Protectionism of the Future vs. Protectionism of the Past
Politics / Protectionism Mar 10, 2011 - 03:56 AM GMTBy: Ian_Fletcher
Protectionism is frequently tarred as a backward-looking policy which merely preserves yesterday’s jobs at the expense of tomorrow’s. This is a snappy-sounding canard, but it has nothing to do with the contemporary critique of free trade. It does, however, have something to do with some of the cruder protectionist impulses that have sometimes surfaced in the past. As a result, it’s worth distinguishing between forward-looking protectionism (the good kind) and backward-looking protectionism (the bad kind.)
It is, for example, important to avoid calling for protectionism merely to save dying industries. In recent decades, critics of free trade have reliably fretted about these industries, rarely about the harm free trade does to still healthy ones, and almost never about industries that free trade prevented America from developing in the first place.
But trying to keep a primitive labor-intensive industry in the U.S. by protecting it (and perhaps stuffing it with subsidized investment) will just squander money that would have been better spent defending an industry in which America has a fighting chance. Or breaking into an entirely new sunrise industry.
All over America, there are people stocking shelves at Walmart for $8 per hour who could have been HDTV manufacturing technicians at perhaps double that. This industry doesn’t exist in the U.S., so we don’t know what their wages would be, but we can guess by looking at other industries that require comparable skill sets. These people don’t know who they are, so they don’t complain about it, but they are just as big a part of our trade problem as the unemployed.
Most of the benefits of protectionism center on winning tomorrow’s industries and keeping today’s from falling into trouble, not on rescuing industries already dying. Centering protectionism on dying industries is like lecturing a heart attack victim lying in an ambulance on diet and exercise. Better than nothing, but still...
Industries in trouble are often (not always, as free traders claim) industries in which high-wage nations like the U.S. are becoming intrinsically uncompetitive, and which we quite rightly should be shedding. Not everybody wants to hear this, but accepting this truth is the price we must pay for constructing a rational protectionist policy that will protect industries that do deserve protection.
Protectionism cannot protect every job in America, even if this is the natural promise that tends to get made in the political arena. Even if we could, this would not be a rational objective, as keeping every existing job would mean that the workers in them could not be upgraded to better jobs over time, which is what we should want. And even if everyone can’t upgrade to a better job, the natural progression of industry life cycles means that no job will last forever. There is no future for VCR factories, even if this was a sunrise industry in 1978.
As a result, an effective defense of our industrial base will be a rolling defense, not a static one.
Ian Fletcher is the author of the new book Free Trade Doesn’t Work: What Should Replace It and Why (USBIC, $24.95) He is an Adjunct Fellow at the San Francisco office of the U.S. Business and Industry Council, a Washington think tank founded in 1933. He was previously an economist in private practice, mostly serving hedge funds and private equity firms. He may be contacted at ian.fletcher@usbic.net.
© 2011 Copyright Ian Fletcher - All Rights Reserved
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