Monday, June 18, 2018

This is Your Daughter’s Labor Movement [feedly]

This is Your Daughter's Labor Movement
https://workingclassstudies.wordpress.com/2018/06/18/this-is-your-daughters-labor-movement/

eachers protesting in Kentucky, photo from CNN

If there is going to be a revival of the U.S. labor movement, it's likely that women are going to lead it. Women activists, especially young women of color, are doing much more than resuscitating traditional unions; they're pushing boundaries that have long constrained labor, and are re-envisioning what workers' organizations can be and do.  We used to say "this not your father's labor movement."  Increasingly, this IS your daughter's labor movement, or even your granddaughter's.

Already this year, a tsunami of red-shirted, striking teachers – – mostly female – – swelled the main thoroughfares of some of America's reddest states, walking out despite the fact that public sector strikes are illegal in many of their states. Then 29,000 nurses in the University of California (UC) hospitals created the largest mass labor stoppage in years in their sympathy strike with 25,000 striking UC workers. Meanwhile, hotel housekeepers, waitresses and female farmworkers continue to boldly claim their place in the #metoo movement, ensuring that working-class women are front and center one of in the most potent workplace-based social movements in recent memory.

Women are on track to be the majority of union members in 2025. That's a big shift, but it's only part of the story of why women are poised to lead labor. In fact, women now hold the kinds of jobs that are at the epicenter of the nation's economy.  In the mid-twentieth century, one in three jobs was in male-dominated manufacturing and agriculture; today these sectors account for only one in eight.  Meanwhile, a full half of our nation's jobs are in the woman-dominated service sector.

Women are also key to the "gig economy," a term that falsely conjures up images of men driving Ubers. A recent Harvard study found that women are now the majority of workers in "alternative work arrangements" which includes temps, freelancers, and independent contractors. Some experts argue that a new government report undercounts contingent workers, but even that survey shows that a third of gig workers are employed in education and health services, both of which are female-centric — think adjunct professors, half of whom are women.

Yet women are doing more than holding a large share of the future jobs; they are expanding the range of the workers' movement's demands and raising expectations about our nation's basic social compact.  Current times demand it, because the old social compact is quickly shredding. In the mid-20th century, government-backed collective bargaining not only leavened individual workers' paychecks – – it undergirded the entire country's employer-centered social welfare state.  Following World War II, the U.S. chose not to provide universal health care and robust pensions, but instead turned to employers. But it never required employers to provide these social goods. Instead, unions negotiated for much of citizens' social welfare, through legally backed collective bargaining, and many companies without unions followed the lead of unionized industrial giants.  Unions and collective bargaining thus came to play a key role in citizens' basic social safety net.

Yet this system was never inclusive. Before the 1964 Civil Rights Act, women and people of color didn't have full access to this employer-based system because they were excluded from the kinds of jobs that were most likely to be touched by collective bargaining — and from some unions. Not only that, women have long remained the most likely to be outside this system because they were the most likely to do our nation's unpaid work, as mothers and caregivers.

Today, unions and collective bargaining can't improve social welfare in the way they once did – – too few people can enter into the system. Weak labor law doesn't support workers' efforts to form unions, and too few people are even eligible for collective bargaining because they are contractors or contingent workers, job categories uncovered in labor law. Today's challenge for working people and their organizations is to forge a new, twenty-first-century grand bargain that leverages government support in novel ways to build workers' social protections, perhaps unhitched from the employment relationship. What's exciting is that we have the opportunity remake the social compact in a way that serves what feminist social philosopher Nancy Fraser calls "emancipatory ends," meaning that issues of gender and racial equity can be at its core in a way that they weren't in the twentieth century.

And it's already happening. The women-led Jobs with Justice and National Domestic Workers Alliance, for example, are part of the Maine People's Alliance's Homecare for Allcampaign that would create an entirely fresh social welfare benefit. They have gathered the 67,000 signatures required for a November, 2018 ballot initiative that would initiate a new universal in-home care subsidy for Maine seniors and those with disabilities, paid for by a tax on those wealthy citizens' earnings that are exempt from the Social Security tax.  So not only would this universal benefit free up caregivers, largely women, to remain in the job market, but it also includes higher wages and greater professionalization for the mostly female home health aides who replace them.

