It’s complicated. If you think the role of the government is to protect the American worker, then it’s not hard to come to the conclusion that trade agreements are bad, because every worker who loses his or her job because their factory shut down or, even worse, their company opened a new factory in Mexico, is going to think that it’s bad.
And that’s the politics right now. The American worker was the centerpiece of the 2016 election, with rust-belt regions that have yet to recover from the great recession effectively casting the deciding votes in the presidential race. Add to that President Trump’s tagging someone named Clinton with NAFTA (it was signed by George HW Bush, but Bill Clinton approved it and defended it) and tagging someone named Obama with the Trans-Pacific Partnership (TPP) and so NAFTA is the “worst deal ever” and TPP is “rape”. It’s that simple.
Why isn’t it that simple? Because, first of all, it’s not clear whether we gain jobs or lose jobs from trade agreements, even NAFTA. Some jobs are lost, and some jobs are gained. So jobs just shift around. There are winners and losers. And, conservative economists argue, we gain wealth–companies save money because of global sourcing, so they make more profits, and consumers can buy goods for less–so they save money and/or live wealthier lives. And wealth, at least according to conservative economics, creates jobs — otherwise, where do the “Jobs” come from in the “Tax Cut and Jobs Act”? Finally, having trading partners and trade alliances allows us to compete on the global stage more effectively — so the idea of having NAFTA and TPP is to give the U.S. a trade advantage against China (who isn’t included in any of those alliances), and China takes more jobs, in theory, than any of the other countries involved.
Of course, we can always try for a better deal. But, while acknowledging that there are winners and losers, and some jobs are lost, I am convinced that free and fair trade, and trade agreements to protect it, are good, or at least necessary.
One of the reasons I’m convinced is I’ve studied what happens when you don’t have free trade. After World War II, there were two Germanies, but there had been only one before. The two Germanies, the German Federal Republic and the German Democratic Republic (also known as the DDR for its German Acronym) had a common language, common heritage, common technology. Germany had led the industrial revolution, led in automotive, aerospace, manufacturing. After the war, the Federal Republic (West Germany, we called it) recovered and thrived, competed on the global stage, and its workers could afford products from other countries. The DDR stagnated. Everyone had a job; the government made sure of that and it was illegal not to work, and the government made sure everyone got a fair wage. But there was no competition, so while West Germany was turning out BMWs and Mercedes, the DDR fell behind as was producing cars that drove like lawnmowers, and DDR workers couldn’t afford a pair of Levi’s (which was at that time the kind of jeans that everyone wore in the West).
You can even reflect this on the American automobile industry. Before the wild period of free trade starting in the 1970s, our cars were in a bit of a decline; the workers were protected by strong labor unions and not too many people drove imported cars; then fuel got a bit more expensive and the Japanese started selling smaller cars that were less expensive and more reliable. If we hadn’t had trade with Japan, we might still have inferior cars. The Chinese would be buying Japanese cars now and not American cars. But now after years of free(er) trade a good part of our auto industry has recovered.
So, we can protect certain jobs, and try to have the government decide the winners and losers, or we can try to help make American business more competitive and prosperous. It is very hard to do everything just right and especially hard now given that Americans have been taught that less government is better. Our tax policy, in essence, is that what’s good for American companies will be good for American workers; hence large corporate tax cuts and tax cuts for wealthy heirs. The government says this will create jobs. At the same time, our government says that allowing businesses to trade freely, which is what they want, will take away jobs. It appears inconsistent, and it is indeed confusing to economists.
There is nothing wrong with negotiating better trade agreements, if we can do that. But we need open and fair trade, as even the current administration insists, and along with a host of other economic factors, most importantly a changing society, demographics, and automation, millions of jobs will continue to be lost at the same time that millions of new jobs are created. Conservatives tend to view the eight years of the Obama presidency poorly from an economic perspective, and called Obamacare and nearly every other policy a “job killer”. Yet, even including the worst recession since World War II, the U.S. economy added 11 million jobs during the Obama years. The computer age, automation, the remake of American manufacturing, and a shift toward a more services-based economy have all taken their toll on some American workers, but they have over decades created wealth and jobs. Do we want to put the brakes on that? Of course not.
As in other areas where our policy simply falls short, I believe we need to balance free trade and tax cuts with policies (particularly in education) that help prepare our workforce better to fill the jobs that we are creating. Of course everyone isn’t going to be a software engineer, but we have persistent shortages of skilled individuals in health care, sales, finance, and certain trades. Even if all of our other policies were perfect, we would still be losing jobs in certain farming, manufacturing and mining arenas (American manufacturers added jobs in 2017, and mining added a few, but the overall trend is still down and these jobs will continue to decline as a share of the total jobs in our economy). We would benefit from a clearly articulated, comprehensive economic policy that includes legislation in all the relevant areas, including education. Otherwise it looks like we’re simply not doing enough and blaming former presidents and overseas rivals for our inadequacies.