(What’s Left of) Our Economy: Where China Trade Retaliation Could Really Hurt

Tags

China, import penetration, imports, intermediate goods, manufacturing, The Wall Street Journal, Trade, U.S. Department of Commerce, {What's Left of) Our Economy

According to a Wall Street Journal news report this weekend, China is considering an escalation in its trade conflict with the United States that could cause real problems for the American economy: restricting its “sales of materials, equipment and other parts key to U.S. manufacturers’ supply chain.”

There’s no significant statistical evidence that the U.S. tariffs imposed on Chinese-made steel under the Obama administration have harmed domestic American manufacturing, and as I’ve shown in several posts (e.g., here, here, and here) as of now, there’s no such evidence either that the Trump administration’s more sweeping, worldwide tariffs on aluminum as well as steel have inflicted any harm on those American industries that are significant users of these metals.

But Chinese limits on exports of the parts and components that go into a wide variety of goods manufactured in the United States could produce a very different story. The U.S. government hasn’t officially tracked this development. Indeed, the share of various American manufacturing markets captured by imports from anywhere, or the global total, hasn’t been monitored since 1995, when the Commerce Department’s annual U.S. Industrial Outlook report was discontinued.

So for more than twenty years, there’s been none of the kind of government-generated information that President Trump and his aides can consult in order to assess the possible damage to domestic industry. This information vacuum – which of course predates the current administration – speaks volumes about how cavalierly Washington has taken the responsibility of safeguarding crucial American economic interests against predatory foreign competition

Yet unofficial data is available, in the form of China import penetration rates for dozens of advanced manufacturing sectors that I calculated for several years through 2011. (Here’s the latest.) I haven’t published any follow-ups since 2013’s edition (which presented the 2011 data – the latest then available) because each year, more and more of the raw output or trade figures I needed to perform the calculations seemed unreliable. Specifically, they would produce results that were mathematically impossible (e.g., imports accounting for more than 100 percent of the entire U.S. market for various sectors, or results that exhibited wildly excessive swings year-to-year).

The 2011 results, however, are worrisome because they revealed that products from China had grabbed noteworthy shares of American markets for large numbers of high value industrial parts and components, as well as industrial machinery categories (including much of the equipment used by U.S. industry to produce a wide range of intermediate and final goods). Further, in many instances, Chinese market shares had increased at jaw-dropping rates.

Even more important, in the seven intervening years, most of these Chinese import penetration rates have surely risen to greater heights still.

China’s capture of these markets and the leverage it undoubtedly creates reflects one of the most crucial failures of America’s trade policies in recent decades. The very magnitude of China’s success might prevent Beijing from pulling the trigger on the proposal reported by The Journal – i.e., that the domestic U.S. industry has simply become too big a market for China to exit. Satisfactory substitutes from other countries, or from domestic sources, might also be available. But it’s also possible that in many key manufacturing sectors, Beijing has the U.S. economy over a barrel.

What is certain is that knowledge is power, and that if the United States doesn’t study more carefully its vulnerabilities to foreign retaliation to more assertive trade policies such as the Trump administration seems determined to pursue, its chances of prevailing in the ensuring showdowns won’t look promising. And voters’ ability to judge campaign promises to this effect will be almost nil.

Advertisements

(What’s Left of) Our Economy: The China Trade Cheerleaders Make their Failures Painfully Clear

Tags

Bill Clinton, Bob Davis, Charlene Barshefsky, China, Financial Crisis, Global Imbalances, Great Recession, The Wall Street Journal, Trade, Trump, World Trade Organization, WTO, {What's Left of) Our Economy

This is how abysmal America’s pre-Trump China policies were: Wall Street Journal reporter Bob Davis recently gave supporters of China’s 2001 accession to the World Trade Organization (WTO) ample opportunity to defend their positions on this landmark decision. And what were the most convincing rejoinders they could muster to claims that the benefits of WTO membership (chiefly, legally sheltering China from unilateral U.S. responses to its wide array of predatory trade practices) enabled China’s rise as a dangerous economic and military power – and that American trade policy needs to respond vigorously? Observations that the biggest gains have indeed flowed to China.

According to Davis, WTO admission advocates “can point to real gains from integrating China into the global economy. According to the World Bank, some 400 million Chinese have been lifted from extreme poverty—that is, from living on less than $1.90 a day—since 1999.”

In addition, “After the deal, foreign investment in Beijing mushroomed from $47 billion in 2001 to $124 billion a decade later. The lower investment and import restrictions required of China as part of its WTO entry also encouraged multinationals to rush in, as did the prospect of serving the vast Chinese market. China became the world’s manufacturing floor, and Chinese imports [sic] to the U.S. soared.”

