Jacobin | 27 November 2019
We need a socialist trade policy
By Nicole M. Aschoff
Tariffs and other forms of protectionism often hurt workers — and trade can help produce good paying, sustainable jobs. But we need to build a trade policy that benefits both US workers and workers in developing countries.
The future does not belong to globalists. The future belongs to patriots,” Donald Trump declared at the seventy-fourth session of the UN General Assembly in September. “Globalists exerted a religious pull over past leaders, causing them to ignore their own national interests. But as far as America is concerned,” he continued, “those days are over.”
Trump’s paean to nationalist isolationism is part of a broader effort — albeit haphazard, contradictory, and often solely rhetorical — by the president to develop his own “America First” program, to reorient global capitalism to protect the United States from those who “seek conquest and domination.” The centerpiece of this effort is his trade war with China.
“Trade wars are good, and easy to win,” tweeted Trump in March 2018. More than a year and a half later, negotiations between the United States and China have been a roller coaster of escalation and de-escalation, with no end in sight. So far, the United States has imposed 25 percent tariffs on $250 billion of Chinese imports and 15 percent tariffs on a further $125 billion. Trump has threatened an additional 15 percent tariffs on a fresh $156 billion slate of goods in December if a trade deal hasn’t been reached.
The chances of a deal being reached soon are slim to none, not least because Trump is insisting on much more than a renegotiation of US–China tariff rates or purchasing agreements. His trade team is demanding that China rewrite its developmental playbook.
Trump’s 2018 “framework for discussion” gives a sense of what his administration is looking for. Washington has insisted that China reduce the US–China trade imbalance by $200 billion, and that it “immediately. . cease providing market-distorting subsidies and other types of government support that can contribute to the creation or maintenance of excess capacity in the industries targeted by the Made in China 2025 industrial plan.”
They also demand that China “eliminate specified policies and practices with respect to technology transfer,” and that it “take immediate, verifiable steps to ensure the cessation of Chinese government-conducted, Chinese government-sponsored, and Chinese government-tolerated cyber intrusions into U.S. commercial networks and cyber-enabled theft targeting intellectual property, trade secrets and confidential business information held by U.S. companies.” And these are just some of the demands.
China is not likely to agree to them. In 2000, the United States was the dominant exporter to nearly every country in the world. Today, the situation is reversed, with China taking the lead in all but a handful of countries. This marked shift in trade supremacy — perhaps even more dramatic than when the United States overtook the United Kingdom in the first half of the twentieth century — was, in no small part, made possible by the very practices that Trump now demands China cease.
Trump’s trade team is probably well aware that China will not accede substantively to its demands. Indeed, the politically impracticable quality of the wish list suggests that Trump is not actually keen to end his trade war. He appears to have little interest in preserving the multilateral institutions and norms that have underwritten global trade for the past four decades. Torpedoing them is part of his “exciting program of national renewal.”
Trump blames the woes of American workers on foreign countries (like China) rather than American corporations, though he sometimes gripes about companies who offshore jobs. His strategy so far, if we can call it that, is to make countries pay (in the form of tariffs) for the privilege of exporting goods to the United States’ huge domestic market. He wagers that countries who have been getting a “free ride” will be willing to rewrite their trade relationships according to his demands to retain this access, and if they aren’t, to hell with them. Either way, benefits will, according to Trump, trickle down to ordinary Americans.
Warren and Sanders on Trade
While Trump’s policies on taxes, immigration, the environment, and foreign policy set him apart from some Republicans and nearly all Democrats, his trade talk is echoed across the aisle. Prominent Democrats share his criticism of China, and some, like Elizabeth Warren and Bernie Sanders, have also called for a dramatic overhaul of global trade agreements.
Warren’s approach to creating a new trade regime has two main elements. First, she wants to democratize the trade negotiation process. Instead of confidential advisory committees and “Fast Track” procedures, Warren advocates “a transparent process that offers the public a genuine chance to shape [trade agreements].” Second, she plans to establish “a set of standards countries must meet as a condition for any trade agreement with America.” These standards include the enforcement of religious freedom, the elimination of all domestic fossil fuel subsidies, the recognition and enforcement of the International Labour Organization’s core labor rights, and an independently verified plan to reduce emissions consistent with the Paris climate agreement.
Compared to Warren, Sanders’s plan is more circumscribed. Its focus is on “fundamentally rewriting” existing trade and tax agreements to make them more friendly to workers, including family farmers, and the environment. This includes eliminating “federal tax breaks, contracts, grants, and loans to corporations that outsource jobs.” Sanders also calls for “enforceable rules against currency cheating” and an expansion of “Buy American” and “Buy Local” campaigns.
