Economic and Engineering Experts Destroy Trump’s Trade and Tariff Memes

As much as Donald Trump and his supporters believe, and erroneously repeat ad nauseum,  that NAFTA is some horrible trade policy that destroyed U.S. manufacturing,US manufacturing output is close to a record high, even when adjusted for inflation, so a full 20 years of in-depth studies show quite a different conclusion. The Trans-Pacific Partnership is another animal entirely and, imho, is bad trade policy for the U.S., but it has absolutely nothing in common with NAFTA, and Trump shouldn’t be involved with trade or economics since he cannot distinguish between Macroeconomics and microeconomics, much less trade policy and tariffs’ cause and effect at a government level.trump

The reason Trump makes trade policy “renegotiation” sound like a good idea, is because manufacturing jobs have in fact been disappearing since the late 1980s. But they’ve been doing so for reasons totally unrelated to NAFTA or any other enacted trade policy. It’s barely related to foreign imports being made in countries that employ slave or child labor (which produce ALL of his crappy products incidentally).

In fact, since 1989, U.S. manufacturing output has surged 69% while employment in previous steel or coal-related (called the dirty-raw sector since the ’70s) sectors has fallen by 32%. That’s because the manufacturing jobs have increased in kind, in greener sectors, in which manufacturing jobs have sky-rocketed. So don’t blame NAFTA. It’s evolution and science; and they would’ve disappeared anyway. If you just have to blame someone, blame Silicone Valley.

Manufacturers are doing more with less in the traditional sectors because of technology: computerized machines, streamlined processes, and on just about any factory floor that’s been built or revamped during the last 20 years, robots. Have you seen pictures of automobile assembly lines? There are many fewer humans and many more robotics.

“Automation is eating jobs from the inside out,” says Moshe Vardi, Distinguished Service Professor in Computational Engineering at Rice University in Houston and Director of the Ken Kennedy Institute for Information Technology. “It’s the major cause of old-style, steel and related petro-chemical job losses in manufacturing.”

So, we now have independent, non-political, academic, renowned economics experts (who have proven manufacturing jobs have simply shifted into greener, cleaner sectors; not “gone overseas”) as well as the foremost engineering experts in their respective fields agreeing that NAFTA was not the cause. They could not then, and they cannot now, be manufactured in this country at the wage level required. And one would think intellectuals would be more likely to believe recognized intellectuals in their respective fields than political entities or candidates spouting what is politically expedient—or they simply do not know the facts, or are lying.But one would be wrong.

As for import tariffs, again, Trump makes tariffs his primary focus for improving jobs in the U.S. when in reality, tariffs targeting particular countries or goods has a chilling and opposite effect: High inflation and fewer competitors, and fewer choices:

How? Why? Here:

Tariffs increase the prices of imported goods. Because of this, domestic producers are not forced to reduce their prices from increased competition, and domestic consumers are left paying higher prices as a result. Tariffs also reduce economy-of-scale efficiencies by not allowing companies that would not exist in a more competitive market to remain open.

Want to know more? Read more: The Basics Of Tariffs And Trade Barriers | Investopedia http://www.investopedia.com/articles/economics/08/tariff-trade-barrier-basics.asp#ixzz4EfgUYuA6

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So one of Trump’s primary memes would render the following: along with fewer choices, we get increased unemployment on top of rapid cost inflation–due to higher cost of cheap imports, or high costs of relocating back to the U.S., where once-high-wage manufacturing is now low-wage. (All of which have a disproportionate effect on the non-wealthy of course). But if politicians get the desired response from voters, what the hell do they care? They’re in office by then and can simply blame someone else.

Of course in the presidential campaign, with Donald Trump blaming bad trade deals and unfair labor practices in China and Mexico for the loss of decent-paying blue-collar jobs in the United States, (and the actual bad trade deal, TPP, getting trashed daily) it’s understandable that people think all trade agreements are bad. “They’re eating our lunch,” idiot Trump often says of trading partners that pay their workers well below US standards and sell billions of cheap imports to Americans, which Trump himself uses himself in virtually every of his own branded crappy products that eventually go bankrupt. He can’t even run businesses, how can he lead a much more complicated set of multi-regimented set of economic variables?

