Tuesday, July 5, 2016

On the Issues: The Costs of Trade


Hi, I’m Charlie, and this is Charlie on the Issues. Today I’m continuing my series on foreign policy. This time, I’m talking about trade.

When I was born, my family lived in a mobile home on a bayou side in South Louisiana. My father made a living catching shrimp in the Gulf of Mexico, and business was pretty good. He invested in more boats, hired people to crew those boats, and earned enough to build our family a nice house. Seafood is always in high demand, especially in South Louisiana. Investing in the shrimping business seemed like a solid decision.

This changed at the turn of the century, though. Shrimp prices fell drastically thanks to much cheaper imported shrimp, especially from Asia. That and a couple of cold winters that reduced the shrimp populations in the Gulf of Mexico led to the near-destruction of the gulf coast seafood industry.

My dad had to sell his boats and start looking for work in a different industry entirely. It’s hard making that kind of transition later in life, but my dad had bills to pay. He did what he had to do.

Now, honestly, we can’t blame the fall of the Gulf of Mexico’s shrimping industry entirely on trade. There wasn’t a major shift in policy in America that led to the increased importation of foreign shrimp, for instance. However, there was a shift in policy in Europe that banned Asian shrimp there for a while, which led to Asian traders looking for new markets, particularly the United States.

The Gulf shrimpers were also competing with each other, though, as more and more people were granted licenses to go out and catch shrimp. Also, the price of oil was rising quickly, adding to the overhead costs of running a trawl boat. Also, Japan, one of the biggest importers of American shrimp, was facing a stalling economy, causing their demand to drop.

Perhaps the collapse of the shrimping industry in the Gulf of Mexico was inevitable. However, even if free and open trade didn’t directly cause the collapse, it certainly hastened it.

The shrimping industry is by no means the only industry sacrificed at the altar of free trade, either. Manufacturing in general has declined nationwide as foreign manufacturing offers rates that aren’t simply better than American prices, they’re game-changing. It’s extremely difficult to actually make a living in the mass production of goods if you don’t use foreign manufacturing.

For example, I’m currently employed at a company that primarily sells shirts printed and manufactured in the United States. Because of this, we have to sell the shirts at a premium, but it’s not always easy to sell twenty-four dollar shirts in a nation that’s used to buying shirts for half that price. Unless you’re at a rock show.

Anyway, I’m pointing out the costs of trade, because even though I’ll be going into the benefits of trade later on, it’s important to remember that the impact of trade is not one hundred percent positive. That though trade has the capacity to improve our country and the world as a whole, there are those who will feel those costs more than they feel the benefits, as their livelihoods are stripped away in the name of progress. People like my father.

You see, charts and graphs explaining the efficiency and value of trade are of little comfort to a unemployed worker trying to provide for their family.

That said, though I believe trade is necessary and, generally, good, for reasons I’ll explain in a future episode, I first want to start talking about ways to mitigate the human impact of trade.

Over the course of American history, our economy has changed from an agricultural economy to an industrial economy and, now, a service economy. We still have plenty of agriculture and manufacturing, of course; lots of both, in fact. But these things are no longer the driving force of our economy. And though there are those who decry the fact that America doesn’t make anything anymore, economists argue that this shift to a service economy is not only good but necessary.

The benefits of a service-based economy are numerous, including environmental and human health benefits. However, right now we’re focusing on its effect on jobs.

Service jobs are extremely valuable because they are some of the most difficult jobs to replace through automation and outsourcing. It’s not impossible, of course: we certainly outsource a lot of, say, over-the-phone customer service work to other countries. However, it’s much harder to outsource, much less automate, teachers, actors, warehouse managers, accountants, athletes, artists, writers, scientists, plumbers, and chefs, for instance. In the economic reality of global trade and rapidly developing technology, the service industry is the sector that is the least likely to shrink and the most likely to grow.

That is not to say that American agriculture and manufacturing is going to shrink, by the way. On the contrary, American manufacturing and agriculture are some of the most productive in the world. America absolutely does make things. However, jobs in agriculture and manufacturing are shrinking constantly due to the rapid advancement of automation, which allows people to do far more work with far fewer workers. I mention this mostly because often people blame trade for shrinking the job market when, in fact, the cause is often technology.

Again, jobs lost in the name of progress. And, again, that progress is real. But so is the job loss.

So, what’s the solution?

Well, there isn’t too much the government can do about technological progress. In fact, fighting technological progress would be extremely short-sighted and counter-productive. Technology is a force of nature, so to speak, and it should take its course.

However, I do think we should be more judicious about how our trade deals will impact our job market. Which is not to say that we should avoid trade deals that impact jobs, just that, if people are going to be losing jobs due to the actions of the government, then the government should be prepared to take responsibility and give those people assistance to make the transition less of a blow. I can think of a few ways to do this:

A good first step is to announce the effects of trade deals openly and early to give employees and employers in the affected industries time to form a plan of action. I’m not sure how much time is appropriate, but I would assume the longer and more gradual the transitionary period the better prepared people will be when the transition is complete.

Another good step is to provide education and training for other types of jobs to people who may be losing theirs. This seems like the best course of action for younger people who have long professional lives ahead of them, and would be best served by switching careers.

For the older folks who don’t have the luxury of youth and the ability to simply switch careers later in life, the government should be prepared to offer direct financial assistance.

These are just tentative suggestions, to be clear. Trade is complicated, and the solution to its effects are likewise complicated.

However, figuring out a way to mitigate the damaging effects of trade is essential, because trade itself is likewise essential.

I’m planning to go over the value of trade and the nature of trade deals on the next episode of Charlie on the Issues.

In the meantime, if you have any comments about the current topic or suggestions for future topics, please email me. I’m interested in hearing your thoughts and your stories.

Thanks for watching. Until next time.

No comments:

Post a Comment