In this second edition of Current Accounts, the Hinrich Foundation's podcast on global trade, our Research Fellow Stewart Paterson speaks with Jeff Ferry, chief economist at the Coalition for a Prosperous America, on how globalization has evolved from a worldwide success for multinational corporations to a dilemma for the American economy, blamed for job losses, low wages, and slow growth.
In key parts of the world, and not least in the planet’s largest economy, trade has become something of a dirty word. In democracies, politicians that advocate for greater levels of global trade are finding themselves ever more unelectable.
Many voters in the US, in particular, have in large swaths turned against the idea that trade is a boon for economic growth. In Washington, leaders and lobbyists no longer dare speak in favor of free trade agreements or offering market access to foreign economies for fear of getting run out of office.
In large part, the belief is that trade – and its byproduct, globalization – has benefited a select slate of large corporations and elites, but left many industrial belts jobless and stagnating. Meantime, China and other Asian economies that bid to manufacture the products that the US chose to offshore have sustained stratospheric growth rates and persistent current account surpluses against the US that has aggravated, in Ferry’s view, de-industrialization, social inequalities, and, increasingly, national security threats.
In trade policy circles, such views are by no means theocracy. Many believe that globalization remains inevitable, though its restructuring – or a “reglobalization” led by geopolitics – is equally inescapable in the rising Great Power rivalry between the United States and China. Supply chains have grown so complex that attempting to reshore all of them is a fool’s errand, some argue. These arguments too will be showcased as the Current Accounts series progresses.
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Here’s an excerpt of Ferry’s conversation with Current Accounts:
Stewart Paterson: The clear barrier seems to have been over the last 20 years, or much of the last 20 years, a reluctance on China's part or the current account surplus countries generally, to stimulate domestic demand to a level that brings their current account back to balance. And therefore, a disproportionate amount of the responsibility for ensuring there is sufficient demand in the world has fallen upon the United States, it has become this kind of consumer of last resort.
But implementing a more balanced global economy or encouraging a more balanced global economy is going to require a lot of cooperation, isn't it? And the level of cooperation that existed in the World Trade Organization in the early part of this century seems to have been sort of inadequate for the job at hand. And that was before the organization and the multilateral trading system generally started to fray at the edges. So, do we not enter into a period here of sort of trade anarchy?
Jeff Ferry: Yes, you could call it trade anarchy, or you could call it, the revolt of the 'dumping-ground countries'. As you say, the United States has been the dumping ground for dozens of countries, really, that want to expand production.
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Tune into the Hinrich Foundation’s podcast series for insights on international trade.