08/10/2016 Talking Business

International trade makes the world go round.

New York was built on it, everyone engages in it.

But in this election cycle, it's getting a bad rap.

That's the topic of this week's Talking Business.

There's been a significant slowdown in global trade growth,

according to the World Trade Organisation and

In fact the WTO warned trade is likely to grow at its slowest

One reason being cited is rising protectionism.

Here in the US we are certainly hearing hostile rhetoric

Voters blame international trade for their economic woes,

and both candidates have taken up the cause.

Is trade policy the culprit for America's economic disaffection?

During the past half-century, the US economy has become more

As it has grown, so has the number of US jobs supported by it.

In 1992, trade accounted for 10% of all US jobs.

By 2013, that figure had grown to almost 22%.

But if we look specifically at manufacturing, in 1960 almost

a quarter of American workers had a job in manufacturing.

And some blame global trade for this decline.

So, what do these figures actually mean?

Has trade been good or bad for the US economy?

Here to help me decipher this are Claude Barfield,

resident scholar at the American Enterprise Institute.

You also served as an adviser to the Office of US Trade

Representing the unions we have Celeste Drake,

you are a trade and globalisation policy specialist at the AFLCIO, I'm

The American Federation of Labor and Congress of Industrial

And last but not least, David Lowenstein, you are president

of Joseph H Lowenstein Sons, a fourth-generation dye manufacturer

Well Claude, if I could start with you, talk to us

Well, because with international trade, you could trade among

the states of the United States or among the nations in Europe,

but if you could add to that economic activity with other

countries, in the current political scene a number of people,

including Hillary Clinton the other night, made the point that 95%

of customers around the world are outside the United States.

So clearly if you can latch onto that both in terms

of businesses and in terms of workers being able to produce

for trade-related things, you will be better off.

I see you nodding there, Celeste.

International trade is absolutely important and I think what you said

in the opening statement is the right question.

It's not about whether trade is the cause of some of our economic

So we have unfortunately these statistics like 95% of consumers

That's true, but about half of them live on less than $2.50 a day.

So we aren't going to be selling high-tech goods to a lot of these

folks until we get their incomes up and start building middle classes,

and then we can have a really dynamic international economy,

I would say quickly, incomes in developing

All studies show the reason they have risen is globalisation.

That the countries that were more open to trade and investment have

grown at a more rapid rate than those that were not.

And so we had less inequality around the world over the last two decades,

the last two decades, because, I think, of globalisation.

And consumers have benefited, American consumers have benefited

by being able to afford goods at cheaper prices.

David, you are someone who imports raw materials,

You've stayed in New York for four generations.

What is the competitive advantage for you of staying right

The advantage for us in New York is, I would say, the skills

We are not one of these multinational conglomerates

where we move to wherever things are cheaper.

This is where my family is from and this is

And if things are tough, we do as best we can

I can imagine maybe a couple of generations later,

if we get to be in a different category where we start having

global assets and thousands of employees, then we can start may

But as a family owned closely held small business,

this hopping around from country to country is not really

We are Americans and we do what we do right here in our home.

Is that tough when you are competing against other countries,

whether it's Mexico or China, against lower wage companies

where they can therefore produce a cheaper product?

In our business, we have a large mix of products, some of them

you could call specialties and some you could call commodities.

The commodities are subject to those price pressures,

The specialties are more dependent on our ability to innovate and be

That said, when we approach a customer or region,

we need a package of products, including the commodity side.

If we are undercut by another country in that area,

it's harder to get our foot in the door and sell the specialty.

It's certainly a factor but we try to overcome it by out

We work with a number of employers who produce exclusively in the US,

and they tend to have views on trade, in many cases that agree

As opposed to the companies that produce either only overseas or both

It's important to have lowered tariffs so you can have access

But some of the other features of trade agreements like limitations

on the government's ability to prefer American products

over foreign products, or local products in

a state or a city, those things are not helpful

And they frankly limit the government's ability in many

cases to use fiscal policy to say we want to create jobs

here and we want to do this through how we spend taxpayer money.

Discriminating in favour of US manufacturers is protection.

And we, whether a Democrat or Republican president,

We are trying to tell the Europeans or the Asians,

the South Americans, no, we want to compete on an equal basis.

So you should not intervene to help your Brazilian company

Now, what was just said means that we would then be subject

Now we don't do it a lot, I think.

The American economy by and large is the most open in the wild.

