I agree with the tariffs, but not the way it is being done. It should have been planned, phased in, coordinated with US industry and, most important, part of a comprehensive US economic/trade/industrial policy. The latter just isn’t going to happen under Trump nor under a Wall Street dominated economy even with Democrats running things.
Trump’s tariff doesn’t come out of nowhere. This is the result of an actual process. It comes after our Commerce Department ruled on a case that started under Obama that China is dumping steel.
Here is an example of the problem. China increased its capacity dramatically during their infrastructure boom (which is how they got through the recession). Then internal demand dropped as the infrastructure projects wrapped up, but the steelmaking capacity continued because they don’t want to lay a lot of people off. So they are selling the steel wherever they can at prices lower than cost. The rest of the world suffers. Esecially the US “rust belt” workers. But also our country’s ability to make steel as needed. Imagine a conflict with China and they cut off steel to us, after this “dumping” has closed what’s left of our production capacity.
From April 2016’s CAF post, The Big Fight Over Chinese Steel,
When China’s growth was very high, and China was building tall buildings and high-speed rail all over the place they needed a lot of steel. Then their economy slowed. Now China is making more steel than they need.
Meanwhile countries around the world are fighting their own slow growth with austerity policies that literally take money out of their economies – like cutting back on infrastructure maintenance and modernization. And their slowing economies mean less steel use.
… So there is less demand for steel in China and around the world. Current global overcapacity is estimated at 700 million tons – more than seven times what U.S. steelmakers can produce. This is expected to get worse.
But Wait, There’s More – Cheap Labor
OK, now the bigger picture. Economists will tell you about the benefits of trade. I should have said Wall Street economists.
“Trade” is supposed to be about “comparative advantage.” This means a region that grows bananas has an advantage doing that compared to Iowa. But Iowa is great at crowing corn. Iowa trades corn for bananas, etc.
However currently discussion of “trade” really just means using “trade” deals for moving American production out of the country to low-wage places. The “comparative advantage” involved is cheap labor. (The factories aren’t even already there, they are moved there.) Wall Street likes to argue the benefits of lower prices resulting from using what amounts to slave labor outside the US but the real benefit they get from this and the rest of the trade regime is pressure on US wages, which means people have to take what they can get (or drive for Uber) and labor cannot demand a larger slice of the pie.
When they say trade agreements “increase trade” remember that moving a factory across a border and bringing the same goods back here “increases trade” because now they cross a border. “Trade”?
Even More – “Expanding Markets”
There is another part of what we call “trade.” They say trade “opens up markets for US goods and services.” As if those markets are not already being served? What it does is open up “markets” for exploitation by the largest, ost powerful competitors, wiping out whatever has developed locally. There AND here. Look at how “trade’ has wiped out OUR textile, electronics, etc producers. And OUR giant monopolies like to use their power to wipe out local industries elsewhere.
So “trade’ is currently being used by giant multinationals to consolidate their power.
It Doesn’t Have To Be This Way. Imagine Democracy.
It doesn’t have to be this way.
Imagine if the US had full-employment policies, so everyone who wants a job has one. This is in fact easily done.
Imagine a democracy with rule of law and sensible coherent structures for determining policy. (Those policies would include breaking up monopolies and reducing the power of big companies.)
Imagine a government that offers a job to anyone who wants one, with reasonable above-poverty pay and benefits. There is so much that needs doing, like child care, elder care, retrofitting buildings to be energy efficient, fixing up parks, teaching — you know, the list of things that a democracy would put resources into to make people’s lives better.
So imagine a system where everyone has the ability to get by, and the opportunity to do work that does good. Imagine how jobs would change if employers had to compete to get people to do the jobs they need done. That competition would involve offering jobs that actually do make the world a better place, because people would be able to choose to do that.
This Creates A New Economic Problem – A NEED To Outsource Production
Never mind the societal reckoning full employment policies would bring, with its higher wages, increases in labor’s power, etc. (That’s another discussion…) There would be a new economic problem: Our economy would have trouble finding enough labor to get things done. In other words, the economy would be prevented from running at full capacity by a demand for labor. What to do?
THEN it makes economic sense to move production elsewhere. But then it could be done non-exploitively, bringing higher pay and prosperity to the places we outsource to as well as here. Then trade becomes the benefit it is supposed to be, benefitting everyone. This is how democracies would do it.
And immigration. (But that’s also another discussion.)
In an economy designed to be of, by and for We the People outsourcing production could be good for everyone.
Imagine an economy designed to be of, by and for We the People. Wow.