Monday, January 16, 2017

Why Protectionism Won't Work To Make America Great Again

In The Week weekly news is an article entitled "Protectionism's Misguided Nostalgia" by George Will:

"Trade protectionists want to make America great again by making it 1953 again"...That’s when manufacturing’s share of the labor force peaked at 30 percent. But the decline in factory jobs that followed “was not caused by imports from today’s designated villain, China, which was then a peasant society.” In reality, it was the return of competition from industrial nations devastated by World War II, combined with rapid technological advances. The latter trend continues today. Of the 5.6 million manufacturing jobs lost in the 2000s, trade accounted for only 13 percent; productivity improvements from new tech accounted for more than 85 percent. Efforts to protect workers by pricing imports out of the market through tariffs also tend to backfire, often by dramatically raising prices for consumers. In the 1980s, Ronald Reagan’s limits on Japanese auto imports helped create 44,000 U.S. jobs, but “the cost to consumers was $8.5 billion in higher prices, or $193,000 per job, six times the average annual pay of a U.S. autoworker.” Similarly, President Obama’s tariffs on Chinese tires saved 1,000 Americans’ jobs, but at a cost of $900,000 per job, “paid by American purchasers of vehicles and tires.” We’ve tried these interventions before. But for protectionism’s fans, “there is no Everest of evidence too large to be ignored.”