• Breaking News


    Search This Blog

    Saturday, August 5, 2017

    Schumer Unveils Democratic Trade Policy Geared For 2018 Election

    Chuck Schumer has laid out the Democratic approach to trade in the latest addition to the "Better Deal" plan being put together for the 2018 election. While the media reports describe the approach as being very similar to Trump's, I don't think that is entirely accurate. Although there is clearly an emphasis on protecting American workers, the trade plan outlined by Schumer does not involve tariffs or trade wars that Trump favors. Instead the plan focuses on targeted protection of American workers from overseas buyers, ensuring standards are raised for foreign workers in trade agreements, and preventing offshoring of jobs through changes in the tax code.

    One of the major planks of the plan is to create an agency that would have the ability to block foreign purchases of US companies if it was determined that purchase would threaten American jobs. The new agency may, in fact, be redundant as there is already an agency, the CFIUS, tasked with determining whether a purchase of a US company may provide a foreign company with the ability to get an upper hand in certain technologies. In fact, Schumer is proposing a bill that would allow the CFIUS to do exactly what the proposed new agency would do. In addition, Schumer's bill would ask the CFIUS to block Chinese purchases until they do more to help defuse the North Korean nuclear threat.

    Another part of the plan is the creation of an "independent trade prosecutor" who would be responsible for investigating unfair trade practices by other countries and challenging those practices in a venue outside the World Trade Organization (WTO). I have to admit that this part of the plan is a bit disturbing because going outside the WTO will only end up with similar retaliatory actions by other governments and potentially cause chaos down the road in international trade.

    More importantly, Democrats want future trade agreements and a renegotiated NAFTA to include specific outcomes to raise standards for foreign workers so that American workers will be less disadvantaged. As one analyst says, "There is no legalese about ‘striving’ to meet nonbinding ‘declarations.’ It's outcome-focused: full stop." This is critically important and a way to protect American workers while making sure the living and working standards of foreign workers actually improves.

    In addition, the plan includes taxing American companies for outsourcing jobs overseas and, admittedly mimicking Trump's "Buy American", encourages the use of American made products in new infrastructure.

    While, as I've noted above, I'm not crazy about resolving disputes outside the WTO or think that the "Buy American" plan will be particularly effective, it is without doubt good politics as far as the Democrats are concerned, especially for those Democratic Senators who are defending seats in states that Trump won. In addition, Schumer has a chance to create a split between the President and the free traders in the Republican party over the next year, not only on trade but also perhaps on infrastructure.

    Economists are screaming that the Democratic plan is protectionist. But virtually every country has some kind of protective policies. In Europe, much of it is geared to protecting the agricultural sector. And here in the US that is also true to some extent, with wasteful and useless subsidies for things like ethanol or the sugar industry. Instead, in this day and age, we should protecting important nascent technological industries for a limited period. The chip and solar panel industries are two cases where technology largely developed and perfected here in the US were essentially handed over to the Asian tigers to destroy our manufacturing base, primarily because those Asian countries subsidized those industries. Even now, in 2016, China is planning to spend $170 billion over the next few years to develop a domestic chip industry.

    Despite what economists may say, governments are continually engaged in protectionist activities. Dean Baker has been railing for years about how white collar professionals in the medical and pharmaceutical industries here in the US have been effectively insulated from foreign competition. The real answer is to make sure those protectionist policies are actually benefiting important industries and workers, rather than those with the most powerful lobbies. That, of course, is admittedly easier said than done.

    As with so many policies, Trump ran on a slogan that was admittedly popular but had no detailed thinking behind it other than slapping countries he thought were dumping illegally here in the US with across-the-board tariffs. Democrats, on the other hand, seem to be taking a much more nuanced and targeted approach to "protecting" the actual workers and industries that are being harmed by unfair foreign competition. But I'm guessing you could make that statement about the difference in approach of the two parties on so many policies.

    No comments:

    Post a Comment