ABC The Drum
Free trade agreements have long been blamed for outsourcing and the loss of local jobs but protectionist policies also result in outsourcing — and can lay claim to an even longer history of doing so, writes
"Why, exactly, aren't we seeing more protection?" And why aren't politicians looking at the ongoing recession and saying "hmm, a tariff . . . could clearly help create jobs?" New York Times columnist Paul Krugman recently asked.
First off, as Krugman should well know, there are plenty of protectionist policies other than protective tariffs, high among them government subsidisation of industries and currency manipulation.
Secondly, we have indeed been witnessing mounting calls for protectionism in response to the Great Recession, whether we look at the ongoing Sino-American tariff war, the Australian Green Party's attacks upon the Trans-Pacific Partnership, or whether we look at, well, just about anywhere else. World Trade Organization (WTO) director-general Pascal Lamy even now warns us that "the threat of protectionism may be greater now than at any time since the start of the crisis," a sentiment seconded by Lamy's just-named successor, Roberto Azevedo of Brazil.
In the United States, the debate surrounding protectionism is of course closely tied to jobs — or the lack thereof. The current high American unemployment rate (hanging around 7.5 per cent) is certainly an ongoing cause for concern: and made even worse when domestic jobs get shipped overseas. Protectionist critics have long placed much of the blame for outsourcing on American free trade agreements (FTAs).
Such anti-free-trade attacks have proven especially popular during presidential campaigns. On the 2012 campaign trail, Barack Obama and Mitt Romney took turns taking potshots at one another over their respective proclivities for outsourcing American jobs overseas. Last December a Huffington Post columnist belatedly bequeathed to Bill Clinton the nickname "Outsourcer-In-Chief" for signing NAFTA into law in 1993. Similarly in 1992 Ross Perot ran for president by pointing American ears to the "giant sucking sound" of jobs heading to Mexico.
Protectionist volleys against the fast-developing Trans-Pacific Partnership (TPP) and Transatlantic Trade and Investment Partnership provide even more recent cases in point. The Teamsters have been particularly vocal in requesting that the TPP have safeguards against outsourcing by including a "Buy American" requirement, and the AFL-CIO warns that the transatlantic "NAFTA with Europe" might very well be little more than a smokescreen for outsourcing jobs to Eastern European countries, where wages and worker protection are both relatively low.
Admittedly if a transatlantic trade partnership is established, then some jobs will more than likely move to Europe, and vice versa. But less noticed (and denied by economic nationalists today) is that protectionist policies also result in outsourcing — and can lay claim to an even longer history of doing so.
If we were to travel back to the late 19th century, for example, we would find that American manufacturers like Singer Manufacturing Company and Westinghouse were picking up shop to Montreal in order to get around Canada's 1879 protectionist tariff. We would similarly discover that various textile firms in England had "moved a whole or a portion of their plant across the Atlantic" to American shores in 1890 to avoid the high tariff walls erected by the US McKinley Tariff.
Fast-forward to today and at first glance we might find it surprising that, amid an era ostensibly dominated by free trade and neoliberal institutions like the WTO, tariff wars are still alive and well — and that outsourcing follows in their wake.
The Los Angeles Times, for instance, has just reported on a massive EU tariff hike on American-made women's denim trousers, jumping from 12 per cent to 38 per cent, enacted in retaliation against continued US protectionism against the EU. This new EU economic nationalist legislation is forcing US jeans makers to consider moving their production out of the country. Brazil has similarly been forcing tech industries like Apple and Asia's Foxconn to relocate jobs to Brazil by means of subsidies and by threatening to maintain high tariffs on imports.
Economic nationalists, ignoring these inconvenient connections between protectionist legislation and outsourcing, instead more comfortably focus their ire on FTAs. Such critics, however, must realise that protectionist policies are not inherently a panacea for the ills commonly associated with neoliberalism.
Nor is protectionism inherently in opposition to the forces of global economic integration, despite what diehard free-market neoliberals might say to the contrary. Rather, protectionist policies, whether by way of high tariff walls, government subsidisation, or currency manipulation, are part and parcel of modern globalisation — and part and parcel of job relocation.
In other words, FTAs do not have a monopoly on outsourcing. Rather, both FTAs and protectionist legislation have the ability to simultaneously send jobs out and bring them in, depending on the job and depending on the sector.
It's therefore high time that advocates of protectionism stop outsourcing to FTAs the sole responsibility for job flight, and start taking some of the credit.
This article was originally published at ABC The Drum