Wednesday, January 15, 2014

The colossal, incalculable cost of protectionism...

Here's Harold Meyerson in today's column, Free Trade and the Loss of U.S. Jobs ,worrying about President Obama's self-negating act of bemoaning rising inequality while promoting a free-trade agreement.
Trade agreements that promote the relocation of U.S. corporations’ factories to nations like China and Mexico have played a central role in the evisceration of American manufacturing and the decline in U.S. workers’ incomes. Two out of three displaced manufacturing workers who got new jobs between 2009 and 2012, the Bureau of Labor Statistics reports, experienced wage reductions — most of them greater than 20 percent.

Two out of three displaced workers took lower-paying jobs. Okay, but let's ponder for a moment what else resulted from the relocation of U.S. factories. For sure, U.S. consumers benefited directly from lower cost goods---freeing up income to enjoy elsewhere (like with local, people-employing, merchants) and to save and invest (providing capital for the expansion of job-producing U.S. businesses). Also, for sure, U.S. exporters (employers) benefited from the investment of U.S. dollars those relocating U.S. corporations made abroad (only someone desiring U.S.-made products and services would trade for green-colored paper claims against U.S.-made products and services). One more: What is all too often overlooked is the fact that a major reason U.S. factories relocate abroad is to more efficiently serve those markets---remember, we're merely 4% of the world's population. Investments made in serving the markets---and improving the lot---of those whom we trade with ultimately come back, manifold, as those folks evolve into future customers for U.S. businesses, and, as importantly, suppliers of whatever future goods and services will be best produced on their shores. And, besides, what are the chances that the next world-changing genius will be born on American soil, 4% (I suppose a little higher given our resources)? Shouldn't we, in the PRIVATE SECTOR---for our own future's sake---be doing everything we can to engage our kids' and grandkids' future business partners?

The benefits of protectionism are easy to see because they're showered upon select, identifiable, individuals: The BLS, for example, was able to track manufacturing workers from '09 to '12. Had their previous employers lacked the freedom to relocate those factories, they might still have their old jobs. The costs, on the other hand---the individual not having the discretionary income, the small local businesses not seeing the extra business, the budding entrepreneurs not seeing the added investment, the exporters not seeing the growth abroad, and our future trading partners not having the opportunity to grow better lives and become greater contributors to the world marketplace---while colossal, are less visible, diffuse, and, therefore, incalculable.

1 comment:

  1. the strongest it has been since its birth in 1999. Against this backdrop, American exporters are finding quite favorable overseas markets for their products and U.S. consumers are responding to their general housing slowdown by slowing their spending. Furthermore, China, the Middle East, central Europe and Africa are absorbing more of the world's imports which in the end may result in a world economy that is more evenly balanced. All of this could well add up to a major readjustment of the U.S. trade deficit, which as a percentage of GDP, began in 1991.