Or consider the red-shirted teachers; they didn't just demand higher wages and benefits.  They demanded more money for students and an end to the right-wing gutting of our schools.  Such calls for more classroom funding aren't entirely new, points out Jon Shelton, author of Teacher Strike!, which chronicles teachers' 1970s uprisings. What is unprecedented today, he asserts, is both teachers' commitment to these demands and the public's outraged support. Teachers, in fact, have been central to forging "bargaining for the common good," one of the labor movement's most forward-thinking innovations.  Bargaining for the common good redefines collective bargaining not as zero sum contest between employer and employees, but instead as a social and economic platform that engages in larger community issues, like class sizes, racial profiling in schools, or municipal debt and spending.

Women's activism will be especially important if the labor movement must forge a new path in the wake of a negative decision in the Janus v. AFSCME Supreme Court case. This decision could strip public sector unions of the right to require fees in exchange for representing workers, thus eroding public sector unions' funding base.  A majority of the nation's public sector workers – – 55 percent – – are women. If unions are to continue as an anchor for the nation's progressive movement then women like those red-shirted teachers will need to be on the front lines of redefining union membership and renewing connections with members in the decision's wake.

Women are testing the ground for a new workers' movement that both rethinks how workers exercise their power and expands the limits for the changes they can win.  Look up from the Trump headlines, look around, and you can hardly miss that they're already showing the way.

Lane Windham

Lane Windham is author of Knocking on Labor's Door: Union Organizing in the 1970s and the Roots of a New Economic Divide.  She is the Associate Director of the Kalmanovitz Initiativefor Labor and the Working Poor at Georgetown University, and co-director of WILL Empower(Women Innovating Labor Leadership.)  



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Iron Law of History Blunts China Trade Folly [feedly]

Thi is a good piece, originallyy from Bloombert, but the graphs did not copy, and you don't want to miss them ---- the link should be free unless you have used up your freebies at the Post!


Iron Law of History Blunts China Trade Folly
https://www.bloomberg.com/view/articles/2018-06-17/iron-law-of-history-blunts-u-s-s-china-tariffs-folly

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Public Funding for Job Training at the State and Local Level: An Examination of Massachusetts, Texas, and Washington [feedly]

Public Funding for Job Training at the State and Local Level: An Examination of Massachusetts, Texas, and Washington
https://www.urban.org/research/publication/public-funding-job-training-state-and-local-level-examination-massachusetts-texas-and-washington

To provide a more complete picture of federal, state, and local job training investments, this report describes public expenditures for three states—Massachusetts, Texas, and Washington—and five cities—Austin, Boston, Houston, Seattle, and Worcester. Compared with the federally-funded Workforce Innovation and Opportunity Act, state and local investments in workforce training and related services is substantial, in some cases surpassing federal funding. States and localities demonstrate six strategies to manage funding—seeking diverse revenue sources, leveraging public- and private-funding, braiding and blending funding, using dedicated fees for training, funding sector-based training initiatives, and collaborating and coordinating to fill training gaps. Executive Summary Private Investment in Workforce Training (Fact sheet)

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Xinhua: The Customs Tariff Commission of the State Council issued an announcement deciding to impose tariffs on US$50 billion imported products originating in the United States


The Customs Tariff Commission of the State Council issued an announcement deciding to impose tariffs on US$50 billion imported products originating in the United States


Xinhua News Agency, Beijing, June 16 (Reporter Han Jie) On June 15, 2018, the U.S. government issued a list of goods subject to tariffs, which will impose a tariff of 25% on approximately US$50 billion of goods imported from China. About 34 billion U.S. dollars of goods began to impose tariff measures from July 6, 2018, and began to solicit public opinions on about 16 billion U.S. dollars worth of goods. The US measure violated the relevant rules of the World Trade Organization and is contrary to the consensus reached in the economic and trade negotiations between China and the United States. It seriously violates the legitimate rights and interests of our country and damages the interests of our country and people.