Evidently, the WTO admission supporters tried to identify benefits for the United States, too. For example, “Today, technology companies tap the Chinese market to boost profits and defray research costs.” And “The low inflation associated with cheap imports, together with Chinese purchases of U.S. government bonds, has also helped to hold down interest rates, making it cheaper for Americans to buy not only clothes and electronics but also homes and cars.”

But apparently none could point to evidence of U.S. companies’ China earnings trickling down to the American domestic economy and its workers. Indeed, the reference to “defraying research costs” looks like a euphemistic way of describing how these businesses often moved white collar and professional as well as blue-collar manufacturing jobs to China.

Similarly, the low inflation and interest rate points amount to gushing that China’s WTO membership helped enable Americans to live way beyond their means. On that score, the only sane U.S. response should be “thanks but no thanks” – since the result was a decade of bubbles whose inevitable bursting triggered the terrifying global financial crisis and ensuing Great Recession.

The unprecedented bubble decade global trade imbalances fostered by the WTO’s enabling of China’s mercantilism, and their nearly cataclysmic results, also provide vital context to claims (chiefly by former U.S. Trade Representative Charlene Barshefsky) that China “became the world’s second-largest importer, giving a boost to rich and poor nations alike.” For these imports and their growth were clearly dwarfed by China’s export surge. And although China’s post-2009 spending spree did help “the global economy from tumbling even more deeply into recession,” it’s unquestionable that the “kitchen sink” stimulus from the Federal Reserve and other major central banks played a far more important role.

But perhaps the most compelling evidence offered in Davis’ article for the abject failure of the China WTO decision came from former President Bill Clinton – who led the campaign to support Chinese membership by promising both an economic boom for U.S. exporters and irresistible pressure for a democratization of China that would bring more global peace and freedom. As Davis reports, the normally loquacious Clinton “declined to comment for this article.”

(What’s Left of) Our Economy: Trump Metals Tariffs Coverage has Just (Again) Been Exposed as Largely Fake News

Tags

ABC News, aluminum, Associated Press, Bloomberg, CBS News, CNN, durable goods, Financial Times, Jobs, Mainstream Media, manufacturing, Marketwatch.com, metals, metals-using industries, NBC News, PBS, private sector, Reuters, steel, tariffs, The New York Times, The Wall Street Journal, Trade, Trump, Washington Post, {What's Left of) Our Economy

In case you still think that President Trump’s charges of fake news-peddling by the national news media are fake news themselves, consider this: For the second time in two months, if you decided to hold your breath till you found a Mainstream Media item reporting that the America’s metals-using industries have been major job-creation leaders, not laggards, you’d have died.

Such omissions are especially important because since the Trump administration began imposing tariffs on steel and aluminum imports (in March), the media has been filled not only with predictions of massive employment and production losses in metals-using manufacturing (because the prices of two noteworthy inputs for these industries was bound to rise), but with accounts of actual economic damage that numerous companies in these sectors have already suffered. (See here and here for just two examples.) 

Last month, I noted that, for all these accounts, authoritative government data (through June) showed that the metals-using industries’ performance by both measures had both generally improved, and had indeed both generally improved more than job creation and output in the rest of manufacturing.

Since then, more steel and aluminum tariffs were put in place (mainly because some major U.S. trade partners initially exempted from the tariffs were subjected to the levies). And what did we learn from the newest jobs report, which was released last Friday, and took the story through July (on a preliminary basis)? That the metals-using industries continue to set the national job-creation pace for the entire economy, not simply for manufacturing.

Here are the percentage gains for employment in some major sectors of the economy from April (the first month during which any metals tariffs effects would have been felt) through July except for the industries noted:

entire private sector: +0.53 percent

overall manufacturing: +0.73 percent

durable goods: +0.96 percent

fabricated metals products: +1.10 percent

non-electrical machinery: +1.43 percent

automotive vehicles & parts: +1.06 percent

household appliances (thru June): -0.63 percent

aerospace products & parts (thru June): +1.05 percent

Unfortunately, it was not possible to learn any of this from America’s leading news organizations. For these figures were completely ignored.

To their credit, some leading media mentioned that Trump tariffs and trade war fears in general seemed to be having no effect on manufacturing job creation overall despite industry’s exposure in principle to the fall-out. These included the Associated Press, The New York Times, the Financial Times, CNN, ABC News, and NBC News. Yet the metals-using sectors were never mentioned.

As for The Wall Street Journal, the Washington Post, and CBS News, they made no connection of the tariff/trade war-manufacturing job connection whatever.

And several news organizations actually tried to rationalize the unexpected results. Reuters, for example, claimed that “With manufacturing payrolls increasing by the most in seven months, the moderation in hiring reported by the Labor Department on Friday likely does not reflect the rising trade tensions between the United States and other nations including China.”