But there are these protectionist elements that we have,

The public or at least a section of them at the moment seem to be

They feel people at the top are benefiting at their expense.

Is there any statistics to back that up?

The statistics, over the last year, have shown that the American people

are much more in favour of trade and the politicians.

Unfortunately, we have two candidates, one of whom is cowardly

because her party is against her, and the other one is a demagogue.

I would also say that Republican candidates are moving

toward who is going to win, did not stand up for trade.

The American public is bombarded with anti-trade, anti-global

And yet, recent polls have shown that well into the 50s,

It depends on how the question is asked.

And also ironically, as you know, the Democrats today

when they are polled are more favourable to trade

I think that somebody answering a poll saying yes I'm in favour

of free trade is not the same thing as saying I am in favour

of the rules that are in the TPP, that look like they are going to be

Everybody likes to drink coffee and eat bananas,

It doesn't mean that they agree that foreign investors should

have a special right to sue our government,

it doesn't mean they agree with giving away the use of fiscal

policy, it doesn't mean that they agree that we should give

permanent trade advantages to countries that engage in human

There's a lot of broader questions than free trade.

Is there any evidence that free trade deals cost American

It's whether you look at the studies done by the economic policy

institute that really gauge job loss based on the size of our trade

deficit and which say that we've lost about 700,000 jobs

to Mexico because of NAFTA, or 3.2 million jobs to China

because of China's accession to the WTO.

Or more conservative estimates like the work of David Dorn

and Hanson and Autor, which say we've lost at least

a million jobs to China because of its accession to the WTO.

Trade will create job gains and job losses, and that's the case always.

And traditional theory says that nations as a whole

But that really doesn't get into questions of how much market

power do these large companies have and are they taking

the gains as profits rather than sharing them with workers.

It doesn't get into what are our domestic policies that encourage

There are a whole host of other questions.

The US just doesn't have the right policy mix to make sure

Later in the programme, why has trade become such a big

issue in this election, and what are the implications

But first let's hear from our comedy consultant Colm O'Regan.

In this week's Talking Point he went down to the docks in Dublin.

COLM: as far as I'm concerned, there's no better place to come

to look for international trade than a port.

It's got it all, ships arriving and leaving,

Containers, cranes, the whole shebang.

When I'm down here at the dockside, trade feels very tangible,

We send you some of our stuff, you send us some of yours.

It's underpinned by international agreements, and the general

assumption that trade is good for the economy.

When you're talking to trade negotiators, I used to be one,

there's a focus on opening up markets for exports.

And so there's always a sense of quid pro quo,

we'll give you some market access if you open your market.

So you can get to this sense of someone is going to walk out

Loads of containers filled with consumer goods,

But is all this stuff coming in from abroad make it difficult

for local companies to compete, and does cheap

If there's a market for a poor quality TV set in the

And the market will determine whether or not that survives.

There's also the question of selling goods in the United States below

cost, and this issue of dumping which is seen as being unfair

Dumping, of course nobody wants that.

A lot of people are very anti-free trade at the moment as a result.

In fact there's calls for protectionist policies.

One proposal which you hear is about going back,

reconstructing tariffs, building more obstacles to

And the question is whether that would return these industrialised

countries and the industrial sectors back to their former vigour.

For someone who gets as excited about trade and containers

as I clearly do, in fact I can hardly contain myself,

I find it hard to understand why anyone would want to restrict trade.

In fact politicians are full of talk about trade restriction.

We've seen certainly in the presidential debates

in the United States, for instance, I think

to some extent we see it with what is happening with Brexit

in the UK, we see it in some of the debates in the continent,

in Europe, increasing voices for more protectionism.

For closing off economies, for turning away from

The structure of global trade has changed, and there has been trade

liberalisation around the world, and therefore any move to return

to an era of protection is going to lead to lots of unpredictable

If Donald Trump gets elected, and taking him at his word,

I think we are potentially in for a significant

era of protectionism, trade wars, and deterioration in

So in these choppy and probably murky waters of International Trade,

negotiators are going to have to balance a number

There is national self-interest, there's politicians arguing

for protectionist policies, and at the same time there's

One way or another we are all in the same boat.

MICHELLE: Colm O'Regan examining the dilemmas of national interest

Remember you can see more of his films on our

Back here in the United States, the Obama administration has

been negotiating several historic trade deals.

The Transpacific Partnership with Asia and the Transatlantic

Trade and Investment partnership, or TTIP,

But both have been controversial at home.

