Tag Archives: trade policy

Old McDonald Had A Subsidy

Like many of you, I get all sorts of newsletters, from a variety of sources. A recent report about farm incomes, from this issue of Axios Markets, made me take a deep breath, because I’m old enough to remember the Republican Party that no longer exists.

That iteration of the GOP would have screamed bloody murder had a President imposed tariffs; defense of free trade was (forgive the pun) a party trademark. Those Republicans would have pointed to all the readily-available evidence of the negative effects of tariffs, including but not limited to the fact that they are paid for by consumers in the nation that levies them.

That GOP was also a champion of genuine capitalism, and an (admittedly selective)  opponent of corporate welfare.

That GOP did scream bloody murder when President Barack Obama “bailed out” American auto companies. Never mind that we were just coming off the “Great Recession,” or that thousands of American jobs were at stake, or that the funds were structured as loans, not giveaways. They continued to criticize the decision even after it was clear that the intervention had worked, and even after the companies completely repaid the loans.

But I haven’t heard a peep from any of today’s Republicans about the mounting subsidies to farmers–subsidies meant to compensate them for losses entirely caused by Trump’s tariffs. Those subsidies are now larger than the amounts lent to automakers.

Here’s the information from Axios Markets that set me off:

What’s happening: U.S. farmers have been suffering this year. Chapter 12 bankruptcies have risen 24% over the previous year and farm debt is projected to hit a record high $416 billion.

While farm income is expected to reach its highest total since 2014, 40% of that income will come from trade assistance, disaster assistance, the farm bill and insurance indemnities, according to the American Farm Bureau Federation.

What we’re hearing: That’s “definitely not the normal,” Farm Bureau chief economist John Newton tells Axios. The $28 billion bailout package for farmers that President Trump signed earlier this year has “increased the percentage to a level we’ve not seen in a while.”

So let’s see.  The party that believes in capitalism and markets–the party that counsels poor folks to suck it up and avoid ” welfare dependency”–is perfectly fine with government dollars supplying 40% of farm income.

The party of free trade has no problem with disruptive tariffs that interrupted farmers’ existing markets (many of which are unlikely to come back once this episode is over–other countries grow soybeans) so that their “leader” could look like the “tough guy” he clearly isn’t, and they’re hunky-dory with using billions of taxpayer dollars to compensate the people their idiocy injured.

Chinese imports of U.S. agricultural products totaled $24 billion in 2017 and peaked at $29 billion in 2013, according to U.S. government data. Imports fell to $9 billion last year as a result of the trade war.

Trump insists that he’ll make a new deal under which China will buy “40 to 50 billion”  dollars of American farm products annually. As the Axios report notes, we’ve heard that song about an impending “great deal” before–and each time, Trump has had to pull back.  Peterson Institute senior fellow Jeffrey Schott has opined that, even  if a deal is signed, it’s unlikely that either side could deliver on its bloated promises to sharply increase US farm exports to China to $50 billion annually, “or anywhere near that total.”

Of course not.

Sentient Americans understand that virtually all of Trump’s pronouncements are untethered to reality–that they come straight from the fantasy universe he inhabits. What we don’t understand is where all those free-trade, fiscally-conservative, pro-market Republicans have gone.

I guess those policy preferences were less important than supporting a “leader” who promised them the continued dominance of straight white Christian males….


It’s All About White Panic

It’s indisputable: Trumpism is primarily about race.

Political science research in the wake of the 2016 election confirms that the characteristic most predictive of support for Donald Trump was “racial anxiety.”

A recent article in Vox even explains Trump’s damaging trade policies by reference to race.

“We must protect our borders from the ravages of other countries making our products, stealing our companies, and destroying our jobs. Protection will lead to great prosperity and strength,” Trump declared in his inaugural address.

