A highlight from Trade Protectionism, With Adam S. Posen

Automatic TRANSCRIPT

Welcome to the president's inbox far podcast about the foreign policy challenges facing the united states. I'm jim lindsey director studies at the council on foreign relations. This week's topic is trade protectionism with discuss calls for the united states to create a trade policy for the middle class. is adam. Posen adams president of the peterson institute for international economics. He has had a distinguished careers economist. If i listed all of his awards and accomplishments were we'd use up all the time lodhi fraud discussion. So i'll just throw one example. Adam was made honorary commander most excellent order of the british empire by her majesty queen elizabeth the second two thousand fourteen for his services to british economic policy as an external voting member of the bank of england's rate-setting monetary policy committee. No adam gained a lot of attention in making circles earlier this summer with his article. The price of the style show america's self-defeating economic retreat which was published in the may june issue of foreign affairs. Welcome to the presence inbox. Adam thanks so much jim. I'm not just a gassama listener to the president's inbox. So thanks for having me. Well thanks you being listener. I'm even more delighted to have you as a guest. I think what i'd like to begin. Adam is with what seems to be the political conventional wisdom in washington these days in that as we look at both democrats and republicans. No one seems eager to pursue new trade agreements and that reluctance reflects a political consensus. Bipartisan consensus that america's economic openness over the past two or three decades which tragically misguided. The story goes something like this. We signed a range of trade agreements that gave foreign competitors access to american markets. Those competitor didn't return the favor. The results is been unfair foreign competition. That stole american jobs in helped. Destroy the american middle class. Is that a fair description of what actually happened over the past quarter century or so. It's very accurate description. Jim of the shared view is by large numbers of both democrats. Republicans wash it but it is completely inaccurate description of what actually happened and some relatively straightforward honest data work the mechanics. And i've done that gets covered in my foreign affairs base of documents this in reality since roughly two thousand around the time that Everyone agrees china became a major factor in global trade. The us started withdrawing across both democratic and republican administrations our share of trading. The economy has barely moved over the last twenty years. It's not gone up very much. Inactive mostly state now while the share of trade of most other impact all other rich economies including once thought to be aggressive trade people like germany. France and japan have gone up a lot and it's not just trade our willingness to take an immigrants went down significantly over this period. It's been a steady downward trend since the early nineties whereas again even countries thought of his pretty close like japan or australia have started taking in more immigrants. Foreign direct investment has moving sideways a world. Where most other economies are seeing huge increases even at china just every substantive thing you look at and then you mentioned rightly interest in trade deals in expanding new markets and the. Us has done very little of that. We did a korea. Us deal fifteen twenty years ago. That was really about protecting. Us auto in the street and the us mca. Renegotiation of nafta is essentially the same thing. It's about protecting the auto and straight. We can debate whether or not. That's gonna payoff at all. And it. Sure isn't anything like the eu and japan including a trade deal or dozen countries joining the trans-pacific partnership. So how would you explain atom the fact that so many people see the story so differently again. The story is we signed. All these trade deals they were rocking trade deals. Donald trump said even stronger things about it. My sense is democrats while they use kinder words to describe. Trade deals also heavily critical about them. So what accounts for disjuncture between what we think happened in. What has actually happened. You're absolutely right that it's a very tightly believed view of the world that the us has sold out to. China has sold out to trade. In general and i cannot fully explain it. All i can say is that as we're seeing with with things in financial markets as were seeing with vaccination sadly people can believe very strongly things that are simply not true. And it's just not true that the us sold out that way. There were certainly mistakes. Made mistakes are certainly people who are overly optimistic about what would happen with china if they were admitted to the wto if we traded with them lot in terms of them becoming more open mortem that's a finding to point out but on the economic facts. It's not there. There's been a lot of attention paid to what's called the china shop In the same issue foreign affairs one of the authors of that study had an article about assisting people displaced by trade. But the fact is that the share of total employment in the us displaced by the china shock even on the high estimates is roughly under one percent of the total workforce in fact attended tenths of a percent of the workforce when you compare it to how many people just normally lose their jobs or get fired or move around in the us economy so it is very deeply believed. It is also false. I cannot patronizing patronisingly. Explain or deeply incite uae but it is false. Well when we talk about the china shock again that refers to the decision to sign up to china's entry into the world trade organization which gave it better access to the us market. You've just gone through why you think china shock wasn't didn't have the impact often attributed to it. What about nafta. I've had the pleasure of both living in the american middle west michigan in particular. I've also had the chance to live in the american south. Texas specifically are very different views of the benefits of nafta depending on whether you are north of the mason dixon line or south of the mason line but again obviously a lot of talk. About how nafta ed led to this big sucking sound. His jobs went down to mexico. Yeah and and again. It's something that has a little more justification than china's shocked but very little if we go back and you and i are old enough to remember back in the mid nineties when the nafta agreement was coming up for approval in the us congress. Ross perot was talking about the giant sucking sound you meant and then vice president al gore debated him and frankly walked up the floor with him. not just in my opinion and opinion of all two polls taken after that met and things did not work out as the critics of nafta claimed what we did see was a very strong decline in the number of desperate people coming across the border because there were more good jobs created in the macadear in the north region of mexico integrated the us auto industry there were more experts created by nafta both in the sense that there was a bigger market in mexico canada but also in the sense they made the north american production more competitive on the world market and so we took back some market share versus the rest of the world again. It didn't work out the way the most optimistic people thought it did not lead to a huge transformation and reform of the mexican economy. It did not lead to in an enormous jump in the number of manufacturing jobs. When did happen that was real and arguably was negative. Was some people in highly paid. Union jobs in northern states in auto and auto-parts lost jobs. Two people in non unionized jobs in the southern u s. And an again. The number is this are vastly exaggerated and more importantly. A a lot of those jobs would have gone away without nafta because simply we wouldn't have had the export markets and people would bought cheaper cars from abroad and be because the amount of job loss was not that big compared to what normal people in service industries in medical industries in other industries in this country suffered anyway in the sense that just as part of a capitalist economy people lose their jobs and moved to new jobs. So i don't want to say there was no pain the nafta Just as with the china shock it's vastly exaggerated

Coming up next