According to PBS, “Economists say it is too early to tell whether the Trump administration’s tariffs on imported steel and aluminum are having a significant effect on manufacturing jobs.”

Bloomberg and Marketwatch.com weren’t as disingenuous, but still felt compelled to contend that rising trade tensions continued to cast a long shadow on the job markets’ future – without reporting that, if anything, new U.S. policies and statements were so far having exactly the opposite effect on parts of the economy most exposed to existing metals tariffs.

But no account of press coverage of these Trump trade policies would be complete without observing an equally weird development: Neither the President nor anyone else in his administration has pointed to the outperformance of the metals-using industries, either.

In a little over a week, the nation will get its next major opportunity to gauge the impact of metals and other tariffs, and future possibilities thereof – when the Federal Reserve releases the July industrial production data, which includes detailed statistics on inflation-adjusted manufacturing output. Will the Mainstream Media finally zero in on the sectors where the tariff rubber hits the road? At this rate, Americans should be grateful if they simply ended the string of job loss and other Chicken Little metals tariff impact stories.

(What’s Left of) Our Economy: Is the Offshoring Lobby Shaping U.S. China Policy Once More?

Tags

Bob Davis, China, Logan Act, offshoring lobby, Robert Mueller, Special Counsel, The Wall Street Journal, Trade, Trump, U.S. Chamber of Commerce, {What's Left of) Our Economy

Quite the nugget that came near the end of The Wall Street Journal‘s April 29 report on the run-up to the upcoming U.S. trade talks with China scheduled to begin in Beijing this week:

“During the past few weeks, China’s ambassador to the U.S., Cui Tiankai, and the U.S. Chamber of Commerce’s executive director, Myron Brilliant, operating as a backchannel between the two governments, called on their extensive contacts in Washington to try to get talks going again.”

It’s bizarre on so many levels. Most notably, but far from certainly, is the possibility that President Trump (whose campaign for the White House emphasized remaking America’s China trade and broader economic policies specifically to promote U.S. growth and employment) is being significantly influenced by the Chamber of Commerce (which has long championed a China policy that helps America-based businesses supply the lucrative U.S. market from super low-cost and largely unregulated China)?

That would be some kick in the pants to Trump supporters expecting the President to keep his China trade campaign promises.

Alternatively, the President might simply have been using the Chamber as a means of communication. But this decision would be puzzling, too, since the United States maintains a big embassy in Beijing, complete with a full-fledged ambassador, as well as numerous other official ways to talk with the Chinese. What could the Chamber add?

It’s even more interesting, and potentially important, to consider the chances that the Chamber took the initiative. If so, could the Logan Act have been violated? You may remember that this is a U.S. law requiring criminal penalties for

“Any citizen of the United States, wherever he may be, who, without authority of the United States, directly or indirectly commences or carries on any correspondence or intercourse with any foreign government or any officer or agent thereof, with intent to influence the measures or conduct of any foreign government or of any officer or agent thereof, in relation to any disputes or controversies with the United States, or to defeat the measures of the United States….”

You might also remember that in the wake of former Trump national security adviser Michael Flynn’s admission of lying to the FBI in connection with the the Bureau’s Trump Russia collusion investigation, calls proliferated to prosecute him – and other Trump-ers – for violations of this (little used) eighteenth century statute. No one outside his office knows whether Special Counsel Robert Mueller is looking into this possibility in its own probe, but this former Chairman of the organization Common Cause believes he should. If the Chamber was acting as a free agent, might it be in legal jeopardy, too?

I asked Bob Davis, a co-author of the Journal piece, about how this backchannel began, and he responded that he couldn’t go beyond his description of the actions he was told about. Which is of course fair enough for any reporter.

What should be clear, however, is that, if the Journal report is accurate, neither of the above explanations should comfort anyone, whatever their views on U.S.-China trade issues. The former could signal the imminent shattering of a campaign promise – which could only fuel further corrosive public cynicism about American politics. The latter could indicate that special interests unaccountable to the American people keep wielding ever greater influence over the nation’s policies – including those extending “beyond the water’s edge.”

So let’s all hope that Davis and his Journal colleague will keep digging, and/or that other reporters start.

Our So-Called Foreign Policy: More Upside-Down U.S. Thinking on the Korea Crisis

Tags

alliances, allies, globalism, North Korea, nuclear war, Our So-Called Foreign Policy, South Korea, The Wall Street Journal, tripwire, Trump, Walter Russell Mead, Winter Olympics

It was great to see earlier this month that Walter Russell Mead was chosen by The Wall Street Journal to be its regular foreign affairs columnist. Mead has often (though not always) been an important voice for a broadly realist approach to American foreign policy (meaning one that understands the need to set at least some finite priorities because not all good things are possible simultaneously). He’s also been a serious and insightful student of U.S. diplomatic history. Therefore, his new position seemed to guarantee that some badly needed diversity would be added to a Mainstream Media pundits lineup that has long been completely dominated by globalists of the left and right. (The Journal has specialized in the latter.)

