He’s pointing a finger at fellow economists for backlash to trade
WASHINGTON — Many mainstream economists say they’re appalled by President Donald Trump’s threats to trash trade agreements and tax imports in a blunt-force drive to shrink America’s bulging trade deficits.
Yet economists themselves bear some blame for the backlash against free trade and globalization that helped propel Trump to the White House and Britain to abandon the European Union.
So says Dani Rodrik, a Harvard economist, in a provocative new book. In “Straight Talk on Trade: Ideas for a Sane World Economy,” Rodrik argues that most economists long ignored what their own scholarship had made clear: Global free trade, for all its benefits, inevitably ends up depressing some industries and communities.
Economists kept quiet about this, Rodrik argues, because they feared any criticism of free trade would empower “protectionist” critics who oppose open trade in nearly all forms. But says Rodrik, it all backfired: By dodging an honest debate on the pros and cons of open trade, he says, economists perversely “empowered the barbarians” and made it easier for “extremists and demagogues” to win public support.
“Economic theory teaches us that globalization and openness to trade cause a lot of redistribution of income,” Rodrik says. “The flip-side of gains from trade is that some people, some communities, some parts of the country end up becoming worse off. That wasn’t a mystery. That’s what economists were teaching all along.”
Rodrik wants to be clear: He supports free trade. But he is critical of what he calls “hyperglobalization” — something he says involves wresting control of commerce from individual governments and handing it to global institutions to spur ever-freer-flowing trade and investment.
Countries should form their own policies, Rodrik says, guided by the likely impact on workers and communities. If European nations fear the consequences of genetically modified foods for people, for instance, they should be free to ban them — even knowing the trade-off will likely be fewer food choices and higher prices.
Some of his peers take issue with Rodrik’s argument. One of them, C. Fred Bergsten, director emeritus of the Peterson Institute for International Economics, argues that while some economists downplayed the costs of free trade, others, including at Peterson, backed programs to help workers who lose out to foreign competition and train them for new careers.
More at fault, Bergsten says, are business leaders and free-trade advocates in Congress who pushed trade deals but refused to pay for the safety-net programs that would support displaced workers.
Rodrik says he empathizes with the grievances that led to Trump’s election. He agrees with the president, for example, that the North American Free Trade Agreement with Mexico and Canada cost America jobs by opening the U.S. market to cheap Mexican imports and by encouraging U.S. manufacturers to move jobs to capitalize on lower-wage labor. Still, he rejects Trump’s idea that his administration could bring back those jobs by renegotiating or withdrawing from NAFTA.
“Just undoing that agreement is going to create new dislocations elsewhere,” he says, “like in all the auto supply chains” that now cross NAFTA borders.