Freaking out about the end of TPP and NAFTA? Here’s why you shouldn’t.
.. But it’s worth remembering that even if he does go down the path of disrupting global trade pacts, even if the move toward globalization halts, we still cannot return to some imagined past. A return of some manufacturing to the United States is possible and has already been happening, care of technology that makes the cost of making stuff in our expensive country less of an issue. Factories today, however, are output machines, not job machines. A new factory employs hundreds of skilled workers, adept at robot programming or high-end value-add work; it does not employ thousands of shift workers. The myth of manufacturing today is that jobs will come back, but most of the jobs that disappeared over the past decades can never exist again. Period. American withdrawal from the TPP, or changing the terms of NAFTA will not alter that.
.. For instance, U.S. companies have been selling into China for the past 20 years even as the difficulty of doing so has been significant and the costs have been considerable. China is simply too attractive a market for companies to ignore, even with a government that hardly welcomes foreign competition. The United States is an even larger market, which means that a U.S. that is less welcoming to foreign business is still too desirable a market for foreign companies to forgo simply because Washington raises hurdles.
.. Separate from whether these initial trade moves are wise or foolish, they are not nearly as consequential as the Trump administration would have us believe or as various critics would contend. They are mostly words codifying current trends, rather than actions that set America in a new direction.
How Trump’s wall could beckon a global trade war
But Mexico — or other trading partners — could try to punish Trump and other supporters of the tax by targeting goods in politically sensitive areas, said Gary Hufbauer, a senior fellow at the Peterson Institute for International Economics.
“The Mexican minds will be thinking about what they could do that would give President Trump the most pain in his political base,” he said, adding that that might mean “stopping imports of certain products made in Indiana or Michigan or wherever.”
And they could go after areas not directly associated with legal trade.
“They can do all sorts of things we don’t like,” Hufbauer said. “They can legalize marijuana. They can legalize cocaine. They can stop cooperating with the U.S. with respect to refugees from Guatemala, Honduras and so forth.”
The plan, which would target imports while allowing tax-free exports, would boost the value of the dollar, giving customers more purchasing power to manage the higher costs, supporters say.
.. And proponents maintain the costs would even out eventually, even with what Ikenson called a likely “adjustment period” at the start.
.. “But 97 percent of American importers are small businesses, [companies] with under 500 employees. … Small businesses are in the center of the bulls eye in this law.”
Trump’s Little Mexican War
Doesn’t the “art of the deal” include giving your negotiating partner room to compromise? Mr. Trump made it impossible for Mr. Peña Nieto even to negotiate, all the more so after Mr. Peña Nieto went out of his way in August to invite Mr. Trump for a visit. That campaign stop helped Mr. Trump show he could stand on stage as an equal with a foreign leader, but Mr. Peña Nieto took a beating at home when Mr. Trump returned to Mexico-bashing.
When Mr. Trump visited the Journal in November 2015, we asked if the U.S. should encourage political stability and economic growth in Mexico. “I don’t care about Mexico honestly, I really don’t care about Mexico,” he replied.
.. Mexico’s main political parties have since traded stints in power, but both the PRI and the PAN have pressed economic reforms that have raised living standards and given Mexicans reasons to stay on their side of the Rio Grande.
.. Mr. Trump has accused Mexico of seeking a weak currency, but the central bank has been vigilant against inflation. The main reason the peso has fallen to 21 to the dollar from 17 in less than a year is Mr. Trump’s threats to destroy Nafta and start a trade war. The U.S. President is devaluing Mexico’s currency—the opposite of what he claims to want.
Everyone Seems to Agree Globalization is a Sin. They’re Wrong
Jack Ma, the founder of the e-commerce giant Alibaba, estimated that over the past three decades the U.S. government spent $14.2 trillion fighting 13 wars. That money could have been invested in America, building infrastructure and creating jobs.
“You’re supposed to spend money on your own people,” he said. He pointed out that globalization produced massive profits for the U.S. economy but much of that money ended up on Wall Street. “And what happened? Year 2008. The financial crisis wiped out $19.2 trillion [in the] U.S.A. alone. . . . What if the money [had been] spent on the Midwest of the United States developing the industry there?” he asked. “It’s not [that] the other countries steal jobs from you guys — it is your strategy,” he concluded.
.. Since 95 percent of the world’s potential consumers live outside the United States, finding ways to sell to them will have to be a core strategy for growth, even for a country with a large domestic economy such as the United States.
.. The Economist reports, in a survey on globalization, that in 2009 the Obama administration punished China with a tariff on its tires. Two years later, the cost to U.S. consumers was $1.1 billion, or $900,000 for every job “saved.” The impact of such tariffs is usually felt disproportionately by the poor and middle class because they spend a larger share of their income on imported goods, such as food and clothing.
That same Economist survey points to a study that calculated that, across 40 countries, if transnational trade ended, the wealthiest consumers would lose 28 percent of their purchasing power, but the poorest tenth would lose a staggering 63 percent.
the key driver depressing wages and eliminating jobs in the industrialized world is technology, not globalization. For example, between 1990 and 2014, U.S. automotive production increased by 19 percent , but with 240,000 fewer workers.
.. Tariffs on China will simply mean that production will come from some other developing country.