That’s why it was so disappointing to see that in his recent, second Journal offering, Mead has lapsed into the thoroughly bizarre (but characteristic) globalist habit of viewing America’s security alliances as mattering more to the United States than to the allies.

The passage in question comes about a third of the way in. According to Mead, the real diplomatic winner of the current Winter Olympics in South Korea is not, as widely reported, Kim Yo Jong, the visiting sister of North Korean dictator Kim Jong Un. Instead, it was South Korean President Moon Jae In. That’s a perfectly reasonable conclusion. So was the first part of Mead’s explanation: “Mr. Moon got a political boost from Ms. Kim’s visit and the appearance of a thaw between the Koreas, but he avoided the backlash from appearing naive or overeager.”

It’s the second part of the author’s analysis that has gone off the deep end: Moon “also reminded the Americans that South Korea cannot be taken for granted; without Seoul’s support, the Trump administration’s North Korea policy is unsustainable.”

Actually, in a narrow sense, Mead makes a novel and (disturbingly) convincing case for this proposition: The campaign to force North Korea to the nuclear bargaining table

“has been Mr. Trump’s most effective diplomatic and political effort to date. The administration has moved B-1 bombers and F-35 fighters to the Korean Peninsula during annual military exercises. It has reached out diplomatically to countries ranging from China to Indonesia. It has coordinated speeches by officials at the Pentagon, State Department and White House to keep the government on message.

“This is the sort of orchestration that the Trump administration, and the president in particular, is supposed to be too undisciplined to carry out. The relative success of the North Korea process suggests that Mr. Trump and his staff may be more capable than critics expected in operating the complex machinery of American power.”

It’s certainly possible that, at least in an unwitting way, the President and his aides place precisely this value on their North Korea strategy. But if so, the administration would be prizing image-making over elements of strategy that are not only fundamental, but existential – and needlessly exposing the United States to the risk of nuclear attack in the process.

For even if the Trump-ers are clinging to the appearance of success or competence in their North Korea policy, the overriding reality is that American power right now is the only obstacle currently blocking a North Korean military conquest of the South, or a South Korean future dominated by endless blackmail from the militarily superior North.

Consequently, although a successful American North Korea strategy could burnish the Trump administration’s resume, and possibly shore up its domestic political support, for South Korea, it’s literally a matter of national survival at worst and of genuine independence at best.

Unfortunately, moreover, Mead’s column also explicitly makes the broader and completely ludicrous globalist argument that allies like South Korea enjoy at least as much leverage in these relationships as the United States. And as a result, he too overlooks the yawning asymmetry in the respective sets of national interests involved.

Hence his contention that crucial to any diplomatic effort to denuclearize North Korea is “the need to keep America’s alliances united. The Winter Olympics kerfuffle should remind the White House that maintaining coordinated policies with Mr. Moon will be vital in the months and years to come.”

Far more important to recognize, however – and especially given the emergence of nuclear risk to the U.S. homeland – is that by virtue of geography and military power, the United States boasts inherent options in the Korean crisis that South Korea lacks. And the principal such option is washing the nation’s hands of this entire mess.

So if any party to this relationship needs to avoid taking the other for granted, it’s South Korea. All the more so because, as I’ve written, the “tripwire” mission of U.S. forces in South Korea aims to ensure that, in the event of war, Washington comes to the South’s rescue with nuclear weapons – and before too long could thereby trigger a successful North Korean nuclear strike on an American city.

That’s not to say that South Korea lacks the right to take the lead in Korean Peninsula diplomacy, or any legitimate interests in doing so. It merits exactly these rights and interests, precisely because no country outside the peninsula has remotely comparable stakes in a peaceful resolution.

But by the same token, the United States has the right to insist that any country expecting America to run catastrophic risk on its behalf pay a price in the form of deferring to its judgment. And for the sake of the American people’s security, their leaders have an overriding obligation to remind such allies that, if they’re unhappy with these terms, they will be more than welcome to handle whatever threats they face on their own.

Im-Politic: Listen Closely to the Florida Students

Tags

adolescence, families, Florida school shooting, gun control, guns, Im-Politic, mass shootings, mental health, Nikolas Cruz, Peggy Noonan, pop culture, Ron Powers, school shootings, The Atlantic, The Wall Street Journal

As I’ve written before, the upsurge in school shootings and other mass shootings in America must surely stem from multiple causes. Aspects of U.S. gun laws clearly are defective. But broader social and cultural trends are at work as well.

