I think it fair to say there are two strands to American foreign trade policy.
One is purely driven by American businessmen who want to buy products from the cheapest source… this is the Walmart effect.
The other is to boost American power and influence in the world. It can be argued that our trade policy has been a very important factor in making us the world’s primary superpower.
For very many years we have been using trade policy to increase our power and influence in the world. Throughout the Cold War we have been using trade policy to peel support away from Moscow and Beijing.
Buying foreign products that could be produced here at a reasonable price (say up to 20 per cent higher than the foreign price) is an act that in the short run must by definition decrease the demand for American labor and drive down the pay that American workers receive. It can be argued that by buying foreign products we give foreigners dollars that are then used to buy American goods. And then the argument gets real complicated.
Undeniably, trade with foreign countries can be used to bind us closer together with those countries and enhances our position within the world.
Foreign trade produces winners and losers within the U.S. You win when you can purchase a product at a cheaper price, leaving more dollars in your pocket.
But you lose — you lose big — very very big — if your job gets exported overseas and you have to accept a lower paying job.
The Department of State in Washington DC — and our whole nation — gains international power whenever it gains leverage over a foreign country through use of trade policy. Think Iran with trade embargoes. Think the Soviet Union when we peeled away at countries like Yugoslavia through buying their products. Think China and the way in which we have been peeling the Chinese away from a system where the state owns all the means of production.
The main thing I want to say in this article is that the losers MUST (not “should”) be fairly compensated.
The big policy question is how can this be done fairly, how purchasing power can be restored to American workers who have lost their jobs through outsourcing, and have to accept lower pay (which I think empirically is what really happens, on the average … I have seen it with my own eyes … guys who used to get paid $19 an hour are now getting minimum wage. People I actually know. For sure, one can produce anecdotes of cases where workers have been shaken out of the rut of their current job and into another job that is better paid. But I am talking about average effect.)
Guy I know… let’s call him Alphonse… used to be working assembling refrigerators at $18 per hour. Then his plant got shipped to Brazil. Alphonse was re-trained to be a welder. “Welders can always get paid well”. Hah…. hah…. certainly not always. Al is working as a hospital aide at $8.50.
Now Alphonse was easy to identify as someone hurt by our foreign trade policy and outsourcing policy. But what of the local community, where Al is spending less ? The damage to the local community is much harder to measure with any accuracy.
Now… just simply forbidding foreign trade… becoming totally isolationist, living in our own little bubble, is not a very appealing solution.
So what to do ? How best to compensate the losers ? Is it to strengthen the social safety net? Increase the earned income tax credit ? Make housing more affordable through programs like Section 8 ? Pay for these transfers of income by raising taxes on high earners — or on businesses ?
I honestly do not know the answers to these questions.
But I do think — echoing Kossack Bernie Horn who has written a lot on how Democrats should campaign in elections — that a central principle on which Democrats should operate -— is to make every effort to restore and maintain fairness. I think fairness can be sold to most of us. Though of course there is the classic retort “Life ain't fair”.