  Pursuant to the laws and regulations of the People's Republic of China Foreign Trade Law, the People's Republic of China Import and Export Tariff Regulations, and the basic principles of international law, the State Council Customs Tariff Commission issued an announcement with the approval of the State Council, deciding that 659 items originating in the United States should be approximately US$50 billion. Imported goods will be subject to a 25% tariff, of which 545 items of about 340 billion U.S. dollars worth of goods such as agricultural products, automobiles, and aquatic products will be imposed with tariffs from July 6, 2018, and the implementation time for additional tariffs on other goods will be announced separately.

.................................................. ..................

  An Interpretation of the Responsible Person in the Office of the Customs Tariff Commission of the State Council for Imposing Tariff Collection on Some Imported Goods from the United States

   The relevant person in charge of the Office of the Customs Tariff Commission of the State Council said on the 16th that on June 15, 2018, the U.S. government announced that it would impose a tariff of 25% on about US$50 billion of goods imported from China, of which about US$34 billion will be used since 2018. On July 6th, the implementation of tariff escalation measures began, and at the same time, it imposed public opinions on about 16 billion U.S. dollars worth of goods. The U.S. practice violates the relevant rules of the World Trade Organization and is contrary to the consensus reached in the economic and trade negotiations between China and the United States. It seriously violates our legitimate rights and interests and damages the interests of our country and people. China firmly opposes it.

  The U.S. imposes a 25% tariff on thousands of commodities worth about US$50 billion. It will substantially change the terms of trade of U.S. goods with the U.S., and affect the production and trade of these commodities' production and trading enterprises and their upstream and downstream affiliates. Operating. To this end, in response to the above-mentioned emergencies caused by the United States' violation of its international obligations in China, China decided to comply with the basic principles of international law and in accordance with the laws and regulations and authorizations of the People's Republic of China Foreign Trade Law and the People's Republic of China Import and Export Tariff Regulations. The same amount of imported goods in the United States is subject to the same level of taxation to protect their legitimate rights and interests.

  The Chinese side noticed that the United States issued a statement saying that if China takes retaliatory measures, the United States will continue to add additional tariffs. In this regard, China will reserve the right to take corresponding measures.

.................................................. ..................

  Xinhua Times Commentary: The United States will reverse the trend and will certainly pay a price

  The US announced trade measures to China on June 15th, again provoking a trade war against China. This veritable behavior of the United States not only undermines the consensus of both parties and damages the world trade order, but also constantly dispels the trust of the world and ultimately hurts itself.

  Recalling the economic and trade frictions between China and the United States, from May 3 to June 3, the three Sino-U.S. consultations moved forward in a candid manner toward solving the problem. Now Trump's government has once again appeared "do not fly" behavior, taxing China's goods "destructively", ignoring the overall situation of bilateral economic and trade relations, and moving further and further away in the unilateralism and trade protectionism astray. The U.S. will arbitrarily override the international rules and arbitrarily give up the rule system it has advocated. It will not solve the problem and will allow China and the United States to negotiate all the results before returning to zero. It will also have a major impact on the U.S. international image and reputation. .

  With the adjustment of the international economic and trade pattern, the U.S.'s competitiveness in the world has declined, and the promotion of unilateralism and trade protectionism has become the forerunner of its "U.S. priority" strategy. Against this background, there will inevitably be frictions between China and the United States, and it will become normal to talk about playing with all kinds of variables. However, this does not mean that one party can act arbitrarily and unilaterally to launch a trade war.

  If the trade war provoked the party does not feel pain, it will not stop its unreasonable behavior. In the face of unilateral provocations by the United States, we must resolutely fight back hard. China's position of defending the interests of the country and its people has always remained unchanged. The determination to safeguard economic globalization and the multilateral trading system has never changed. China is absolutely not afraid of any war and difficulties, and the Trump administration will behave in an awkward and capricious manner and will surely be equal. Measures of the same magnitude and countermeasures are used to counterattack. "There is preparation for small, medium, and big hits."