The student survivors of last week’s Florida school shootings who are demanding that their elders more effectively protect them and their generation – and of course all other potential victims – deserve major credit not only for the passion and eloquence with which they are pressing the case, but for recognizing that better mental health care is essential along with better ways of keeping guns from the other Nikolas Cruz’s in U.S. classrooms.

Nonetheless, there’s a gap between their clear prioritization of gun control on the policy level, evident in their anger at the National Rifle Association, and an emotion that seems much more elemental – and compelling. Moreover, it’s doubtful that any single new law or set of new laws will make a major difference on this particular front. Consider the following statements:

>From a student survivor: “We had been doing drills on this in the past month. In every single class period, my teachers had gone through safety protocols. We have safety zones, we have protocols for every single emergency….”

>From another student survivor: “If our legislators don’t take action, how can we ever feel safe?” (Same source.)

>From that same survivor: “…I will not feel safe going back to school myself until reasonable mental health care legislation and gun control legislation is passed. Because, at this point, it’s unacceptable. How many more students are going to have to die and have their blood spilt in American classrooms, trying to make the world a better place just because politicians refuse to take action?” (

>From a student at a neighboring school: “I’ve seen these shootings happen my whole life. I’ve grown up with them. I remember Sandy Hook. I remember every single one.” (Same source as the second quote.)

It’s painfully obvious, at least to me, that what we’re being told here is that these young people are literally terrified that the kid sitting next to them, or the one sitting alone at the far end of the lunchroom, or the one who was just expelled, or one of the aimless, surly slightly older kids or twenty-somethings hanging around the neighborhood or the mall, literally is a ticking time bomb capable of exploding at any times. Moreover, the adults who have raised them and teach them are alarmed by these threats, too.  And these (all too believable) fears reinforce can’t help but reenforce the contention that something terrible has happened in America in recent decades that has turned entirely too many adolescent boys in particular into actual or potential killing machines.

Columnist Peggy Noonan made this point with her characteristic common sense and eloquence in The Wall Street Journal last week. It’s definitely worth your while. (For the record, however, I’m not entirely convinced about the abortion point.) And if you think such claims are simply right-wing talking points, take a look at this 2002 piece in The Atlantic – no conservative stronghold.

As I’ve written, it’s absolutely true that school and other mass shootings don’t happen in other high-income countries where young people are exposed to the same kind of toxic pop culture that prevails in the United States (although where the breakdown or family and community haven’t been nearly so advanced?) – which strongly supports the belief that tighter gun control is the key to stopping them or dramatically reducing the numbers. But it’s also true that these tragedies were much rarer earlier in American history, when guns were much more widespread.

So again, I strongly applaud the activism of the Florida students. I hope it doesn’t fade. I hope it helps shame American leaders into taking more productive action. But I also hope the students, their peers, and other Americans start asking more persistently not only why so many young people can so easily buy or otherwise access shockingly destructive weapons, but why they want to.

(What’s Left of) Our Economy: Some Rare Big Media Realism on Globalization

Tags

globalization, Immigration, Jobs, Labor Department, NAFTA, North American Free Trade Agreement, offshoring, Pankaj Mishra, Sarah Chaney, strikes, The New York Times Magazine, The Race to the Bottom, The Wall Street Journal, Trade, unions, wages, {What's Left of) Our Economy

Every now and then, the Mainstream Media and the establishment conventional wisdom it parrots show some signs of approaching an understanding of how trade liberalization and globalization really work. Happily, this past week was one of those weeks.

The first of these two signs came in The New York Times Magazine, in the form of an article by Pankaj Mishra, who weirdly isn’t identified in the on-line version of the piece, but who appears to be a prominent Indian writer. Its theme: The world’s leading economies – including the United States in the first two-thirds of its history and now China – have nearly all experienced their greatest rises to prosperity and power based on policies that rejected orthodox free trade principles.

To anyone who has seriously followed the trade and globalization debate over the last quarter century, the case for this claim is anything but new. It’s been made by numerous leading scholars and other analysts. What is new is for this argument to be showcased in such a high profile media outlet. On the one hand, if this kind of information was presented to readers remotely as often as the trade and globalization conventional wisdom, American policies today might be vastly different – and the economy much sounder.

On the other, because of Donald Trump’s political success, the chances of moving U.S. trade policy onto a more realistic foundation seem higher than at any time since the 1930s. So if Mishra and The Times Magazine wind up speeding up that process to any extent, and aiding the adoption by Washington, D.C. of policies that factor in this reality, more power to them.

The second sign came in a Wall Street Journal story on findings I’d spotlighted on Friday – a Labor Department study on the virtual disappearance of major labor actions like strikes from the national economic scene. In her own report on the Labor study, Journal correspondent Sarah Chaney quoted a scholar of labor relations as noting that (in her words) “one major impediment to work stoppages…is globalization.”

