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BK Blog Post
Posted by Jared Bernstein.
From 2009 to 2011, Bernstein was the Chief Economist and Economic Adviser to Vice President Joe Biden, executive director of the White House Task Force on the Middle Class, and a member of President Obama’s economic team.
In his oped out today, Larry Summers lands where I do in various recent posts. What he calls the “revolt against global integration” can lead to regressive Trumpian protectionism or to a new, more inclusive approach to expanded trade.
Larry lays out the benefits of expanded trade both in terms of consumer benefits and “economic integration as a force for peace and prosperity.” But, after suggesting people don’t always adequately recognize these upsides, he notes
The core of the revolt against global integration…is not ignorance. It is a sense — unfortunately not wholly unwarranted — that it is a project being carried out by elites for elites, with little consideration for the interests of ordinary people. They see the globalization agenda as being set by large companies that successfully play one country against another. They read the revelations in the Panama Papers and conclude that globalization offers a fortunate few opportunities to avoid taxes and regulations that are not available to everyone else. And they see the kind of disintegration that accompanies global integration as local communities suffer when major employers lose out to foreign competitors.
OK, maybe that’s a bit begrudging, but it’s essentially the same thing I’ve been saying for awhile now: many people believe their own well-being, along with that of their families and communities, are neither represented nor enhanced by the process by which we are expanding trade. And the politicians are listening to them.
In my work, I’ve associated this with the inadequately representative and non-transparent “free-trade agreement” (FTA) process, which, as Summers suggests, is too dominated by elite stakeholders here and abroad.
The question then becomes how can we move forward in a positive direction? How can we best tap the benefits of globalization in a more inclusive manner?
I don’t think protectionism will prevail. Global supply chains are deep and consumers will not accept the impact of Trump-level tariffs on prices. Over 300 FTAs have been enacted such that the infrastructure of international trade is in place (though it needs work…read on). Do not conflate trade with FTAs.
Thus, I tend to think Hillary Clinton has it right: “Even if the United States never signs another trade deal, globalization isn’t going away.”
Here’s Larry’s view of the way forward:
The promotion of global integration can become a bottom-up rather than a top-down project. The emphasis can shift from promoting integration to managing its consequences. This would mean a shift from international trade agreements to international harmonization agreements, whereby issues such as labor rights and environmental protection would be central, while issues related to empowering foreign producers would be secondary. It would also mean devoting as much political capital to the trillions of dollars that escape taxation or evade regulation through cross-border capital flows as we now devote to trade agreements. And it would mean an emphasis on the challenges of middle-class parents everywhere who doubt, but still hope desperately, that their kids can have better lives than they did.
Good points, all. “Bottom-up” means what I’ve been calling a more representative, inclusive process. But what’s this about “international harmonization?”
It’s a way of saying that we need to reduce the “frictions” and thus costs between trading partners at the level of pragmatic infrastructure, not corporate power. One way to think of this is TFAs, not FTAs. TFAs are trade facilitation agreements, which are more about integrating ports, rail, and paperwork than patents that protect big Pharma.
It’s refreshing to see mainstreamers thinking creatively about the anger that’s surfaced around globalization. Waiting for the anger to dissipate and then reverting back to the old trade regimes may be the preferred path for elites, but that path may well be blocked. We’d best clear a new, wider path, one that better accommodates folks from all walks of life, both here and abroad.