Donald Trump’s trade war is an international tragedy. But it could have a happy ending if it eventually reminds us of the risks that free trade imposes on people, and if we improve our insurance mechanisms to help them.
.. on July 11, only 39% of respondents approved of US President Donald Trump’s imposition of tariffs on foreign countries, while 56% were opposed. But, while it’s good news that a majority of Americans oppose their president on this key issue, Trump is plunging ahead, apparently thinking the public will like the tariffs better when they are in place... So, why are we seeing so much public support for a US-initiated trade war now?It must stem from the job insecurity sometimes imposed by free trade, and the sense of injustice that arises when one is among the losers. Most people do not want charity. Voters in the United States responded well to “Make America Great Again.” They did not respond well to former President Barack Obama’s “spread the wealth around.”
.. programs such as Trade Adjustment Assistance in the US. Trade Adjustment Assistance allows people who can demonstrate that their jobs were lost to foreigners because of free trade to receive temporary compensation while they find a new job.
.. In my 2003 book The New Financial Order, I argued in favor of privately issued “livelihood insurance,” which protects against long-term loss of income and sets premiums on the basis of occupation and training.
.. if the government offers the coverage against risks to livelihoods from free trade, it just looks like redistribution. This is especially so because the risks of maintaining free trade with low tariffs may be long-term. Losing one’s job in the US steel industry as mills shut down in the face of foreign competition may look awfully permanent. But it is hard to imagine governments subsidizing displaced workers for decades.
.. with increased globalization an apparently permanent new condition, and with inequality within countries widening, people tend to feel that their long-term economic situation is getting riskier.
We need to find a way to insure people against the risks of the global market without in any way demeaning them.
.. When the government spends tax money on universal public education and health care, it does not strike many as redistribution, because the services are offered to everyone, and accepting them appears more patriotic than abject. As long as most people use the government schools and doctors, redistribution does not look like charity.
.. Another solution is to have the government encourage private livelihood insurance by subsidizing it to help cover the cost of jobs lost because of foreign trade. Private insurance companies, competing against each other and subject to appropriate regulations, may show much more entrepreneurial creativity in successfully managing the risks that free trade imposes on individuals.
.. Trump’s trade war is an international tragedy. But it could have a happy ending if it eventually reminds us of the risks that free trade imposes on people, and if we improve our insurance mechanisms to help them.