The U.S. should abandon false promises of protectionism??

Protectionism is making a comeback, especially in the United States. The driving force behind it is xenophobia and nostalgia. For reasons of national security, a certain degree of self-sufficiency can be argued. But these arguments need to be carefully evaluated. This is not something that is happening all the time, and certainly not under the leadership of Donald Trump.But although the tone is different Joe Biden, This is not the case, alas. On the contrary, protection has become one of the few issues on which the two parties have reached consensus.

This Conveyed The leaders of the Group of Seven countries issued a statement stating, “We have agreed… to… by advocating freer and fairer trade within the reformed trading system to ensure our future prosperity.” This paper reports on disagreements between the United States and increasingly doubts about trade. For example, Germany, whose prosperity depends on trade, is the same for all smaller high-income countries. (See chart.)

Not surprisingly, a large country like the United States with a complex economy and diversified resources tends to be less trade intensive than a small country, so it does not care much about it. It has gained many benefits of trade through internal specialization. But, as Annie Kruger said in her book, international tradeSince World War II, trade has been the maidservant of global economic growth.

In addition, even if trade is less important to the United States than to other members of the G7, this does not mean that the United States is an unfortunate victim of evil practices in other parts of the world, especially ChinaOn the contrary, taking protective measures is like looking for keys under a street light, not because that is where they are lost, but because that is the brightest place.

The problem in the U.S. is protection-taxing the domestic economy, mainly consumer, For the benefit of producers-is a politically acceptable but ineffective alternative to well-designed social safety nets.Europeans have a lot to learn from the United States, especially in InnovationBut they are far ahead in how to combine open trade with personal economic security to adapt to trade.

The chart shows that the U.S. lags far behind in trade opening

In a wonderful Recent controversy, Economist Adam Posen confronts protectionist arguments. He specifically pointed out that the United States is far from being particularly open to trade, but relatively closed. In the past 20 years, it has not suffered an abnormal degree of openness, but has been withdrawing from openness. Far from being particularly impacted by imported goods from China, about 150 jobs will be lost due to “similar impacts in other industries” for every failure in China’s competition. Not only is it the only victim of the decline in manufacturing employment, the same thing happens to all high-income countries.

There is no doubt that the U.S. economy is suffering from severe and rising inequality and poor labor performance, and the employment of mature adults is increasingly lagging behind most G7 members. But these phenomena cannot be caused by trade, because the United States is less open than other countries, even Japan.The real explanation includes the emergence of new wealth in the field of innovation, but also Rent squeeze In the economy as a whole, there is especially a lack of support for income and work (especially in the latter aspect, for mothers).

The chart shows that the age of employment in manufacturing is ending everywhere

Why is the loss of industrial jobs so prominent politically? Part of the answer is that their jobs are mainly white and male workers. But this is also because, in the United States, there is a lack of universal health care and almost no support for retraining and job hunting, which makes unemployment also mean the loss of basic protection. By separating security from specific tasks, the modern economy becomes more flexible, not less.

In the absence of what the Danes call “flexible guarantees”, protectionism seems inevitable. But nothing can bring back old industrial jobs. Robots will replace workers on production lines everywhere. The manufacturing industry will eventually be like agriculture-extremely efficient production, and almost no production workers are hired at the same time. As Posen said, nostalgia is not a wise policy.

The chart shows that U.S. prime-age employment lags behind most G7 countries

In addition to nostalgia and finding safety in the wrong place, there is xenophobia. But the era of China’s overwhelming power in the supply of cheap manufactured goods is long gone. The debate now focuses more and more on national security.

For example, there is a view that the pandemic proves the danger of extending the supply chain. The situation is just the opposite. After the initial shortage, supply surged due to unexpectedly strong demand. Relying on our own production cannot solve this problem. Today’s vaccine supply is problematic, but this is due to global capacity shortages and strong demand from the rich.

The graph shows that income inequality in the U.S. is high and rising

Yes, it is necessary to maintain the technological leadership of key departments and ensure the safety of the supply of basic products. But these problems need to be precisely defined and resolved. Most importantly, in economic competition with China, democratic stability and investment in people, infrastructure and innovation will be the decisive factors.

The chart shows that the upward trend of the global value chain has reversed since the global financial crisis

At the same time, the continuation of world-wide trade will not only consolidate interdependence, but will also consolidate prosperity, especially for poorer countries, as the 2020 World Development Report, Regarding supply chain and development, emphasize. This is also in line with responding to climate change under the correct policies agreed globally. The G7 is correct to believe that the world trading system needs to be reformed. But this does not mean destruction. We should not abandon free trade for the wrong reasons and in the wrong way.

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