Of the three of these trade strategies, Trump’s is clearly the weakest, and as things are going now, the least likely to achieve anything positive for working people. The president’s ideas about trade are filtered through a geopolitical lens. His goal is to either cut China off at the knees through escalating tariffs or bend the rising superpower to his will through an overhaul of its trade relationship with the United States. In either outcome, he imagines a glorious renewal of US global supremacy and claims that ordinary Americans will reap the rewards.
The dots don’t connect here for the simple reason that, while it is true that China engages in questionable industrial practices, it is US corporations — and the trade policies implemented by the US government — that are chiefly responsible for the stagnant wages, increased indebtedness, and lower quality of life experienced by Americans over the past few decades.
More programmatically, while tariffs have their time and place, in practice they are rarely pro-worker. Protectionist measures, such as tariff and non-tariff barriers, voluntary export restraints, and import substitution schemes, all work indirectly (if they work at all) to improve the jobs and living standards of working people.
The vast majority of gains from protectionism go to companies because they have the power to organize work and production. There is no mandate to channel profit gains from tariffs toward workers through the creation of new jobs or wage gains. Workers only benefit if they are strong enough to demand their fair share, so in the present climate, profits from tariffs are simply redistributed to executives and shareholders. Moreover, without strong oversight and market intervention by the state, high tariff regimes over longer time spans generally mean shoddier, higher-cost products for consumers.
Sanders’s proposed reforms around trade policy are abbreviated and echo long-standing calls from US labor and environmental groups rather than breaking any new ground. His framing of the problems with trade is the polar opposite of Trump’s, in the sense that he places the blame squarely on footloose multinational corporations and their ability to shop around for bargain-basement production costs and tax breaks. Rather than rebooting US supremacy, Sanders calls for “binding labor, environmental, and human rights standards to be written into the core text of all trade agreements.”
Warren’s plan, while more comprehensive than Sanders’s, is a mixed bag. Some of it is quite good. For example, Warren’s call for trade agreements to be democratically decided, rather than crafted in back rooms and then rushed through Congress without public oversight, is spot on. The demand that representatives from labor, environmental groups, community organizations, business, and government negotiate trade agreements together through a democratically accountable process should be a core part of any future trade policy.
Warren’s call to eliminate trade with any countries that fail to meet her standards of religious freedom, core labor rights, climate policies, and so forth is less compelling. Demanding that countries meet these standards — which the United States does not currently meet — amounts to a novel form of protectionism that would in practice eliminate imports from nearly all developing countries.
The concept of de-linking certainly merits revisiting, and Warren is right to emphasize how multinational corporations take advantage of weak or complicit states to lower production costs and skirt environmental regulations. But using the carrot-and-stick of trade policies to position the United States (because of its huge domestic market) as a global arbiter of thorny social and political problems is neither a desirable, nor a workable, solution.
An Alternative Approach to Trade
The key to creating a worker-centered trade policy — rather than a trade policy that primarily benefits corporations or the nebulous geopolitical goals of governments — is to focus first on the things that workers need: well-paying jobs, high-quality, affordable goods, and a healthy environment. Instead of imagining that good jobs will flow from good trade policy, we should flip the script and put trade policy in a supporting role to achieve this primary goal.
To illustrate, consider the Green New Deal. It has the potential to catalyze a massive, decades-long infrastructural overhaul with many facets, such as the retrofitting of America’s housing stock to dramatically reduce household emissions. As part of a nationwide retrofitting project (in which the government would fund the transition for individual homeowners, and landlords would foot the bill for their rental properties), a comprehensive worker-centered trade program designed specifically for the retrofitting project would ensure that the project meets the overarching goal of a just transition that supports working families.
In addition to the need to create thousands of unionized green skilled trades jobs, we can also imagine all of the manufactured goods that would be necessary for zero-emission housing: triple glazed windows and skylights, filtration and ventilation systems, insulation, energy-efficient appliances, heat exchangers, solar panels, green roofing, window treatments, and more.
These are goods that, under a worker-centered trade program, could be designed and manufactured in global value chains that benefit both US workers and workers in developing countries. Domestic content regulations for both design and production, state-subsidized worker cooperatives, and the large-scale retrofitting of existing manufacturing capacity (such as idled automotive plants) would generate good jobs in the United States while minimizing the extractive and wasteful construction of new plant and equipment.
At the same time, worker-centered global value chains would recognize the needs of ordinary people in other countries whose economies depend on producing for export to the United States, particularly the upstream production of raw materials. Instead of locking out workers in the Global South from the US market, worker-centered global value chains could create partnerships that enhance global solidarity.
Trade will be a defining issue in the coming decades. In this moment of flux, it is possible to think about it in new ways. Instead of imagining trade as an end in itself, or as the driver of job creation and production, we should think about trade as a support mechanism for well-defined political goals centered on improving the lives of working people.