April 2018Theory

Trade: beyond globalization and nationalism

President Trump’s announcement in early March that he would slap a 25 percent tariff on imported steel and 10 percent on imported aluminum was a big enough deal to divert attention from school shootings, the Russia investigation and the latest turmoil in the White House for a few media moments.  The decision was greeted with horror by the mandarins of free trade ideology:  the U.S. Chamber of Commerce, the Business Roundtable and the Cato Institute among them, as well as many members of Congress – mostly Republicans – and the countries that import the metals to the U.S.  It even provoked Gary Cohn, Trump’s top economic advisor and an ardent free trader, to resign in protest.

Meanwhile, the announcement brought applause from quarters who usually have nothing kind to say about the White House’s number-one television addict.  AFL-CIO President Richard Trumka called tariffs “a commonsense mechanism for trade enforcement and the best way to start fighting back” in the “war against working people.”  Senator Sherrod Brown of Ohio, one of the Hill’s leading progressives, also came out for the tariffs, saying that they will help stabilize steel jobs in his state.

Bernie Sanders offered half a cheer for Trump’s plan.  He gave Trump credit for “identifying a problem” but added that the government needed “a more comprehensive approach than Trump is laying out. . .We need to fundamentally rethink our trade policies and move to fair trade rather than just unfettered free trade,” he told the Daily Beast.

It was interesting that based on Sanders’ nuanced appraisal of the tariffs, the Daily Beast article went on to label him an “ally” of Trump on the issue.

It should surprise few that the media have difficulty reporting nuance and prefer a narrative that sets out two warring camps in whatever subject they happen to be covering.  On tariffs, the two sides as portrayed by the media are unfettered free trade vs. America-first-and-only economic nationalism.

The free-trade argument is often put forward as a vehicle for global economic uplift, a rising tide that lifts all boats.  It holds that the free movement of capital and goods across borders expands the pie for everyone, providing both jobs and cheaper consumer goods across the globe.

Or so they say.  In reality, free trade has resulted in a race to the bottom in which companies from the United States and other first-world, high-wage nations have relocated their production to low-wage countries such as China, India and Malaysia where workers labor in often filthy and unsafe factories for starvation wages.  If they should try to organize a union they would face immediate firing, if not worse.  Under a free-trade regime, consumers in the first world do often enjoy more and cheaper goods, which is small consolation if their jobs get moved overseas.  The real beneficiaries are the multinational corporations, the Nikes, Walmarts and Apples who enjoy record profits through their exploitation of cheap labor.

So economic nationalism is the way to go, right?  Every country for itself?  Well, one practical problem of the this each-against-all mentality is that countries can retaliate against protectionist nations, and aggrieved countries are plotting just that against the United States in response to Trump’s tariffs.  The European Union, for example, is threatening to impose its own tariffs on U.S. products such as Harley-Davidsons, Kentucky bourbon and blue jeans.  Also, tariffs on steel and aluminum might help U.S. companies and workers who produce those metals, but they will also drive up costs for domestic producers of goods that use them, such as makers of cars and machine parts.  The benefit to some U.S. companies and workers comes at the expense of others.

If tariffs are good for the steel and aluminum industries, why not others?  Why not impose tariffs on other products made in the United States where there is competition from overseas, such as cars, clothing and kitchen appliances?  Because that could cause the world to slip into an era of economic warfare that could erode international relations and cause more conflict than cooperation among nations.

More defensible than the (almost) global steel and aluminum tariffs would be sanctions against specific countries that engage in unfair trade practices, such as the more recently proposed tariffs against China.  China’s practice of dumping steel onto the international market at artificially low prices, in addition to its ruthless exploitation of its workforce, make it a prime candidate for tariffs.  The same can’t be said for all of the democracies with decent labor standards that would be caught up in the broader Trump dragnet.

No one is under the misconception that Trump himself engaged in any deep thought about the ramifications of his tariffs.  Rather, economic nationalists in the White House led by economic advisor Peter Navarro – who outmaneuvered Cohn, his supposed superior in the White House hierarchy – sold the policy to a receptive Trump.  After all, the issue plays well to Trump’s white working-class base, making him seem a champion of the little man and woman against the impersonal (and foreign) forces that are threatening their livelihood.

However, there are plenty of signs that the tariffs are more show than substance.  Trump initially declared that the tariffs would apply to every country, but then very quickly exempted Canada and Mexico.  (After Trump asserted that the United States had a trade deficit with Canada, Canadian premier Justin Trudeau had to correct the president; it is Canada that has the trade deficit with the U.S.).  He then announced short-term exemptions for Argentina, Australia, Brazil, the European Union and South Korea pending trade negotiations with those countries.  And just a few days before the tariffs were announced, Treasury Secretary Steve Mnuchin publicly raised the possibility that the United States might, after all, pursue membership in the Trans-Pacific Partnership (TPP), the multinational free-trade pact that Trump roundly condemned during his campaign and was considered dead, as far as U.S. participation was concerned, once he was elected.  The tariffs could be little more than a bit of distraction for the masses while global trade steams ahead with the mildest of inconvenience.

The problem with economic nationalism is that it assumes U.S. corporations and U.S. workers are natural allies, with their adversaries being their foreign counterparts.  In reality, it is the corporations across the globe who have struck an alliance, and their workers are the targeted enemy.  Among the largest corporations with headquarters in the United States, few of them can really be called “American” anymore.  They obtain their materials and supplies from where they can be purchased most cheaply, locate their factories in job-starved third-world countries, and market their products worldwide.

Labor cannot match the mobility of capital, although many individual workers do try to relocate to countries in pursuit of better jobs.  If their target is the United States, they often find themselves stopped at the border or, if they do get across and find employment, exist in the shadows as undocumented immigrants.

Meanwhile, there are still regions of the world where a relatively high proportion of workers enjoys decent wages, benefits and working conditions and where, not incidentally, many of them are members of labor unions.  Europe is one of these regions, and the European Union is subject to Trump’s tariffs.  So who is the real enemy of the American worker – fellow workers around the globe, whether living on the edge in the Third World or relatively secure in Europe, or the global corporations who wave the American flag while shipping jobs overseas?  Trump would assert the former.  I would argue the latter.

American workers, instead of allowing themselves to be played off against their international counterparts, should instead be uniting with workers in other countries against the exploitation of global corporations.  Instead of supporting broad tariffs that would mostly hurt workers abroad, the broad majority of Americans who work for a living should embrace solidarity with their compatriots abroad to demand fair wages, decent conditions and the right to organize for all workers.  Otherwise, workers in the Third World will continue to be immiserated, unionized European workers will see their standards decline, and what’s left of the U.S. labor movement will go the way of the dodo.  And the global corporations will continue to laugh all the way to the bank.

Through many of the trade struggles of recent decades, from NAFTA to the TPP, labor organizations and their progressive allies have stressed that they were in favor of fair trade, not all trade.  Fair trade would level the playing field among nations and require that countries entering trade agreements guaranteed their workers a decent level of wages and workplace protections while minimizing the economy’s impact on the environment.  It ideally would put a halt to the global labor race to the bottom, where high-wage countries lose their jobs to third-world workers laboring in near-slavery, with corporate shareholders pocketing the difference.

The AFL-CIO, notwithstanding its support of the Trump tariffs, has played an active role in promoting solidarity among unions around the world.  But a lot more needs to be done.  Labor organizing across borders is hard, as opposed to moving capital and production across borders, which is easy.  But the first step in rectifying the problem is to correctly identify who the allies and enemies of America’s workers really are.

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