, or the nearly two dozen countries accused by some of currency manipulation.)

No, what confuses me is this: given Nager's focus on how trade has cost so many jobs, I would have expected his organization, the Information Technology and Innovation Foundation, to have made proposals to help workers. Some examples might have included enhanced Trade Adjustment Assistance, retraining, employer-employee job-matching, and many other "active labor measures'' to which some northern European nations devote 1 percent or more of their GDP. Right now, the United States spends a niggardly 0.1 percent of GDP, the lowest among rich countries. That's just $1,800 per unemployed worker, a fraction of what the country spends on unemployment compensation. And yet, a 2011 study by Federal Reserve economists--based on evidence from many countries--suggests that doubling that amount could create and/or save nearly 700,000 jobs. Much of that would prevent people such as a displaced fifty-year-old autoworker with just a high school diploma from leaving the labor force.

Maybe I missed something, but I could find no worker-oriented proposals at all on ITIF's website, including its "Memo to Trump on Innovation, Productivity, and Competitiveness." There was a plethora of proposals that would benefit the high-tech companies sponsoring ITIF, such as subsidies for clean energy, and switching some public works expenditures from steel and concrete to computerized traffic lights and intelligent vehicles. However worthy the ITIF's proposals may be, they hardly seem likely either to help the workers supposedly victimized by trade or boost political support for open trade policies. Moreover, why are American steelworker jobs less deserving of support via government spending on public works than jobs for those working in high tech? If the ITIF's answer is that high-tech is better able to improve American growth and living standards, then I'd have to point out that most economists say the same thing regarding international trade. Countries with higher trade-to-GDP ratios tend to have higher productivity growth.

What's even more confusing is the ITIF's stance on trade policy itself. Nager's fulsome criticism of the "Washington trade consensus" included the claim that Trump voters "understood from first-hand experience what can happen when trade isn't conducted on a level playing field." Nager's policy conclusion was: "Deepening global integration is one of the most important tasks of U.S. economic policy, but only after America successfully contains and then rolls back the spreading cancer of foreign innovation mercantilism while at the same time putting in a place a robust national competitiveness strategy [emphasis added]." Exactly what does the ITIF propose as a way to implement "containment" and "rollback"? Would it raise tariffs or impose other sanctions on issues ranging from intellectual property rights to currency rates? It's hard tofind specifics on its site, aside from support for the controversial "border tax" promoted by President Donald Trump and some of the Congressional GOP leadership.

Perhaps other TIE readers made the same inference I did: that Nager's dictum meant postponing new pacts like the Trans-Pacific Partnership. After all, if there was anything in this election which epitomized the "Washington trade consensus" among both Trump and...

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