With last Tuesday’s election of Donald Trump, a reversal of the current trends in globalization may be imminent. The answer is not to slam the door on trade or to ignore the existence of a problem, but rather to start talking honestly about it and the unforeseen side effects it is having on our country and economy.
We all acknowledge that isolation and over-protection of trade is not a prudent path. But doing nothing and merely accepting these increasing trade deficits and the mass exodus of skilled jobs guarantees the continued decline of the American standard of living and the death of working class prosperity.
All things being equal, the best product at the best price should win out and reap the rewards of the greatest market share. But this is the ideal, not the reality.
Governments with their industries influence trade agreements by exploiting unfair advantages on behalf of their foreign interest. They often negotiate focused on the fiscal health and sovereignty of their nations. Many of our trading partners have negotiated their agreements from the perspective that the U.S. is a competing opponent and not a partner. Might it be time for the U.S. to join the global playing field and competitively renegotiate our terms from this same strategic perspective?
Domestic markets have always been a mixed bag. Private companies compete to openly sell products, their success determined only by price and consumer demand. But neither our domestic nor global markets operates truly freely. An overprotective, even well-intentioned, government intervenes to set certain mandated consumer protections and to ensure fairness.
Unfortunately, most government intervention obstructs free market efficiency because it drives up cost, dilutes outcomes, and limits or controls consumer choice. This involvement is overbearing and leads to unnecessary burdens on business.
American companies have a longstanding tradition of lobbying for fair and level markets by insisting that government policies be applied consistently to all competitors and products in every applicable market equally. History shows that this parity has been a vital ingredient in our domestic markets, so why would we not want to maintain similar practices within our global markets?
Globalization brings new opportunities to sell goods and services to a much bigger and expanded marketplace. We as a nation open our markets and expect that competing nations will open theirs. If any rules or government interventions exist, we presume that they will be applied consistently and equivalently to all goods and services exchanged. This is a crucial practice which upholds the principles of fair and level markets.
American corporations have often succeeded in this expanded global marketplace not by penetration of their products, but by penetration of the production of these products. It is well known that globalization has opened new markets in regions that have significantly lower cost structures. Corporations have rightly exploited this opportunity, capitalizing on this alluring feature and reaping a significant cost savings.
It is entirely understandable and acceptable to capitalize on this opportunity, but there is a price to be paid when it is achieved on an uneven market platform. Yes, American consumers benefit from lower-cost products, but this benefit is arguably more than offset by the skilled job losses and declining real median incomes.
Crony capitalism (and by extension, crony globalism) promotes specific winners and losers within our domestic and global markets. What pathways exist for the working class American suffering through the vast deportation of manufacturing, production, sales, service, and IT jobs to overseas locales?
Shifting these jobs to low-cost regions (on such a grand scale that technology and automation cannot be blamed) has ultimately led to downward pressures on wages and real median incomes. It is reasonable for domestic corporations to have seized on this global opportunity, just as it is reasonable for working Americans to be concerned by trade deficits, job deportations, lower wages and less skilled employment.
Trade with competing nations must be free, but it must also be fair and level. We must support our President-elect’s plan to adjust trade by returning home America’s capacity to produce, so that we can experience the much needed renewal of economic expansion and the long overdue boost to our wages.
Robert Chester lives in Somers.