But was his appeal to voters on trade, especially in the Upper Midwest, separate from his more baldly inflammatory arguments on immigration and refugees? Or was it all wrapped up into one overall message that appealed not so much to people’s economic circumstances but instead to their anxiety over their place in the American and global power structure?

In recent research, Peterson Institute scholar Marcus Noland found the backlash to free trade and the turn towards protectionism associated with the views, largely held by white people, about America’s perceived decline in global position and the status of whites within America.

The negative reaction to the rising tide of globalization “is particularly intense among some communities, low-education whites and older whites,” that “diversity in and of itself seems to be provoking and intensifying these reactions,” he told Vox….

“Considerable evidence indicates that attitudes toward international trade and domestic minorities are not separable … the Trump campaign’s articulation of protectionist positions and the use of racially charged, anti-immigrant, and Islamophobic political language amounted to a self-reinforcing package.”

I’ve previously cited to Charles Blow’s article making the same point in the New York Times.

Everything that has happened during recent years is all about one thing: fear by white people that they will inevitably lose their numerical advantage in this country; and with that loss comes an alteration of American culture and shifting of American power away from white dominance and white control.

Even the uptick in efforts to ban abortions have been linked to white panic–  an effort to ensure that white women will produce more white babies. (60% of the 1.6 million abortions annually in the United States are for white women.)

This isn’t just a leftist perspective. An essay from last year in Reason Magazine-a libertarian publication–analyzed anti-immigrant rhetoric and came to the same conclusion. The article began with quotes from longtime racist Pat Buchanan:

Over at his blog, Buchanan asserted, “The existential question, however, thus remains: How does the West, America included, stop the flood tide of migrants before it alters forever the political and demographic character of our nations and our civilization?”

Sadly, this is not the first time in our history when bigots have urgently prophesied that America would soon be destroyed by a rising tide of allegedly unassimilable immigrants. We are now in the midst of the third such anti-immigration panic.

The article noted that sentiments very similar to Buchanan’s were expressed in 1850s by the anti-immigrant Know Nothing Party, and that the threat of

tides of national-character-altering immigration as a political bogeyman has a long and undistinguished history in America. Just before the outbreak of the Civil War, foreign-born immigrants comprised just over 13 percentof our nation’s population—about what it is today.

The animus against immigrants, of course, is directed at our Southern border–no one seems concerned that those pasty Canadians might cross from the north.

One of the most authoritative books on the subject of white panic was last year’s The End of White Christian America, by Robert Jones. From the synopsis:

Drawing on findings from one of the largest troves of survey data on contemporary politics and religion, Robert Jones shows how today’s most heated controversies – the strident rise of a white “politics of nostalgia” following the election of the nation’s first black president; the apocalyptic tone of arguments over same-sex marriage and religious liberty; and stark disagreements between white and black Americans over the fairness of the justice system – can be fully understood only in the context of the anxieties that white Christians feel as the racial, religious, and cultural landscape has changed around them.

Today, although they still retain considerable power in the South and within the Republican Party, white Christians lack their former political and social clout. Looking ahead, Jones forecasts the ways that white Christians might adjust to their new reality – and the consequences for the country if they don’t.

White panic gave us Trump.

We can only hope that people of good will recognize the extent to which Trumpism is a politics of hate, and reject it soundly in 2020.

Trading On Myths

There is a relatively heated policy debate about the relative impacts of trade and automation on job creation. It’s an argument with rather obvious implications for policymaking, not to mention politics: one of Trump’s most successful campaign themes (a deviation from a longstanding GOP position) was his promise to “renegotiate” or terminate the trade agreements to which the U.S. was a party.

That attack on trade pleased many  working-class voters who were–and remain–convinced that changes to America’s workforce and the disappearance of well-paid manufacturing jobs can be attributed to those trade agreements. The reality is more nuanced, to put it mildly.

Whatever the relative impact of trade vis a vis automation, Trump is dangerously wrong about NAFTA, as the Brookings Institution has recently documented. (And yes, I know he’s “dangerously wrong” about pretty much everything, but this post is a discussion of trade policy.)