  The wise build bridges, and the fools build walls. In today's economic globalization, there are no isolated islands, and no country is willing to create barriers and move against the historical trend. In the face of problems and differences, it is upholding the community of human destiny, embracing the world with openness, cooperation, and mutual benefit, or choosing the country's own priorities and closing the door to building. China and the United States are using their own actions to give answers. Faced with the history of a trade reversal, the countries of the world should join hands to better safeguard economic globalization and the multilateral trading system.

  The efforts of the Chinese side to expand its opening up are not due to pressure from the United States, nor will they stop at the provocation of the United States. For China, no matter how the external environment changes, China will never yield to external pressure, nor will it change its pace of development. Going along the path of expanding and opening up is China's best response to the trade dispute between China and the United States, and it is also the responsibility of the great power that should be in the world.



--
John Case
Harpers Ferry, WV
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The U.S. obstinately bent its own way -- this will definitely hurt people




Although China and the United States have conducted several rounds of consultations on economic and trade issues in an effort to resolve differences and achieve a win-win situation, on June 15th, local time, the White House still disregards the consensus that has been formed between both sides, and insisted on throwing out a $50 billion taxation list to provoke it. The trade war between the world's two major economies has not only undermined bilateral interests but also undermined world trade order. China's first time expressed its firm opposition.

  "Illegal behavior" "damages and harms oneself", and international public opinion is shocked by the short-sighted behavior of the United States. Ever since the trade dispute was provoked, the fickleness of the United States has become the "normal", which not only has consumed and squandered its own national credibility, but has also allowed China to further recognize the unruly, self-serving nature of the Trump administration. The Chinese side has already said earlier that China does not want to fight a trade war, but it never fears a trade war. Regarding the seemingly unexpected behavior of the United States, China is well prepared and has enough determination and ability to strike back the trade war imposed on us. On the one hand, tax measures of the same scale and the same intensity have already been on the road and will be given to the United States. On the other hand, the date on which the US taxation list was landed was when all the economic and trade achievements reached through consultations between the two sides were destroyed.

  There is no winner in the trade war, and the United States instigates a trade war, which is extremely destructive to free trade, economic globalization, the multilateral trading system, and global industrial chains throughout the world. The entire world will be guilty of unilateralism in the United States. As the number one developed country, the United States should have become a common defender of the multilateral trading system and let everyone benefit from the economic development and globalization process. However, "U.S. priorities" are becoming an act of the United States alone, and the Trump administration is obsessed with playing a disgraceful role as a global economic disruptor. Recently, the United States has waved the great stick of its trade war and has rashly rushed to other countries. The former allies of the European Union, Canada, and Mexico have successively become victims of trade protectionism, fully exposing the Trump administration's deregulation of globalization and opposition to trade liberalization. Suspense. In the eyes of the United States, the rules of international trade are splendid garments, worn when needed, and taken off when they are not needed. The United States can behave arbitrarily, but the world economy and international trade have tossed with such irresponsibility and can't afford it. China must work together with other countries to resolutely fight against this irresponsible behavior, and to color the militants so that the good will accept them. lesson.

  Calculate profits when it comes to the world. Trade has always been a multilateral and bilateral behavior that promotes the interests of all parties. History has repeatedly proved that engaging in trade wars in order to solve trade imbalances is an outdated, backward, and inefficient act that not only harms the economy, but also loses morals and counters the world. The trend does not meet global interests. The multilateral trading system is the right way to resolve trade imbalances. Destruction of the multilateral trading system will only cause countries to fall back to their old game models that use each other as their neighbors. The trade war slapstick initiated by the United States has pushed the multilateral trade order to the edge of a dangerous cliff. Only the people of insight throughout the world can boycott and work together to set the course for the development of the world economy, roll the wheels of economic globalization, and crush any attempts and illusions of trade protectionism.

