It is that progressive Dems some time ago glommed onto the idea that protectionism is "progressive." It has been going on so long and has become so ingrained that Bernie Sanders has been running around bragging about how he is more protectionist than Trump. Elizabeth Warren has been a bit more subtle about it, calling to renegotiate all existing US trade agreements to make them super strong on labor and environmental standards.
The problem is that one of the biggest disasters of the Trump presidency has been his trade wars, now pushed further with his latest move to raise tariffs on another $300 billion in Chinese imports. Stock markets and oil markets took huge dives all over the world on this. The Fed has just cut interest rates to offset the negative effect on the world economy of Trump's trade wars. Trump has delivered a big fat zero in terms of anything positive from his protectionist moves, and even industries that were crying for protection, such as steel and and autos, are now complaining about his trade wars. And this has done a big fat zero for workers as well, whom supposedly our great "progressive protectionists" claim they are spouting their now completely irrelevant drivel.
This is going to be one of the biggest issues in the coming campaign, and while so far almost nobody is focusing on it, both Sanders and Warren are complete and totally worthless disasters on it. I find this very frustrating given that on so many other issues they make a lot of sense.
Barkley Rosser
I've always had two views on this:
ReplyDelete1. You need arms-length free trade not to protect local industry but to insulate domestic markets from foreign turbulence. I.e. some tariffs of some sort are useful but they must be uniform. In some ways a VAT fulfills this requirement because it taxes imports but not exports whereas relying primarily on middle class income taxes, taxes exports but not imports. Of course this can and may well be counteracted by exchange rate movements but it seems a fairer way of going about things.
2. Trade liberation was always justified in that everybody could be better off if the winners compensate the losers. Oops - the second part always seems to have been forgotten. I'm a UBI guy, and this is just another reason for it. I'm glad to see that finally in Europe they are getting serious about raising carbon taxes and distributing the proceeds. It may even happen - a rare case of sense being translated to policy.
reason
Even if the trade war precipitates a hit to GDP and some economic pain, China needs to be dealt with regardless. Our relationship to the Chinese government has been untenable. Action against Chinese continual abrogation of any and all trade agreements is about the only thing on which I agree with Trump. Also, even if we take an economic hit because of our trade war with China, relative power matters as well. China is a serious geostrategic threat to the U.S., and if they are hurt more by the "trade war" than us due to less trade than that is a good thing.
ReplyDeleteI forgot to mention. Regardless of how fixing it is achieved, since when does a humongous trade deficit not matter? I have yet to find a convincing plan from economists for how to cut down on on our balance of payments deficit with the rest of the world. Years ago this was not the case. What happened? In my opinion, if you don't like tariffs it is incumbent on you to come up with your own solution.
ReplyDeleteAnonynous,
ReplyDeleteI have always supported strong adjustment assistance to workers laid off due to trade like they have in Nordic nations, but this has not had much support from either GOP (no govt programs) or Dems (unions prefer protectionism).
Jacques,
Trump keeps escalating his trade war with China. How far should this go? As for the trade deficit, we have had one since the mmid-70s, which reflects the international role of the dollar plus our low savings rate. Have you noticed that the effect of Trump's idiotic trade war has been to appreciate the value of the USD and worsen our trade deficit?
A really important post, that I would appreciate having extended.
ReplyDeleteBarkley: I completely agree. And it's not just self-styled progressive politicians, but soi-disant progressive economists!
ReplyDelete(Incidentally, a propos of nothing, I suppose people here know that Kamala Harris is the daughter of Donald Harris, the great heterodox economist, who must have been lonely in the Stanford economics department - he's emeritus now.)