The title of the post is fairly self-explanatory: The trade deficit isn’t destroying jobs, but tearing up NAFTA will.

Here’s the reality: All advanced economies, regardless of changes in their trade balances, lost manufacturing jobs. The figure below shows the change in the share of workers in industry (which includes mostly manufacturing) versus the change in the trade balance as a share of total output for all Organization for Economic Cooperation and Development countries between 1995 and 2010. The data point for the U.S., indeed, fits the White House narrative: During that period, the U.S. lost manufacturing jobs while its trade balance deteriorated (as all other countries in the lower left panel). However, that is not the story for most countries. In fact, Mexico increased its share of workers in manufacturing even though its trade balance also deteriorated during that same period. But most, importantly, most countries—in the lower right panel of the figure—lost jobs in manufacturing even if their trade balance improved. In short, the White House is trying to sell a fallacy that the trade deficit has destroyed American jobs.

Other research suggests that approximately 100,000 net job losses are attributable to NAFTA; that’s equivalent to about 0.1 percent of the U.S. labor force. On the plus side of the ledger, NAFTA has allowed U.S. companies to access new markets for their exports and reduce their costs of production. That has created more jobs, not fewer.

As the author of this report points out, there are better ways to help American workers–a more robust safety net facilitating transition to other jobs, or to early retirement, for example. We can argue about the approaches most likely to be helpful; what we shouldn’t be doing is basing policy on inaccurate data and (sorry!) “fake facts.”

After this round of negotiations, the likelihood of NAFTA overall surviving this process keeps decreasing. The U.S. government is walking on thin ice by keeping their focus on wrong facts. And if NAFTA collapses, it will bring down those who the administration is allegedly trying to protect: American workers.


Can We Talk About Trade? Probably Not.

When I teach policy analysis, certain barriers to sound analysis tend to recur. At least three of those barriers are pertinent to the current debate about America’s trade policies.

  • Americans tend to be inappropriately “bipolar.” Too many partisans, Left and Right, approach complex policy issues with a “bright line” ideology–doing X is either good or bad. Period. Their world is divided between good guys and “evil-doers,” (to use Bush the Second’s terminology) and there is no middle ground.
  • Although there are certainly some policies that are simply wrong, in most cases, the proper approach to analysis is to ask “how,” not “whether.” That’s because, in most cases, the devil really is in the details; otherwise good policies can fail because they are not properly developed or implemented, and otherwise problematic approaches can be rescued by careful development and thoughtful application.
  • In today’s America, increasing numbers of policy domains are complicated and highly technical. Even well-informed citizens are unable to make independent judgments about the best approach to such matters–examples include telecommunications, arms control, tax policies and multiple other areas. We are increasingly dependent upon experts in the field to assess proposed laws and regulations–and we are increasingly suspicious of the bona fides of those experts.

These challenges to sound policy analysis are front and center in the arguments about trade agreements like the TPP.

On the Left, we have a number of activists who believe that trade agreements inevitably cost American jobs, no matter what their content. This is demonstrably false. Outsourcing and poorly drafted agreements certainly undermine both domestic employment and compensation, but trade also generates jobs and economic growth. According to the U.S.Department of Commerce, in 2008 the United States exported nearly $1.7 trillion in goods and services, exports that supported more than 10 million full- and part-time jobs and accounted for 12.7 percent of gross domestic product (GDP). (If I find more recent data, I’ll update this post.)

On the Right, we have proponents who support any and all “free trade” proposals, no matter whether the agreements safeguard workers or the environment, and no matter how unbalanced the agreement, because “all trade is good.”

I haven’t followed all of the pronouncements, pro and con, about TPP, but in those I have heard, not one person on either side has identified provisions of that proposed agreement with which he or she agreed or disagreed. It was all or nothing–good or bad.

