Enforcing Trade Rules is Not a Trade War

Stan Sorscher

Stan Sorscher Labor Representative, Society for Professional Engineering Employees in Aerospace

Enforcing Trade Rules is Not a Trade War

The recent tariffs on steel and aluminum have been characterized as trade war. This is weird, because countries often enforce trade rules with targeted tariffs and sanctions, and markets adjust. What’s the real issue?

In the orthodoxy of free trade, tariffs are heresy. Any tariff suggests that the neoliberal free trade approach has failed and government intervention is required. Also, if we protect steel, then the “protectionist barbarians” all rush in and want import restrictions, too.

This begs the question, “Why have rules for globalization at all, if we won’t enforce them?”

The context for the recent steel and aluminum tariffs should start with a central message from the 2016 presidential campaign. Millions of workers and communities around the country feel left behind by our approach to globalization. We can do something about that ….. or not.

President Trump speaks in terms of win-lose or “everyone is out to get us.” But he is doing something. The advice from free-trade establishment experts seems to be:

●  We can’t do anything;
●  Don’t worry about large chronic trade deficits, de-industrialization, stagnant wages, and growing inequality; and
●  At some point in the future, China will realize that our approach is right and theirs is wrong.

This is a tough message in communities that have lost jobs in aluminum, logging, and other industries that had sustained those communities for many years.

A better leadership message for tariffs would give more context for these tariffs.

First, China has built historic overcapacity in steel and aluminum. Chinese leaders recognize they should close some plants, particularly those that are most polluting. Multi-national talks have tried to address this for years. China has slow-walked that process. Their dumping has continued, holding the price of steel below the fair market level. This damages our steel and aluminum industries, which have closed facilities and laid off tens of thousands of workers.

It should not be our public policy to let China distort markets and take production from the U.S. to China. Our economy has already lost electronics, home appliances, textiles, solar panels, and many other manufacturing industries. If China displaces our steel and aluminum, they could repeat that process with cars and airplanes.

Tariffs are rough tools, but legitimate and appropriate in cases where dumping has been identified. Economist Rob Scott proposed a refinement to Trump’s tariffs. Any country that also has a tariff on steel from China would be exempted from our tariff. This would reverse President Trump’s fascination with trade war, by calling for a multi-lateral defense of appropriate rules for globalization.

Second, China, Japan, South Korea, and other countries have well-designed industrial policies that serve their national interests and have raised their living standards. For decades, we have followed a particularly weak industrial strategy, which diverts gains to those at the top, while de-industrializing our economy, worsening inequality, and eroding confidence in social and political institutions.

Our approach works very well for investors and global companies, but leaves most people behind. Our neoliberal free-trade approach to globalization is exhausted socially, politically, and economically. Bernie Sanders, Hillary Clinton, and Donald Trump all said we need a new approach to globalization. Well-targeted tariffs would be part of that. We should also stop China’s misalignment of currency, which encourages companies to move production from the U.S. to China. Renegotiating NAFTA gives us an opportunity to strengthen labor rights, help the environment, and change other rules that have encouraged production to move offshore.

In general, we need more effective national strategies that recognize our national interests, and make our economy fairer and stronger. We have done that in our past. Other countries do that for themselves, now.

Side note #1: We should recognize social dumping as a legitimate trigger for “border adjustments,” which would have the same general effect as tariffs. From that perspective, the recently shelved Trans-Pacific Partnership trade deal (TPP) should never have included five countries that fail to meet global standards in fighting human trafficking. Even worse was inclusion of Malaysia, a 6th TPP country that was ranked by our State Department as being among the worst in the world for human trafficking.

Side note #2: Nothing in economics or trade theory says we need maximum possible trade. There is an optimum level of trade, which may be less than what we have now.

Neoliberal free trade is the philosophical opposite of industrial strategy. Our free trade approach blurs national boundaries and national identities. It puts interests of global investors above public interests. It thwarts national policies.

Many of our major trading partners have effective industrial strategies. This is not about trade war. It’s game theory. Countries with effective strategies will prosper while those with ineffective strategies will fall behind.


This is republished from The Stand.

Stan Sorscher is on staff at the Society of Professional Engineering Employees in Aerospace (SPEEA), a union representing over 20,000 scientists, engineers, pilots, technical and professional employees in the aerospace industry. He is President of the Washington Fair Trade Coalition, and represents organized labor on the Board of the Puget Sound Regional Council Economic Development District. He was appointed by the Governor to the Board of the Export Finance Assistance Center of Washington. After receiving his PhD in physics from UC Berkeley, he worked for two decades at Boeing, building optical, ultrasonic, and X-ray systems to visualize materials and assemblies. Follow Stan Sorscher on Twitter: www.twitter.com/sorscher


Posted In: Allied Approaches

Union Matters

Federal Minimum Wage Reaches Disappointing Milestone

By Kathleen Mackey
USW Intern

A disgraceful milestone occurred last Sunday, June 16.

That date officially marked the longest period that the United States has gone without increasing federal the minimum wage.

That means Congress has denied raises for a decade to 1.8 million American workers, that is, those workers who earn $7.25 an hour or less. These 1.8 million Americans have watched in frustration as Congress not only denied them wages increases, but used their tax dollars to raise Congressional pay. They continued to watch in disappointment as the Trump administration failed to keep its promise that the 2017 tax cut law would increase every worker’s pay by $4,000 per year.

More than 12 years ago, in May 2007, Congress passed legislation to raise the minimum wage to $7.25 per hour. It took effect two years later. Congress has failed to act since then, so it has, in effect, now imposed a decade-long wage freeze on the nation’s lowest income workers.

To combat this unjust situation, minimum wage workers could rally and call their lawmakers to demand action, but they’re typically working more than one job just to get by, so few have the energy or patience.

The Economic Policy Institute points out in a recent report on the federal minimum wage that as the cost of living rose over the past 10 years, Congress’ inaction cut the take-home pay of working families.  

At the current dismal rate, full-time workers receiving minimum wage earn $15,080 a year. It was virtually impossible to scrape by on $15,080 a decade ago, let alone support a family. But with the cost of living having risen 18% over that time, the situation now is far worse for the working poor. The current federal minimum wage is not a living wage. And no full-time worker should live in poverty.

While ignoring the needs of low-income workers, members of Congress, who taxpayers pay at least $174,000 a year, are scheduled to receive an automatic $4,500 cost-of-living raise this year. Congress increased its own pay from $169,300 to $174,000 in 2009, in the middle of the Great Recession when low income people across the country were out of work and losing their homes. While Congress has frozen its own pay since then, that’s little consolation to minimum wage workers who take home less than a tenth of Congressional salaries.

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A Friendly Reminder

A Friendly Reminder