  "Take the ground to Qin and still hold a salary to save the fire." This is what the Chinese people have known since ancient times. In the face of the trade attack launched by power-makers, China did not choose to withdraw from the beginning, but tit-for-tatly, arguing against arguments, resolutely safeguarding national interests and the interests of the people, and resolutely defending economic globalization and the multilateral trading system. Only those who are instigated by the war can stop the war. The inciting trade warfare does not stop the unreasonable behavior without feeling pain. In response to the trade war, although we have to pay a certain price, we will look to the future. This is a good international environment for safeguarding peace and development. We will maintain the excellent situation created during the 40 years of reform and opening up. Such a price can be paid and worth paying. With the challenges and pains, China will usher in a vast space for development and greater opportunities for development.

  From the day of firm choice of reform and opening up, China was determined to fight the storm in the ocean of the world economy, and it was also accustomed to the turbulent waves on the way forward. The great American trade protectionism can not stop China's economic stability and good development, and it can't change the established direction of China's great strides in reform and opening up. As a responsible big country, China is an active participant, a strong supporter, and an important contributor to the multilateral trading system. It will not close its doors because people are unduly arguing. To deal with the external challenges of trade protectionism, the most fundamental thing is to conscientiously manage our own affairs and turn pressure into motivation. It is believed that after the turmoil, the Chinese economy will be healthier and stronger, releasing more lasting development charm.

-- 
John Case
Harpers Ferry, WV
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Economic Update - Tariffs in an Unraveling Economy - 06.17.18 [feedly]

Economic Update - Tariffs in an Unraveling Economy - 06.17.18
https://economicupdate.podbean.com/e/economic-update-tariffs-in-an-unraveling-economy-061718/


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 (size: 66 MB )

"Updates on tariffs as political fiction, Irish state apologizes for the gross exploitation of girls and women, illegal toxic vehicle emissions continue, Senator Gillibrand seeks to cut restrictions on worker coops. Interview with reporter Bob Hennelly on the US housing crisis as a sign of an unraveling economy."



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Krugman: Thinking About a Trade War (Very Wonkish) [feedly]

Thinking About a Trade War (Very Wonkish)
https://www.nytimes.com/2018/06/17/opinion/thinking-about-a-trade-war-very-wonkish.html

Until fairly recently, I didn't really think we were going to have a trade war. What I thought would happen, instead, was a bit of kabuki: America's major trading partners would make cosmetic concessions – perhaps with some lucrative payoffs to Trump businesses on the side – that would let Trump proclaim a "win", and trade would go on much as before.

The reason I expected this relatively benign outcome wasn't that Trump would get or take good advice. It was, instead, the expectation that big money would talk: corporations have invested trillions based on the assumption that an open world trading system, permitting value-added chains that sprawl across national borders, was going to be a permanent fixture of the environment. A trade war would disrupt all these investments, stranding a lot of capital, and I thought big business would get either manage to get that message through to Trump or at least get it through to Republicans in Congress, who would act to limit his room for maneuver.

But these political considerations look a lot less compelling now than they did a few months ago. With Gary Cohn gone, it's not clear that big business has any real pipeline into the White House (OK, polluters have an open line to Scott Pruitt, and predatory lenders a line to Mick Mulvaney, but these aren't the groups who will stand up against trade war.) And Congressional Republicans, terrified of the Trump base, have proved unwilling to take a stand on anything, even if big money is at stake.

Meanwhile, trade decisions are being made at Trump's whim, without input from anyone who knows anything about trade economics (Peter Navarro thinks he understands the economics, which is even worse.)

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Oh, and Trump's version of diplomacy – not just trade actions, but the systematic praise of brutal dictators and disdain for democratic leaders – has created a very angry world out there. Nobody out there wants to give Trump even the appearance of a win, and elected leaders would be punished by their voters if they did.

So a serious trade war now looks very possible, and it's time to think about what it might mean.

There are, I think, three main questions:

1. How high might tariffs go?

2. How much would this reduce world trade?

3. How costly would the trade war be?

These are all slightly tricky questions, as I'll explain. But there's a pretty good case that an all-out trade war could mean tariffs in the 30-60 percent range; that this would lead to a very large reduction in trade, maybe 70 percent; but that the overall cost to the world economy would be smaller than I think many people imagine, maybe a 2-3% reduction in world GDP.

