- Political rhetoric distorts the realities of today’s global economy
- Better education and innovation, not protectionism, are the answer
- Intelligently constructed trade agreements should help U.S. workers
It is time to take a closer look at the political rhetoric about U.S. trade deficits with China and Mexico, as well as accompanying assertions that global trade has caused substantial losses of American jobs.
Numerous studies show that global trade has produced significant benefits for millions of workers, both here and abroad. Although certain U.S. trade agreements need revising, protectionist measures ultimately will likely increase the costs of goods and services for American consumers, while also resulting in lower global growth, less global job creation, slower increases in living standards in emerging markets, and lower productivity in developed countries.
While it grabs the most attention, increased global trade is not the primary cause of the decline in American manufacturing jobs. Instead, it is new technologies – automation and increases in factor productivity – that studies show account for approximately 65% of our lost manufacturing jobs.
It is true that the effects of global trade have been poorly managed by both the U.S. government and U.S. businesses, with the resulting adverse consequences landing disproportionately on manufacturing workers. Also, gains from global trade have not been distributed equally, spurring social unrest linked to rising income inequality between the middle class and the wealthy. However, promising workers a future that somehow re-creates the past is misleading.
If protectionism is not the answer, how should the U.S. handle global trade? We believe the key is to create a stronger U.S. economy that can succeed in today’s globally competitive world. Some specific recommendations include:
- Enhancing our system of education to create a more adaptive, flexible workforce that can capitalize on the benefits of technological change to compete better within global trade
- Driving higher productivity and higher quality in U.S. goods and services at lower costs, which should create more sustainable jobs domestically
- Managing trade agreements wisely to achieve the desired outcomes, so there are appropriate solutions for workers who are adversely affected
In short, we need to embrace global trade. When innovation, education, and flexibility are enhanced across the U.S. workforce, our productivity and competitive advantage should rise, enabling U.S. workers and the U.S. economy to succeed in the years ahead.
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