President Trump imposed tariffs on specialty steel products. A recent news story indicated that this action had benefited a Pennsylvania mill, which had added thirty or so workers and raised the question of whether President Biden would continue the tariffs. Meanwhile, the protection measures had increased the price of the steel and made it harder to get for American manufacturers, and this may decrease employment at some companies. I have no more than an Economics 101 understanding of macroeconomics, but all this made me think back to lectures on free trade that indicated such trade was good and that it increased wealth across the globe.
Assume you and I both raise cotton and make farm implements, but I am not in a good cotton-growing region and you are. You will grow more cotton than I will for the same effort. If you give up the tool business and devote yourself to the bolls, you could produce more cotton than you and I could together. I can devote myself to the hoe business, and we can both trade the fruits of our labor. The world is richer. It has both more cotton and at least the same number of hoes than without the trade.
That, of course, is the basic idea behind free trade. If each country does what it does best, and we can freely trade our outputs, then total productivity increases. Moreover, if the supply of cotton increases, then cotton should cost less, and those who purchase cotton have money left over to buy other things, increasing demand for more goods, benefiting the makers of other products as well.
Cotton can be grown in some places more efficiently than in others because of natural conditions, but different factors are at work for the efficient production of cotton fabric, if by efficient we mean cost per unit of cloth. Manmade factors now become crucial. Local wages, the costs of safety measures and pollution controls, local electricity costs and so on can determine efficiency. Although other factors will come into play, whoever pays workers the lowest wage will most efficiently produce cotton cloth. Since the wages in Bangladesh are less than at North Carolina mills, the cost of products from Bangladesh will be less than products from North Carolina. We consumers benefit. I may pay a half dollar less when I buy, in a somewhat ludicrous attempt to be cool, those patterned socks made in Bangladesh compared to those made down South. With fewer people buying their product, North Carolina workers will lose their jobs. Even so, if we add up all those fifty-cent consumer savings, it may be a greater amount than the monetary losses suffered by the workers. Seen as a whole, American society is better off. But, then again, I don’t want to be the one to tell those who lost their jobs, “Buck up. Your loss was worth it for the rest of us.” With free trade, we often get small winners, the consumers, and big losers, the laid-off workers.
Our free trade conversations now seem to center on those who have been harmed with little discussion of the benefits. To save the North Carolina cotton mills, we could put a tariff on those Bangladeshi socks, but while the tariff may be imposed on the foreign company, it really means that consumers will be charged more for the socks. If the tariff is high enough, the North Carolina mill will be competitive and will not have to shut down. Jobs are saved. But, of course, now consumers pay more for the product and have less disposable income for other stuff. If the country overall was better off economically when the foreign socks came in without a tariff, keeping them out with a tariff must mean overall the country is now worse off.
Besides a tariff or its equivalent, we should be discussing other ways to ameliorate the problems of those who have been the big losers to free trade. We should be thinking of a social net—health care, training, relocation assistance, infrastructure jobs, education incentives–if not generally, at least for those whose jobs have moved abroad. But this discussion is generally off the table. Such a social net is “Big Government,” and, goodness knows, we can’t have that. Meanwhile, a tariff–for reasons that have a mystifying logic–is somehow not considered to be Big Government even though it, in effect, is a widespread tax on consumers, a tax, like most consumer taxes, that is regressive leading to more income inequality.
A discussion of how to help workers who lose their jobs because of systemic societal changes would be valuable since it would apply to more than just those workers who have lost out to free trade. So, for example, coal miners face unemployment not because of NAFTA or other such trade agreements. President Trump had suggested that declining mining jobs would come back once those Big Government regulations were rescinded. Perhaps some work would, but, of course, just as tariffs impose costs on the larger society, the deregulatory approach also imposes widespread costs. Many of those “regulations” are protections against industrial accidents and water and air pollution that impose costs not only on hurt individuals but on society in general. However, the removal of such protections is not going to bring back many of the mining jobs. Better technology has made competitors to coal more efficient, and better technology has led to the more efficient extraction of coal. Fewer miners are needed to mine the same amount of coal as were needed a generation ago, and natural gas competes better against coal than it did in the past. No matter what, all the coal mining jobs are not coming back.
The coal industry is in illustration of an important fact: many jobs are not lost because of free trade or government over-regulation, but because of new technologies. Most of us do not see the dramatic effects of technology on employment, but in a minor way it was on display for millions in the recently completed U.S. Open tennis tournament. This sport has employed many officials for each match. In addition to the chair umpire, four officials make calls on the sidelines, one or two for the center lines, two for the baselines, two for the service lines, and one for calling lets when a serve clips the net…or, at least, it did. Through the years, an electronic device has replaced the human for let calls, and electronics were used when a player challenged a human’s line call. The Open, however, went further and dispensed with all human officials except for the chair umpire. All the in and out calls were determined not by people but by an electronic sensor and an electronic voice that sounded more human than Siri’s. This won’t make a huge difference in our employment statistics; the tournament lasts only two weeks. But a great many line callers lost their jobs.
I may not have thought of technology changing employment in tennis tournaments until recently, but the fact that technology affects jobs in all parts of our economy has been apparent for quite some time. Another minor example, this time as-seen-on-TV: In a segment of the show This Old House, plans were shown for a house with intricate, curved, intersecting roof beams. The viewers were taken not to an old-fashioned woodworking shop, but to a modern factory that had Computer Numeric Control machines. The CNC devices, after some programming, quickly cut the beams and fabricated the complex joints. Norm, a carpenter on This Old House, was duly impressed and noted that it would have taken him days to produce one such beam, while one person operating a CNC machine for a few hours could make all of them. This technology may have had the benefit of making the costs lower for spectacular building designs, but, of course, fewer people with old-fashioned skills will be employed in the fashioning of some roof beams.
Jobs are lost for many reasons, including international trade deals and technological advances. At least some of the time, I benefit because of lower costs. I have done nothing to deserve the benefit of free trade’s lower sock prices or roof beams made cheaper by technology. (On the other hand, the elimination of all those tennis lines people did not seem to translate into lower ticket prices. If the costs of the tournament were less, where did that money go?) And, of course, the mill worker, the carpenter, and the tennis line callers have done nothing to deserve a job loss. And this should lead to the societal question we don’t much discuss: Should I surrender at least part of my undeserved benefit to help those who got the punch in the gut?