Of course it’s easier to blame other countries for the loss of American jobs than it is to blame technology entrepreneurs, most of them American, who have revolutionized manufacturing and will continue to do so.Even if you can’t remember 5th grade history and the Industrial Revolution”, here’s a taste for the historically-challenged:

While industrialization brought about an increased volume and variety of manufactured goods and an improved standard of living for some, it also resulted in often grim employment and living conditions for the poor and working classes.

So just as in the last Industrial Revolution, the numbers, the history, and the facts show that technology has made many manufacturers far more productive and cut the need for human workers. These two charts show all steel and coal-related manufacturing output and the resulting effect on employment during the last 30 years – and they’re clearly going in opposite directions.

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Steel and coal related industries

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Steel and cal related industries

The loss of steel or coal-related manufacturing jobs is probably causing more damage to the middle-class than anything else, as families try to muddle through with stagnant or declining pay, decreasing opportunity and the distressing prospect that today’s digital economy is simply leaving them behind. Meanwhile, the GOP slashes unemployment benefits, training opportunities and hope.

Trump, more than any political figure of modern times, has tapped into that anxiety, with false assumptions, or plain demagoguery, with his call to “make(white) America great again” and remake trade deals that he blames for the predicament of the formerly middle class, instead of the real culprit, a modern version of the Industrial Revolution,and his party’s willingness to blame everyone but themselves for the conditions they’ve created with continuing tax breaks to the wealthy and corporations who simply hide their extra tax windfalls offshore to avoid even the most basic of responsibilities of paying for their government windfalls.

Economists of all persuasions have argued that a large-scale substitution of technology for workers is underway, and only just getting started. In restaurants, both kiosks where patrons self-order, and tablets at tables are replacing waiters who used to take your order. Robots process packages in distribution warehouses and I some larger operation like Amazon, are progressing to shipping their own deliveries by robotic means…at least partially.

White-collar work, such as legal research, is also being pursued. Researchers at Oxford University and consulting firm McKinsey estimate that nearly half of all jobs in the U.S. are vulnerable to automation. The next sector likely to be automated and robotified is transportation, as self-driving trucks, ships and construction machinery begin to come online.

In theory, people whose jobs are displaced by new technology are supposed to get retrained, move if necessary, and find new work in a growing field. But employers are not, and should not be responsible. That’s the job of responsible government and proper use of unemployment taxes. But instead of “upscaling,” most displaced workers end up “downscaling” – taking lower-paying jobs and in many cases falling out of the middle class, if they are even willing and financially able to train in the short period of time that unemployment provides. “The economy for working-class people has been miserable,” says Vardi. “They are not sharing in economic growth from the Internet, and they’ve been doing the same job for many years, with the employer stretching them as thinly as possible.”

While workers connected to the global, digital economy — the top 20% of earners, more or less – are generally doing fine, others are reeling from the twin crush of globalization and digital technology. The percentage of adult men who have a job or are looking for one is currently 69.2%, nearly the lowest level on record. In the years following World War II, more than 85% of men had a job or wanted one. The decline has been most pronounced since the Bush Crash of 2007, and that rising segment of economic dropouts tend to be older white men without a college degree – and it’s no coincidence that they are Trump’s strongest supporters.

Trump wants importers such as China and Mexico to pay larger tariffs on goods they ship to the United States, to make home-grown goods more competitive and boost hiring at home, but the fact that the only action that has EVER created jobs is more demand than can be handled by the current work force, increasing tariffs has historically and proven by statistical analysis, seems to never come up by the GOP or the broadcast media.

And, as expected from someone who knows nothing about macroeconomics, Trump hasn’t offered any plans, just empty promises impossible to fulfill. Of course that would show thoughtful analysis and Trump does not deal in facts, but technology may be the tough challenge and there is no one that Trump could blame that would give him any additional votes.

But as I’ve said before, just because one doesn’t understand the laws of physics doesn’t mean that they aren’t nonetheless true. The same goes for economic realities, and in this case, throwing all trade policies into the same category as “bad” for America.

I would humbly suggest that rather than fixing blame, perhaps Trump’s and any other realistic voters look at realistic changes that can be made and not pipe dreams that benefit no one but one’s own misguided and unknowledgeable political assumptions.

Harvey Gold