To which my immediate reaction was “bingo!” – along with a sense of vindication. Way back in the late-1990s, when I was researching my book The Race to the Bottom, it became clear as can be to me that most efforts to measure globalization’s impact on the U.S. economy were missing a key point: A job doesn’t have to be either eliminated by foreign competition (whether predatory or not) or offshored for American trade policies to have affected employment or wage levels. The mere prospect of offshoring in particular, and its increased likelihood as a result of trade agreements aimed at encouraging it, would also matter, and often decisively.

Wages would be the principal victim, since workers aware that their jobs could easily be sent overseas, to lower cost locations like Mexico (via NAFTA, the North American Free Trade Agreement) or China (through numerous trade liberalization decisions taken since the early 1990s) would hardly be aggressive in pressing for better pay either by striking or taking any similar actions.

And in the book, I cited some evidence for this proposition: A 1992 survey by The Wall Street Journal finding that “one-fourth of almost 500 American corporate executives polled admitted they were ‘very likely’ or ‘somewhat likely’ to use NAFTA as a bargaining chip to hold down wages”; and a 1996 report commissioned by NAFTA’s own Labor Secretariat finding that “more than half the firms…surveyed used threats to shut down U.S. operations as weapons to fight union-organizing drives.”

Moreover, it should be just as obvious that mass immigration creates the same kind of wage-depressing force.

The next step for the establishment and its media messengers to take is to recognize that the very national economic openness for which they have pushed means that terms like “the American labor market,” at least used conventionally, have become largely meaningless. In addition, supposed mysteries like continued wage stagnation during a long economic recovery featuring near-historic lows in the headline jobless rate aren’t so mysterious at all.

In fact, that supposed national labor market has for decades consisted both of American workers inside the country’s borders and all the other workers around the world that have been made available to employers by trade and immigration policies. So if you want a labor market truly capable to pushing wage growth back up to historical norms, no measures are more important than turning that labor market more genuinely national once again.

Im-Politic: The Wall Street Journal Slimes both Trump and TR on Immigration

Tags

assimilation, Cheap Labor Lobby, Im-Politic, Immigration, Jason L. Riley, nativism, progressives, racism, The Wall Street Journal, Trump Theodore Roosevelt, xenophobia

Silly me. I read the headline for Jason L. Riley’s newest Wall Street Journal article, “What Trump and Teddy Roosevelt Have in Common” and assumed he was talking about trade. That is, I thought Riley knew what he was writing about.

I’ll sure never make that mistake again! For Riley’s column was not about the economic nationalism that Roosevelt unmistakably championed – including tariffs – and that President Trump says he’s trying to put into effect. Instead, the subject was immigration – and “almost wholly incomplete” is a charitable description of Riley’s portrayal of TR’s outlook.

According to Riley, Roosevelt was a combination xenophobe and partisan hack who wouldn’t even distinguish immigrants from first generation Americans, and who sought to curb arrivals from Southern and Eastern Europe in particular because, like all Republicans, he “was concerned that too many of these latest arrivals ultimately would vote Democratic.”

Consequently, Roosevelt allegedly was all too happy to endorse the common nativist stereotype of the latest wave of immigrants as (in Riley’s words), “vermin [having] human heads with swarthy complexions, and [wearing] hats or bandannas labeled ‘Mafia,’ ‘Anarchist’ and ‘Socialist’” – not to mention assassins like Leon Czolgosz, the son of Polish immigrants who had gunned down President William McKinley in 1901.

Sound familiar? As made clear by the column, that was Riley’s intent. But whatever you think of President Trump, or current or recent immigration policy, there can be no question that Riley’s portrayal of TR renders the former president practically unrecognizable.

The heart of the legitimate case that Roosevelt harbored many of the prejudices that would shape American immigration policy between 1924 and 1965 entails the former president’s own oft-stated worldview. Entirely consistent with the main currents of progressive reform thinking of his era, he believed that different peoples of the world occupied (as one scholar has put it) “different civilization levels,” and those occupied by Americans and Europeans were at the top. Just as consistent, therefore, was Roosevelt’s support for simply cutting off immigration from China and Japan.

At the same time, his concerns may not simply have been racial. According to one scholar, as Roosevelt saw it:

“the entire ‘coolie’ class from China threatened labor relations because Chinese laborers were lured to the American shores under false pretenses and were forced to work for low wages. The deal made with Chinese labor was bound to result in a lowering of the standard of living and cause future problems. Roosevelt’s response was to close the door for Asia.”

Indeed, he reached an agreement with the Japanese government, in 1907, to resume limited immigration from Japan to the United States proper, and more extensive flows into the American territory of Hawaii. This bilateral deal also specified that the San Francisco Board of Education’s post-earthquake re-segregation of Japanese and Korean schoolchildren (with Chinese!) be reversed.