International trade is complicated, and the negative consequences that partisans cite aren’t necessarily the result of trade itself: the Economic Policy Institute, a progressive think-tank, attributes a significant amount of manufacturing job loss to currency manipulation. EPI says that “Global currency manipulation is one of the most important causes of growing U.S. trade deficits, and of unemployment and slow economic growth in the United States and Europe.”

Like technology, trade both displaces workers and creates new kinds of employment.

My point is not to weigh in on the merits of the TPP. Like most Americans, I simply do not know enough–about the terms of the proposed agreement, about the likely cost-benefit ratio, about the context within which the agreement would be implemented–to come to a reasoned conclusion. Like most Americans, I must rely upon the evaluations of people whose expertise and knowledge I trust.

Which brings me to what I have come to identify as one of the most serious problems America faces: a public in which skepticism, cynicism, and a pervasive lack of trust is rampant. We don’t trust the media (or more accurately, we trust only the media sources that confirm our pre-existing biases), we don’t trust government (the result of thirty-plus years of anti-government rhetoric), we don’t trust members of that “other” political party, and increasingly, we don’t trust each other. We sure as hell don’t trust the experts–those elitists!

It’s hard to make policy in that sort of environment.

Beyond the Bumper Stickers

“It’s more complicated than that” is a sentence I probably mutter in my sleep. (My students  think I repeat it on a daily basis, sort of like a mantra.)

In a New York Times op-ed a couple of weeks ago, Miriam Sapiro, who was a deputy U.S. trade representative from 2009 to 2014, addressed one of the many subjects that is more complicated than either free-trade purists or knee-jerk opponents of markets understand, in “What Trump and Sanders Get Wrong About Free Trade.”

After noting that the United States enjoys a 200 billion dollar trade surplus, she points out that unless we continue working to pry open foreign markets for American goods and services, we will have a hard time creating more jobs: Nearly all of the world’s population lives outside our borders.

The Department of Commerce estimates that every increase of $1 billion in exports sustains nearly 6,000 jobs, and that export-related jobs pay on average 18 percent more than jobs focused on the domestic market.

We Americans have an unfortunate tendency toward “either/or” arguments. Trade is good or bad. We are for it or against it. But this is one of those areas in which the question is not–or should not be–yes or no, but how. What distinguishes a good trade agreement from a bad one? How do we ensure an equal playing field? If domestic manufacturers have to abide by rules protecting the environment and ensuring fair labor practices, for example, other parties to these agreements should be bound by similar constraints. All trade agreements are not equal.

And we need to recognize that there are multiple causes of our economic problems.

Rather than blaming international trade for economic woes, we need to have an honest conversation about what the United States must do to strengthen its economy. More than 20 percent of American children today live in poverty. Our educational system, once the envy of the world, now ranks in the bottom half of much of the developed world. The tax system rewards companies that exploit loopholes, infrastructure is crumbling and training programs lack the kind of apprenticeship and credentialing opportunities that Germany and other major economies offer…
Of course it is easier to score points by denouncing trade than to tackle the tough issues, but such demagogy ignores the roots of economic insecurity and inequality.

It’s handy to have a villain to identify, but the emotional satisfaction of identifying someone or some thing as the “bad guy” rarely translates into a solution to the problem at hand.

It is also a mistake to think that positions on trade policy break down along neat party lines. As we learn from Political Animal, 

U.S. Conference of Mayors (which is overwhelmingly Democratic), endorsed TPP. The reason, as Ron Brownstein pointed out, is clear.

New data released May 13 by the Brookings Institution’s Metropolitan Policy Program helps explain the mayors’ tilt toward trade…Brookings found that fully 86 percent of U.S. exports now originate from urban areas. Moreover, exports drove more than one-quarter of all metro area economic growth from 2009-2014.

I think it was H.L. Mencken who said “For every complex problem there is an answer that is clear, simple, and wrong.”