The U.S. trade representative’s New York Times article defending Trump’s trade policy makes several grievous errors.
I n his recent New York Times essay, U.S. Trade Representative Jamieson Greer defends President Trump’s trade policy to bring industry back to America, extinguish trade deficits, and browbeat other countries. Ambassador Greer characterizes this “Trump round” of tariffs as an attempt to ditch the existing paradigm and usher in a new “Turnberry” system for global trade relations, named after Trump’s golf resort in Scotland where he announced a trade deal last month with European Commission President Ursula von der Leyen. However, in assessing the merits of this reconstruction of trade, he makes several grievous errors.
His essay exemplifies the myth of American manufacturing decline, alluding to “the dangerous trajectory of deindustrialization” and “extensive and well-documented losses in U.S. industrial capacity.” Not so according to the data. In terms of real value added, the fourth quarter of last year and the first quarter of this year were the two best quarters for American manufacturing ever. The sector’s real output is only 5 percent below record highs and more than 30 percent greater than during the Uruguay Round, which Greer derisively calls “our recent experiment in global hyper-integration.”
Greer surmises that “[t]he United States has paid for the system with the loss of industrial jobs.” While manufacturing’s percentage of total employment has dwindled since its mid-20th century highs, this story is largely about rising productivity. The United States is producing as much as ever, but with fewer people. The United States has moved up the value chain into more lucrative sectors: It leads the world in aerospace and other high-tech fields and has left textiles and apparel behind.
Greer then charges globalization with “harm[ing] American workers, their families and communities by undermining a manufacturing sector that creates high-wage jobs, fosters innovation and catalyzes investment.” But Greer is living in the past — a past he views with rose-colored glasses. He fails to appreciate how America’s 21st century services economy is more than capable of providing Americans with meaningful work opportunities and higher wages than assembly-line manufacturing. Especially given the small share of Americans who express interest in factory work, there is little reason to believe that reversing the secular decline in manufacturing employment would improve prospects for workers.
Notwithstanding Greer’s claim that Trump is “implement[ing] tariffs and other economic tools to reshape supply chains and reinvigorate manufacturing,” trade barriers are inimical to bolstering U.S. industry and securing supply chains. Given that industrial materials and capital goods make up half of U.S. imports, Trump’s tariffs apply to intermediate inputs such as steel, aluminum, and copper as much as to consumer goods. As a result, and despite the administration’s lofty promises of an industrial renaissance, manufacturing is languishing with high production costs — made more acute by tariffs — as well as trade policy uncertainty which complicates business decisions. Instead of curtailing trade, policymakers can catalyze investment in U.S. industry through openness to foreign investment as well as deregulation, low taxes, and full expensing. Trump’s tariffs detract from the more favorable portions of his economic agenda.
Far from “sapping this nation of the industrial might that made it, and keeps it, a superpower,” as Greer writes, the trade deficit reflects America’s strength at attracting capital from abroad. Tariffs actually have little effect on the balance of trade, which is driven by macroeconomic factors, namely the gap between national saving and domestic investment.
Greer’s portrayal of an America victimized on trade by foreign nations is ahistorical. He laments that “[o]ver the past three decades, the United States slashed barriers to our market” while “other countries kept their markets closed to our goods.” But this claim is belied by unilateral and multilateral trade liberalization efforts in the decades after World War II which saw countries reduce average tariff rates to single digits. Trump’s “reciprocal” tariff rates — which, for all 25 of the largest exporters to the U.S., exceed those countries’ tariffs on U.S. goods — are not reciprocal at all. Switzerland, which last year unilaterally eliminated tariffs on industrial imports, now faces a 39 percent tariff, giving the lie to Greer’s insistence that Trump’s tariffs and U.S. market access are sticks and carrots to make recalcitrant countries play by the rules.
“Trump has flipped the script,” proclaims Greer, who argues that the administration’s trade actions have successfully induced foreign countries to eliminate trade barriers. The examples Greer chooses to illustrate this point are peculiar to say the least. Consider three:
Greer celebrates that “South Korea is accepting U.S. auto standards along with a 15 percent tariff,” but altogether ignores the KORUS free trade agreement, which initiated a phase-out of most bilateral tariffs. The agreement significantly liberalized auto trade in particular: South Korea slashed auto tariffs from 8 percent to 0 percent and accepted American safety and emissions standards for U.S. vehicle exports. For those concerned with righting imbalances, preserving KORUS, which President Trump renegotiated in his first term, seems like a no-brainer.
Likewise, Greer celebrates the fact that “Vietnam pledged to lower all of its tariffs and barriers” on U.S. imports, but far from being a novel occurrence, Vietnam had already offered to slash nearly all tariffs to zero a decade ago — as a member of the proposed Trans-Pacific Partnership from which President Trump withdrew in January 2017.
Finally, Greer lauds the trade deal with the European Union as “a historic agreement — one that is fair, balanced and oriented toward serving concrete national interests rather than vague aspirations of multilateral institutions.” The deal’s supposed fairness is undercut by its one-sided terms: a 15 percent U.S. tariff on European goods with no EU tariff on U.S. goods. At best, the United States substituted the aspirations of global institutions for arbitrary import promises unmoored from market realities. Pre-Trump trans-Atlantic tariffs were very low—1.47 percent on U.S. imports from the EU and an even lower 1.35 percent on EU imports from the U.S. — while cross-border investment and trade flows supported millions of jobs and businesses in both economies.
From the ashes of the world trade system, it will be up to the rest of the world to pick up the pieces. If this is what Trump’s “Turnberry system” entails, Americans will be much the worse for it.