This last calculation, however, doesn't take account of the disruptive effects of deglobalization: some people would actually gain, but a lot of people, very much including large groups and many communities in the U.S., would take big hits, especially in the short-to-medium run.

How high might tariffs go?

What do we mean by a trade war? In the current context, we mean a situation in which the world's economies, taking their lead from the U.S., abandon the rules and agreements that currently constrain their tariffs and start setting tariffs unilaterally in their perceived self-interest.

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The problematic word, of course, is "perceived". On trade, as on other subjects, Trump's perceptions generally don't seem very tethered to reality. And to be fair, the economic policy performance of other major players, notably the EU, hasn't been noteworthy for the triumph of clear economic thinking.

Still, there have been a number of attempts to model trade war over the years, relying on one of two approaches. The first is to imagine that governments actually do maximize national income, or perhaps an objective function that gives extra weight to well-organized interest groups. The second appeals to the historical experience of the world before international trade agreements became the norm. Fortunately, these approaches suggest similar tariff levels.

On the first approach: any country large enough that it can affect world prices of the goods it exports, the goods it imports, or both, has an "optimal tariff" greater than zero. The reason is that by limiting its trade, such a country can improve its terms of trade: the price of its exports relative to the price of its imports. This raises real income, other things equal. And the optimal tariff trades off the costs of reduced trade – e.g., the cost of producing goods domestically when they could be purchased more cheaply abroad – against the gains from improved terms of trade.

The problem is that if everyone does this, you get the costs of reduced trade without the benefit of improved terms of trade, because other countries are doing unto you the same thing you're trying to do unto them. So you end up in a situation of "optimal tariff warfare", which is actually more like an arms race than a shooting war, in the sense that there's (usually) no victor and no resolution, just a lot of wasted resources.

So how do you estimate the effects of optimal tariff warfare? You need a "computable general equilibrium" model of world trade – something that shows how production and trade flows depend on tariff rates, calibrated to match the actual data. Then you have to find an equilibrium (a Nash equilibrium, for readers of "A Beautiful Mind") in which each country is charging its optimal tariff given what everyone else is doing.

There are many assumptions and imputations involved, with the results depending a lot on how easily goods from one country can be substituted for goods from another – a parameter that's hard to estimate. Still, there are several fairly recent efforts: Ossa finds that a trade war would, under his favored assumptions, lead to tariffs of nearly 60 percent, while Nicita et al, using slightly different assumptions, estimate a rise in tariffs of 32 percentage points from current levels.

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If this seems too abstract, we can look at history: the Smoot-Hawley tariff, the last great protectionist move by the U.S. before we created the system of trade agreements, pushed tariffs up to around 45 percent on "dutiable" imports (tariffs were so high that most imports involved goods that for whatever reason faced no tariff at all.) You may wonder why I don't say 59 percent, which was the peak reached in 1932; but that was sort of an accident, even higher than protectionists wanted, the result of deflation that pushed up the rate of protection for those goods whose tariffs were specified in dollars per unit rather than percentages.

So both history and quantitative models suggest that a trade war would lead to quite high tariffs, with rates of more than 40 percent quite likely.

How much would trade decline?

For any given tariff rate, the amount of trade reduction depends on the elasticity of import demand – the percentage fall in imports for every one percent rise in their price. Such elasticities are hard to estimate, because we don't get many natural experiments. (Fluctuations in exchange rates change import prices, but those only give us an idea of short-run effects, and everyone believes that long-run elasticities are much bigger.)

As best I can read the literature, consensus estimates for the elasticity of import demand are something like 3 or 4, but there's not much certainty here.

If we really believe in optimal tariff warfare, however, the effects of the war on trade volumes are surprisingly insensitive to the precise value of the elasticity. Why? Because the optimal tariff also depends on the elasticity. If foreigners can easily substitute away from your goods, the optimal tariff is fairly low; if they can't, it's high. So high elasticities mean low tariffs, low elasticities mean high tariffs, and the decline in trade is similar. (See this little write-up.)

