by Jonathan McGeachen
Anyone that’s talked to me about foreign trade and outsourcing (I have no idea what normal people talk about) knows that I support free trade. I believe it has been the main driver of global economic growth in the past 30 years, along with the information technology revolution. But free trade even enables the production practices that have made technology so cheaply ubiquitous, and with it, information. I am, as a Trump supporter might say, “a globalist cuck,” or as an ex-Bernie supporter might say, a “neoliberal shill.”
I wish! At least shills get paid.
(image by reddit user 2Thebreezes)
But I’ve been listening to people. There are many valid points made on the other side, about the dislocation of workers both in the developed world and the developing world, about concentration of wealth and tax evasion. Even though I still believe free trade produces the greatest net productivity and efficiency, I am open to the idea that it doesn’t produce the greatest net utility. And the last time I had a discussion with a Democrat about the ills of global capitalism, a thought occurred in the back of my mind:
“Trump’s protectionism could benefit third-world workers, according to left-wing logic.”
I’ll explain in a moment, if it’s unclear what I mean. No, I’m not here to advocate for Trump. Please don’t think that. Virtue-signalling complete. But I do expect that, regardless of who wins this election, this subject will come up again in 2020 and 2024, maybe even in the 2018 midterms. That’s what I’m looking toward right now.
The nomination of a Republican protectionist is a tremendous blow to the decades-long bipartisan agreement on free trade and deregulation known as the “Washington Consensus.” At first, I suspected it was an aberration caused by the Republican “Establishment’s” disorganization, and Trump’s celebrity, wealth, and unique anti-charisma that allowed him to swoop in and grab the party by the… something.
But maybe nominating a protectionist isn’t just the apopleptic death rattle of the Rust Belt, but the start of “something” larger that won’t necessarily confine itself to the Republican party, once this “something” sheds the 2016 election’s distracting overtones. There’s a massive, cross-cutting constituency on the far left (Bernie voters) and populist right (Trump voters) that would agree upon a well-crafted and well-presented protectionist platform. The point is less to draw these demographics “together,” because they’re incompatible in too many ways. The point is for a sane, centrist candidate to draw voters off the edges of these demographics. To, in a sense, outflank an opponent on both the left and the right at the same time. I’m probably not the first to realize this, and Trump’s platform isn’t quite “it,” but it’s a bigger step toward “it” than many people seem aware of. A party or candidate that embraces the overlapping concerns of both factions could perform formidably and firmly establish anti-globalization as an enduring ideology in the US.
Trump’s Missed Opportunities
As I said, Trump’s protectionism could benefit third-world workers, according to left-wing logic. The basic point being:
–IF corporate globalism actually harms third-world workers by paying them less than their time is worth, under worse conditions than first-world workers enjoy;
–THEN a reduction of US imports would reduce that harm.
Trump would have lost nothing by pointing this out as early as the primaries. It would have framed him as “compassionate,” and “globally-minded,” even if his priorities remained nationalistic to appeal to the primary voter crowd. His myriad other problems notwithstanding, it would have set him up to capture a handful more Bernie voters this November than it looks like he is going to. Without those myriad problems, perhaps many more.
Additionally, there’s the concentration of most profits into the hands of a few, and the difficulty of taxing overseas profits, which Bernie touched on but Trump has not very much.
A candidate that elaborates on these issues, as well as the familiar “they took our jobs” angle, will do better than a candidate that only focuses on one side of it.
2. Nuts and Bolts
The actual content of Trump’s trade platform revolves around negotiation and “deals,” with tariffs as mere threats for leverage in those theoretical negotiations. Coincidentally, Donald Trump has spent a lifetime building a brand as a great deal-maker. But anti-globalists should realize, negotiation is not the core of your problem anymore. Trump just wants to frame it that way to play to his perceived strengths.
Free trade is the default of international commerce. If I have a customer on the other side of an arbitrary border, I will sell to them if feasible unless government arbitrarily disincentivizes me. No “deal” is actually necessary for free trade to exist, unless a government first makes a decision to artificially restrict or tax the flow of goods across their borders, and then takes action to implement that decision.