Further complicating the picture: Roosevelt’s definition of political undesirables was not limited to southern and eastern Europeans. He was just just as worried about “German-Americans active on behalf of imperial Germany in World War I.” More broadly, he by no means assumed that those ostensibly more desirable northern and western Europeans would assimilate effortlessly into American society and culture. They would need to make active efforts to give up their Old World political and religious loyalties.

And although Roosevelt’s promptings led Congress to establish in 1907 the Dillingham Commission, whose voluminous reports laid the groundwork for the ethnically restrictive Immigration Act of 1924, with the exception of the Asians, the former president, according to another scholar, “advised against discriminating on the basis of national-origin or religious beliefs.” (Asians still excepted of course.) He also opposed requiring immigrants to pass literacy tests, which were proposed largely to discriminate against newcomers from the non-English speaking world.

In addition, to a great extent, Roosevelt’s championing of urban economic and social reform stemmed from his encounters in New York City with the impoverished lives and oppressive working conditions of recent immigrants – especially from southern and eastern Europe.

Obviously, too many of TR’s attitudes on the allegedly superior and inferior qualities of whites and non-whites, and even of Europeans from different regions on the continent, are completely unacceptable by today’s standards. But a fair-minded analysis would also recognize that he was more than simply a “man of his [prejudiced] time.” In particular, unlike many of even his progressive contemporaries, Roosevelt didn’t seem to view these differing racial qualities as fixed forever by biology. He apparently believed that nurture could augment nature, and however condescending, this view unmistakably – if too implicitly – accepted the inherent equality of all.

Similarly, Roosevelt’s support for various immigration restrictions was based not on a desire to bar permanently all undesirables, however they were defined. It was based on a belief that inflows that were too great and too rapid would undercut the wages of American workers and threaten the cohesion of a country already undergoing a series of tumultuous transitions, and especially one that he and other progressives viewed as supremely important to a successful national future – the creation of a nation whose hitherto fragmented institutions (both public and private) would centralize enough to cope with the challenges of an increasingly complex and rapidly emerging economic and technological modernity.

So if a pundit or any type of analyst wanted to create a truly accurate picture of Roosevelt’s views on immigration – and their implications for America today – he or she clearly would have tried to communicate at least some of this nuance and (genuinely instructive, not exculpatory) context. But if the purpose was to produce a hatchet job aimed at serving the interests of the nation’s Cheap Labor Lobby, Riley’s column will do just fine.

(What’s Left of) Our Economy: A Unproductive Study on Productivity and Pay

Tags

Greg Ip, Larry Summers, manufacturing, productivity, productivity growth, secular stagnation, The Wall Street Journal, Trade, unions, wages, {What's Left of) Our Economy

One of the most important and heatedly debated trends affecting the economy is the nature of the relationship between what workers earn and how productive they are. Judging from a new Wall Street Journal summary of a new academic paper on the subject, the pay-productivity relationship is going to remain heatedly debated. In the process, the Journal report (the paper itself isn’t yet available on-line) indicates that in major respects, the study (co-authored by former Clinton Treasury Secretary and former top Obama economic adviser Larry Summers) may wind up making the subject more muddled than ever.

According to the Summers study (in the words of Wall Street Journal writer Greg Ip), the recent conventional wisdom about productivity since the 1970s rising much faster than pay is wrong. Instead, it found “a strong and persistent link between hourly productivity and a variety of wage measures since 1973.” And although the two sets of data have been diverging, Summers and his colleague claim that, “The problem…is that the positive influence of productivity on pay has been overwhelmed by other forces pushing the other way.”

That’s an entirely reasonable conclusion. After all, as I’ve frequently pointed, the idea that major trends and developments have only one or a small handful of causes is usually wrong. But I find the Summers case fishy for several reasons.

First, at least as Ip writes, the study’s authors don’t seem to be challenging the contention that productivity has been rising much faster than pay since 1973 at all. On a purely mathematical basis, they state that, during short periods, there’s been a consistent tendency for productivity to rise somewhat faster than pay, and that over the entire multi-decade period examined, the accumulation of these relatively modest gaps produced a large gap. That sounds like a distinction without a difference to me.

Second, Summers and colleague seem to assume that one of the productivity-enhancing forces at work in recent decades has been trade. But that belief seems pretty far-fetched given how trade policy in recent decades has pushed offshore so much American manufacturing – the economy’s productivity growth leader for the last three and one half decades – or turned the other cheek as foreign predatory practices have undercut domestic manufacturing production. Good luck to any economy thinking that it can neglect the decline of its most productive sector and maintain the pace of productivity growth.