My back of the envelope calculations suggest that we might be looking at around a 70 percent fall in trade for a wide range of cases. I'd be happy to be corrected by trade modelers if that's wrong.

But if that's right, we're talking about a really big rollback of world trade. Figure 1 shows world trade (exports plus imports) as a share of world GDP back to 1950; a 70 percent reduction would bring us roughly back to 1950s levels. If Trump is really taking us into a trade war, the global economy is going to get a lot less global.

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Image
Figure 1CreditWorld BankHow big are the costs?

There has historically been a lot of hype about the evils of protectionism – Smoot-Hawley caused the Great Depression, and all that. It's also tempting to assume that because the Trumpist argument for trade war is so stupid, Trump trade policies must be totally disastrous.

But I've always ended up being really sorry when I let my political feelings override what my economic analysis says. And simple trade models, while they do say that trade wars are bad, don't say that they're catastrophic.

To do this right, we should use one of those computable general equilibrium models I mentioned above. These suggest substantial but not huge losses – 2 or 3 percent of GDP. What I'd like to do is offer a bit of intuition about why those losses aren't bigger, then explain why a trade war would nonetheless be highly disruptive.

To do this, I'll exploit a dirty little secret of trade theory: while ultimately stories about trade have to be general equilibrium, that is, they must make sure that you've kept track of all markets simultaneously, trade policy analysis using partial equilibrium – ordinary supply and demand – usually gets you more or less the right answer.

So let's think about the demand for imports as if it were an ordinary demand curve, with the costs of a tariff coming in the form of lost consumer surplus (Figure 2). Those who remember their Econ 101 will know that the costs of a market distortion normally take the form of a rough triangle (rough because the demand curve doesn't have to be a straight line, but that's a fairly minor detail.) That's because the first unit of imports lost has approximately zero cost, because people are indifferent at the margin between that unit and a domestic product, but the last unit lost imposes a cost equal to the tariff rate, because that's how much more people would have been willing to pay for the import. And the average cost of reduced imports is halfway between these values.
Image
Figure 2






So when a tariff drives up the price of imports to consumers, leading them to buy fewer imported goods, the welfare loss will be roughly
Loss = fall in imports * ½ tariff rate

Now, the U.S. currently spends 15 percent of GDP on imports. Suppose we end up with a trade-war tariff of 40 percent, and (as I've been suggesting) a 70 percent decline in trade. Then the welfare loss is 20% * 0.7*15, or 2.1% of GDP.

That's not a small number, but it's not that huge either: at the bottom of the Great Recession, CBO estimates that we were operating 6 percent below potential GDP. Of course that loss was temporary, while a trade war might be forever.

But these net welfare costs may miss the real point, which is disruption.

Disruption

The U.S. currently exports about 12 percent of GDP. Not all of that is domestic value added, because some components are imported. But there's still a lot of the economy, maybe 9 or 10 percent, engaged in production for foreign markets. And if we have the kind of trade war I've been envisaging, something like 70 percent of that part of the economy – say, 9 or 10 million workers – will have to start doing something else. And there would be a multiplier effect on many communities now built around export industries, which would lose service jobs too.

This is just the flip side of the "China shock" story: even if you believe that the rapid growth of Chinese exports didn't cost the U.S. jobs on net, it changed the composition and location of employment, producing a lot of losers along the way. And the "Trump shock" that would come from a trade war would be an order of magnitude bigger.

You can see hints of what might be to come in what's already happening. So far we've had only small skirmishes in what might be the looming trade war, but the effects don't seem trivial to soybean farmers already facing sharp price cuts and steel users already facing much higher costs. If the trade war happens, expect to see many, many more stories like this.

O.K., there's no certainty that any of this will happen. In fact, I still find it hard to believe that we're really going to go down this path. But I also don't have any plausible stories about what's going to make Trump stop, or induce other big players to give in to his demands.

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