The main positive use of trade deals over the past few decades has been, when advantageous, to mutually lower such barriers where governments have put them up. But if such barriers already don’t exist, what is there to negotiate? If a foreign government sees a benefit from the lack of barriers, why would they agree to a one-sided barrier on our end? I don’t care if he wrote a book on deal-making, Donald Trump isn’t a wizard who can magically bend foreign nations against their interests. Except maybe, maybe in the case of one-sided practices such as currency manipulation, using retaliatory tariff threats as leverage. But currency manipulation, while possibly a problem, is also not the core of it, just an icing on the cake.
So What’s the Core of It, Genius?
I already mentioned it: the cheapness of overseas labor. You can’t just negotiate overseas laborers out of a low standard of living. And if you target only a handful of countries, such as China or Mexico, you’ll just see production move to other countries where outsourcing remains profitable, such as Vietnam or India, or even, eventually, in Africa. You’ll just be playing outsourcing whack-a-mole forever.
If you apply a blanket tariff on imports, you’ll miss out on plenty of quality products produced under undisputably fair (compared to the U.S.) conditions.
My Proposed Solution
Against all my cucky, shilly instincts, here’s how I’d handle it if I wanted to try to promote a long-term better situation for workers both here and abroad, at a noticeable trade-off of productivity and profits, and increased consumer prices.
1. Unilaterally Cancel Many (Not All) Free Trade Agreements
Scrap all free trade agreements with nations that have some significant lack in workers’ legal protections relative to our protections. Withdraw from, or, if possible, reform any international institutions that might stand in the way of this (WTO, IMF come to mind).
Maintain and expand agreements with nations that have comparable or greater protections, and are like-minded in pursuing measures resembling step 2 (below). Perhaps even include mechanisms to punish partner nations’ non-compliance with step 2.
Either as a single nation or together as a union, but by “unilateral,” I mean no negotiation is necessary with offending nations (bonus: this appeals to the “git ‘er dun” crowd’s restless national pride).
The more worker-friendly nations that are on board going into step 2, the greater the effect.
2. Tariffs Designed to Reverse the Race to the Bottom
A. Clear Benchmarks
This is the key point, and the concept is simple: if a country has poorer legal protections for their workers than we do, we slap tariffs on imports from that country to discourage the “exploitation” of their workers at the expense of American workers. Especially when those protections are quantifiable. The worse the protections, the greater the tariffs. If the country has no standard at all in a given area, we apply a high, flat rate. We apply these standards uniformly to most other countries, unless their labor standards are similar to or greater than ours.
This pursues left- and right-populist goals at the same time: it reduces profit incentives for offshoring jobs from the US, and creates incentives for foreign nations to improve their working conditions. As they do so, they will gradually, automatically regain access to our import market. We reassess their standards annually or even monthly, and adjust our rates accordingly.
Some possible examples (percentages extremely open to adjustment, not necessarily 1:1 ratio):
Example 1: Madeupistan has a minimum wage of $1 per hour. US minimum wage is $7.25 per hour. $1 is 86% less than $7.25. 86% tariff, or maybe whatever it works out to after adjusting for cost-of-living differences.
Example 2: Madeupistan only pays overtime if you work more than 60 hours in a week. In the US, you get overtime over 40 hours. It takes 50% more time to make 50% more pay. 50%*50%=25% additional tariff.
Example 3: Madeupistan prohibits unionization. Automatic 50% tariff.
Don’t apply sky-high tariffs upon half the globe right off the bat; this would create an enormous and unnecessary market shock. Phase them in a few percent per year, up to the caps exemplified above.
Article 1, Section 8 of the Constitution grants the power to tax, and specifically to levy “Duties,” exclusively to Congress. Such a measure would need to at least pass through Congress to be legal.
D. Tariff Revenues
Do what you like with them, they’re not really the point.
What if it Doesn’t Wind Up Benefiting the Third World?
Then we’ll all have learned a valuable lesson, won’t we?
Isn’t This Just a Great Big White Savior Complex?
Seriously? What do you want from me?