Third, and conversely, Summers’ study assumes that forces other than trade (and technological advance) have been “eating away at the ability of workers to share fully in the rise in productivity.” The culprit they single out? “Weaker unions.”

Organized labor has undoubtedly been clobbered since 1973. But why don’t Summers and his co-author recognize that trade policy mistakes bear much of the blame? In particular, how likely are workers to bargain hard for higher wages if they realize that they can easily be replaced by a much cheaper (and equally productive) Mexican or Chinese counterpart? Moreover, wage pressure throughout the economy is bound to decrease as displaced manufacturing workers start competing for remaining services jobs.

One issue on which I do agree with Summers: the significant productivity growth slowdown that’s afflicted the economy in the post-1973 period, and especially since the last recession struck at the end of 2007, has dragged seriously on wage growth, and needs to be reversed. But unless the pay-productivity gap is closed as well, the only way for the political and business establishment to keep U.S. living standards at even minimally acceptable levels will be to keep injecting artificial stimulus into the economy, and boosting its already dangerous addiction to borrowing and spending bubbles.

In fact, there’s been a prominent economist who’s been arguing lately that that’s exactly the trap that the nation has been stuck for many years. He calls it “secular stagnation.” His name? Larry Summers.

(What’s Left of) Our Economy: The Latest Bogus Case for TPP Revival

Tags

Barack Obama, Canada, China, exports, George W. Bush, Mexico, non-tariff barriers, The Wall Street Journal, TPP, Trade, trade deficit, trade enforcement, trade laws, Trans-Pacific Partnership, Trump, {What's Left of) Our Economy

The case for the Trans-Pacific Partnership (TPP) trade deal pushed by former Presidents George W. Bush and Barack Obama, but killed by President Trump, was never serious. For example, America’s economy represented nearly two-thirds of the vaunted new free trade zone the Pacific rim deal would have represented. Many of its largest economies (notably Canada, Mexico, and Australia) were already connected with the United States by trade liberalization agreements. These and most other TPP members have depended heavily on amassing trade surpluses to generate growth, casting major doubt as to how widely they’d open their own domestic markets. And despite being widely touted as a counter to China’s growing economic and military influence in the region, the deal contained an immense back door for Chinese products in the form of sloppy rules of origin.

Now the Wall Street Journal editorial board has taken the bogus pro-TPP case another fact-free step further. It’s claiming to have unearthed evidence that Mr. Trump’s decision is already hurting American exporters. Except the only “evidence” presented is from a single Japanese study. And its findings consist not of developments that have already taken place, but of projections of what it thinks might take place.

Everyone is of course entitled to an opinion – or a projection. And maybe Tokyo’s National Graduate Institute for Policy Studies knows something about such forecasts that has completed eluded the U.S. Government – which has a terrible record predicting the results of trade deals. But everyone is also entitled to ask why the Wall Street Journal didn’t look at what is already known about export flows between the United States and its would be TPP partners since the Trump decision.

According to the U.S. International Trade Commission’s Trade Dataweb, year-to-date 2016-2017, America’s goods sales to these countries have grown by 5.36 percent. That’s somewhat less than the 6.38 percent increase in total, global American merchandise exports during that period. But not a lot less.

Moreover, this small discrepancy is anything but unheard of. Since the current U.S. economic recovery began (a period during which the TPP was being considered in Washington and all the other capitals that sought the agreement), America’s global goods exports have topped their TPP counterparts in two years, and the reverse has been seen in three years. In two other years, merchandise exports to both groups fell – both times by greater percentages for TPP exports. Moreover, the differences in none of the seven full years for which data exist is substantial.

In other words, the numbers so far support the observations that many of the biggest TPP member economies comprising the smallish non-U.S. TPP trade area (along with smaller economies like Singapore, Chile, and Peru) already have reached trade agreements with the United States – and that optimism regarding a needle-moving U.S. export boost has never been justified.

Moreover, neither the Journal editorialists or any other TPP revivalists has grappled seriously with any of the other reasons for exports skepticism. These range from the prevalence in the non-U.S. TPP economies of the kinds of non-tariff trade barriers that American trade diplomacy has never eliminated or even significantly reduced, to the related likelihood that most of the TPP provisions concerning these barriers are unenforceable.

Nor have pro-TPP voices explained why other agreement provisions – such as a yet another dispute-resolution system that would override American trade laws, plus that back door for China and other non-TPP countries – wouldn’t have supercharged U.S. imports and further swelled an already bloated, trade deficit.

The Journal‘s editorial ends with the hope that “If the 11 remaining members hold out for a U.S. return, it’s possible that rational American self-interest will prevail over protectionist bluster.” But its fact-free missive makes clear that it’s the remaining TPP supporters in the United States that urgently need to display a learning curve.