Wednesday, June 28, 2017

Rethinking Our Civil War Over Trade

This is a blog about international trade law written by international trade law professors. So it makes sense that the editors of this blog might assume that international trade is, well, pretty cool.

After all, in an October 2016 survey, 86% of foreign policy scholars thought U.S. involvement in the global economy was a good thing. Only 2% thought it was a bad thing.

But that opinion would put us out of step with many Americans. In an April 2016 survey of the general public, only 44% thought U.S. involvement in the global economy was a good thing, while 49% thought it was bad.

And it’s not just a Republican/Democrat thing. Fewer than half of voters of either party have a positive view of U.S. global economic ties – only 37% of Republicans and 49% of Democrats think trade creates new markets and growth.

Nowhere is this opinion more strongly held than in West Virginia. My fellow West Virginians voted for Trump by the second-highest percentage in the country– 68.7%. Exits polls after the 2016 primaries showed that the economy was the top worry for West Virginia voters of both parties. And West Virginians think trade is a big part of the problem: More than two-thirds of Republican voters and more than half of Democratic voters here said that trade was mostly taking jobs away from Americans.

Republicans were somewhat more likely to have an outright negative view, but many Democrats weren’t enthused either: 55% of Republicans and 44% of Democrats thought U.S. involvement in the global economy leads to lower wages and lost jobs.

The Art of Persuasion, Trade Style

So if foreign policy scholars have a different opinion than the majority of Americans, we have two options:

We could keep pounding on our data and hope for a different electoral outcome in 2018 or 2020.

Or we could dig deeper and see whether we might not be missing something important.

I don’t mean to suggest that trade scholars suddenly start arguing that David Ricardo has no clothes. There are strong arguments in favor of free trade that don’t need to be rehearsed here (but if you want, go ahead here or here or even here).

And Trump’s campaign rhetoric and early actions on trade suggest a protectionist policy that many experts may wish to oppose with vigor. Such opposition is not only principled but critical as the Trump Administration continues to suggest a casual attitude toward rule of law, including respect for U.S. trade commitments.

Still, you can take one page from the playbook of Donald Trump: One of the most important principles of the art of persuasion is that people don’t listen to you when you start by telling them why you’re right.

They are more likely to listen when you start by telling them why they’re right.

And West Virginia voters are right about some things that matter in the trade policy debate.

The Un-Kept Promise of Trade Adjustment Assistance

One of the things West Virginia voters are right about is that trade adjustment assistance is a good idea that mostly hasn’t worked.

In a recent study of the effects of China trade shocks, economists David Autor, David Dorn and Gordon H. Hanson concluded that “adjustment in local labor markets is remarkably slow, with wages and labor-force participation rates remaining depressed and unemployment rates remaining elevated for at least a full decade after the China trade shock commences.”

In light of these decade-long shocks, federal benefits for those who have lost jobs due to trade is inadequate: Displaced workers are eligible only for 18 months while in a job re-training program.

Other federal benefits like disability take up some of the slack, but not nearly enough: Autor and colleagues found that workers in the most vulnerable regions lost $549 in annual pay, while total federal benefits for displaced workers increased by only $58.

50th Out of 50 (Again)

Another thing West Virginia voters are right about is that life in West Virginia has got to get a whole lot better if we are going to talk about a just transition to a global economy.

In a 2017 poll by Gallup and Healthways, West Virginians ranked their own well-being 50th out of 50 states.

This was not the usual health survey that West Virginians are familiar with (and tired of) ranking near the bottom of: obesity, diabetes, smoking, high blood pressure, etc., etc. Instead, the Gallup/Healthways survey asked residents of each state to rate their own well-being across five elements:

  • Purpose – Do you like what you do each day and feel motivated to achieve your goals?
  • Social – Do you have supportive relationships and love in your life?
  • Financial – Do you manage your economic life to reduce stress and increase security?
  • Community – Do you like where you live, feel safe and have pride in your community?
  • Physical – Do you have good health and enough energy to get things done daily?

West Virginians had scores in the lowest quintile in all five categories, and the lowest scores of any state on the purpose, financial, and physical categories.

Certainly, not all of this unhappiness is due to loss of manufacturing jobs, and not all loss of manufacturing jobs is due to trade. But the losses are real, and as Autor and his colleagues showed, trade is sometimes a contributing factor.

Calling a Truce and Finding a Way

Refusal by international relations experts to take these concerns about trade seriously is likely to lead only to further protectionism, with consequences for the national economy that are all too foreseeable to international relations experts.

A wiser approach might be meaningful engagement with Trump voters who are searching for remedies to the loss of their jobs, communities, and well-being. If international relations and trade experts began listening more carefully to those voters, perhaps those voters might also be willing to listen more carefully to us about the economic and political effects of protectionism. 

And maybe, by talking to each other instead of at each other, we might come up with some new and better ways to enhance social justice in a globalizing economy.

http://lawprofessors.typepad.com/inttradelaw/2017/06/rethinking-our-civil-war-over-trade.html

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