Celeste, we've heard a lot of anti-trade rhetoric

Does this point to a more inward looking America,

and why has trade become such a lightning rod in this election?

Because it's a policy that working people don't really have a fair

Because it's negotiated behind closed doors,

because the history of it has shown that there are big winners,

but those winners tend to be the global companies.

And meanwhile you have productivity de-linking firm wages,

you have flat wages for most workers in the US from the 1970s,

you have a whole bunch of things where the future is looking a lot

more bleak than it did 20, 30, 40 years ago.

Trade is not the sole reason for that but plays a big part.

If we can reshape the rules we could make sure that trade

could benefit all across the board, and not just the very elite.

David, Celeste said that these trade deals aim to help more of the global

Do you agree with that, do you find they help you?

We are interested spectators trying to run our business,

and our business, we like to think that our business lives

and dies by how hard we work and our innovations.

And if we can out-think our competitors.

But there are these moments with the trade deals where

we are just caught in the river, and waiting for things to settle

Maybe there will be some retaliatory effect on the line as well.

I'm sure TPP would help us sell to Europe, but from my experience

with Mexico it may be short lived, it may affect some of our

Certainly the companies in the US who are selling mainly commodities

will be hurt by this, I would imagine.

Because if it's the kind of product that could just be put together

with low skilled labour anywhere in the world,

it's going to go where the labour is the cheapest and that's not here.

When you are crafting trade policy, how do

you balance national interests and international interests?

I think, if you look at TPP, sometimes we balance too

much national interest, in my view.

We wouldn't lower duties on sugar, we have protectionist

rules about textiles, where we just don't belong

But I want to go back and tie that to something that you said,

But the real truth is the United States, US companies,

are not going to compete in most cases on things

We'll take the special case of China, maybe.

But if it's more that other countries with less

skilled workers, that's where their comparative

You then say that you have other more high-value added,

and that is kind of in microcosm the story of the future

But I am curious about your thoughts on protectionism.

You've got the IMF, the WTO, the World Bank is concerned that

rising protectionist could have a negative impact

I'm curious to get your thoughts about this idea that America

is among the countries turning more protectionist.

What is really amazing is how little protection we had from 2008 to 2010

when we had the biggest recession since the 1930s.

You can trace what happened in 2009-11 with what happened

Part of it is the fact that people see with supply chains,

you start cutting things off in terms of imports,

you're hurting your own firms because they are importing

Particularly in high-end electronics.

For me, it's not that I'm not worried about protection,

but I think we dodged a real bullet six years ago and I think this

is creeping and we should try to stop it, but it's not

I want to bring in David, our manufacturer in the room.

What do you make of what you're hearing?

Something else we haven't touched on is exchange rates.

From my point of view as a manufacturer, that's something

If the exchange rate changes it affects us a lot.

I'd be interested in the effect of these various deals

In the case of NAFTA, I didn't think it mattered so much,

but in other trade deals we are talking about now

I have a feeling that it's more of a relevant factor.

It's definitely a relevant factor and was something that we pushed

a lot with American manufacturers to get enforceable rules

in the TPP to control that misalignment and manipulation.

You can literally wipe out tariff cuts overnight with the right amount

In fact the TPP doesn't speak to currency manipulation at all.

There's a separate agreement that's not included in the TPP and not

enforceable through sanctions that says countries should cooperate

Frankly, that's a big deal and is something that China has used

in addition to its state owned enterprises and subsidies.

That is going to be a problem because the countries

that are in the TPP, Vietnam, Singapore,

And if China is this aligning its currency,

they are going to follow along and we are going to lose some of

Going against China ten years ago on currency would have been valid.

The problem with now is the Chinese are trying to boost their currency.

The second thing is, Celeste knows, there is no definition of currency

manipulation that anyone can agree on.

They do not cover what our Federal Reserve did in 1908-11

when they had policies that indirectly drove down

The European Central Bank has done the same thing.

It's not the same as the direct manipulation, but people

on the other side will say what the hell are you talking about?

The effect of your Federal Reserve has the same affect indirectly,

but the same outcome that we had directly.

We are going to have to leave it there.

Claude Barfield, Celeste Drake, and David Lowenstein,

thank you very much for joining us this week on Talking Business.

Next week we will be coming from Jakarta,

Indonesia where my colleague Karishma Vaswani looks at Asia's

For now, from New York, it's goodbye.

It's pretty quiet out there right now. It scattered cloud and defuse

showers. Not much change on the way for tomorrow. Some sunshine and if

you showers, some of them could be