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Why saving 'yesterday's jobs' won't help America win tomorrow

  • Engaging in open, competitive trade is key to America's overall prosperity.
  • Trade is clearly good for America as a whole, even if it may not always be good for every single American.
  • That's why it's important to prepare workers for jobs of tomorrow instead of trying to save jobs of yesterday.
A coal miner in Ohio.
Getty Images
A coal miner in Ohio.

There has been plenty of hostile talk about the North American Free Trade Agreement (NAFTA), and about possible U.S. tariffs on Chinese steel. But when it comes to trade, top sports teams can teach the Trump Administration and politicians on both sides of the aisle an important lesson: Competition is good. It improves the players and the team.

While often painful, competitive pressure has kept the United States a world leader. Yet when times are tough, many on both sides blame our competitors in international trade. If we try to prosper by shutting off trade, we will not only forfeit the country's future economic prosperity. We will forfeit the country's standing as a leader on the world stage.

There are two key reasons why engaging in open, competitive trade matters to America's well being.

First, if we allow our firms to "win" by being second or third in class, protected behind tariff barriers, we will not be world leaders. Products and services that can pass only if graded on a curve at home will not succeed abroad. Other nations will control world markets, and will provide greater value to all other consumers around the world. When it is time to write the trade rules, other nations will hold the pen. When the world looks for leadership, measured by commercial success or even military technology, the United States will not have a seat in the front row.

And second, the new technologically advancing world has created more efficient and complex cooperative production relationships. Today, about half of all U.S. imports are used as inputs by U.S. producers who then sell the resulting product. Generally speaking, the U.S. share of these supply chains includes the most demanding and best-paying jobs. Slapping those imported intermediate goods with tariffs or other trade protections would make the participating U.S. producers uncompetitive and would threaten the existing high-value U.S. jobs.

It is easy to celebrate when a few workers seem to keep their jobs because foreign competition is shut out. But what will happen when new, high-wage jobs are not even created because U.S. firms don't have access to foreign lower-value components for their higher-value end products?

"If we allow our firms to "win" by being second or third in class, protected behind tariff barriers, we will not be world leaders."

U.S. consumers enjoy higher living standards because of trade. Less-expensive imports, generally simpler and lower-value products, make consumer incomes go further. The typical consumer is estimated to get 29 percent of his or her purchasing power from trade. And it is the lower-income consumer who gains the most, because of the availability of cheaper products at the lower end of the value scale. So it makes sense for the U.S. to trade. Indeed, we would not be the same great nation if we stopped competing for international trade.

But we must recognize that although trade is good for America as a whole, trade may not always be good for every single American. And in fact, economists contend that advancing technology is causing cuts in manufacturing employment all around the world, even within nations that Americans think of as the villains in trade. In fact, the vast majority of job displacement is due to technology, not shifts due to trade. Even Foxconn, the prominent Chinese manufacturer of technology products sold in the U.S., has employed robots and laid off workers in China.

But whether the problem in any particular instance is trade or technology, the U.S. can and should achieve a win-win by helping our displaced workers to rebuild and update their skills, and to stay involved in the labor market. Allowing workers' skills to atrophy is bad for them and bad for the country. Our nation can do a much better job of retraining our workers (and making sure our new graduates are well trained in the first place). And we need to give job losers the incentive to stay in the work force even if new job offers might disappoint them at first.

To many trade opponents, this controversy is all about jobs. And that is fair – if we take in the whole picture. Our nation can't win by protecting yesterday's jobs at the cost of tomorrow's. We need to let America's advanced exporting firms compete, while helping workers in declining industries modernize their skill sets so they work their way back to the leading position that our nation must hold. If we do, all of us, and the whole world, will be better off.

Commentary by Steve Odland, CEO of the Committee for Economic Development and former CEO of Office Depot and AutoZone; and Joe Minarik, Senior Vice President and Director of Research of the Committee for Economic Development. Read their organization's new report on trade here.

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