Tag Archives: World Trade Organization

JMO 1.

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            Both the Wall Street Journal and the New York Times have been squalling for years about how China controls most of the “rare earth” metals that are vital for much modern technology.[1]  Also, they are hard to find and difficult to develop in the United States.  That is “We’re doomed!”  Then, turns out that there are important “rare earth” sources in…wait for it…Greenland and Ukraine.  President Donald Trump has made plain his determination to get a tight grip on both.  “Oh what an awful man he is, trying to insure the well-being of the United States in such a rude fashion!” 

            The same religious-fanatic dictator has been ruling Iran for 35 years.  The elections are rigged to keep out any representative of “liberal” opinion; there’s a big political prison into which prisoners disappear and from which they rarely emerge; the morality police can get away with murdering girls who don’t wear the hijab properly; corruption is rife and the upper ranks of society live well; living standards low for most people, in large part because the country spends a lot of its oil wealth on weapons systems and on the Revolutionary Guards Corps; the regime built a “ring of fire” around Israel not as a defense against the “Zionist entity,” but as the front line in Iran’s drive to revolutionize the Middle East on its own model; and the regime is close to producing nuclear weapons.[2]  Iran also is allied with Russia, China, and North Korea.  Lots of Iranians are unhappy with their masters.  Help them pressure the regime for meaningful change. 

            America built its economic power behind a high tariff wall in the later 19th and early 20th Century.  Yes, that kept prices for consumers high.  It also created a huge number of blue collar and white collar jobs; vast national wealth, and the industrial base that decided the outcomes of both World Wars and the Cold War.  After the Second World War, the United States adopted a free trade policy as a way to restore prosperity to a war-ravaged world.  Part of this plan involved accepting higher tariffs on American imports than the Americans imposed on their trading partners.[3]  The US was big, rich, and easy, while everywhere else was a pile of rubble. 

By the end of the Cold War (c. 1990), these conditions no longer applied.  It might have been a good time to renegotiate trade relations with many countries.  “But you didn’t do that, did you?”[4]  Instead, we doubled down by admitting China to the World Trade Organization (WTO).  Cheap consumer goods flooded the country, wrecking many industrial areas of the United States.  In the first Trump administration, the president wall-papered China with tariffs and harassed Huawei, allegedly because it posed a security threat.  First, enlightened opinion deprecated this departure from “norms.”  Then Biden continued them.  Now President Trump is hammering everyone with tariffs.  People say “well the tariffs on China are OK, but he’s also hitting our friends and allies.”  Give it a couple of years and everybody will be on-board, just like before. 

Trump’s cabinet is mostly made up of clowns.  The president is pursuing real policies along with the rest of his nonsense.  This is what you get when the Establishment abdicates on solving big problems for decades. 

[1] Take a gander at Rare Earths – The New York Times 

[2] Now big chunks of Iran’s client states are reeling from hard blows struck by Israel. 

[3] The US also accepted Canada adjusting the exchange rate to make American goods expensive in Canada and Canadian goods cheap in the US. 

[4] Looking at you, William Jefferson Clinton.  We should have re-elected George H. W. Bush. 

“The System Is Blinking Red” 3.

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            In 1989-1990, the Soviet Union collapsed.  With it went the credibility of autarkic, centrally-planned economies.  Determined to maintain its monopoly on power, the Communist Party of the Peoples’ Republic of China hastened to adopt a new course.  It opened China to the global market and capitalist methods.  Essentially, use foreign-supplied capital and technology to become the workshop of the world.  Start by making cheap simple stuff, then climb up the ladder.  Pull its people out of impoverished rural life into urban prosperity.  Pull China out of Developing Country status into global power. 

American business and political leaders took an optimistic view of these developments.  China would be a cheap producers of consumer goods for Western markets, raising living standards for Western peoples by lowering costs.  China would become a consumer of high-end  Western products and expertise.  An economic revolution in China would create a growing—and increasingly assertive—middle class.  This would nudge China toward political democracy.[1]  Naturally, there would be some job losses suffered in the West.  Experience with the rise of Japan in the 1970s and 1980s showed that displaced workers would shuffle into new jobs. 

In 2001, China won admission to the World Trade Organization.  Many restrictions on Chinese exports were removed.  Things did not work out as planned.  China moved much faster than expected and on a much larger scale than had been expected.  “Many U.S. manufacturing towns couldn’t compete.”[2]  Factories downsized.  Manufacturing shrank as a source of employment in many towns.  Some workers were laid off, but most were attritted through retirement.  They were not replaced.  Most of the displaced workers were White and Black men without a college education. 

Then, it seemed, the hard-hit areas bounced back.  They didn’t return to the original state.  Instead, “affected areas recover[ed] primarily by adding workers to non-manufacturing who were below working age when the shock occurred.  Entrants are disproportionately native-born Hispanics, foreign-born immigrants, women, and the college-educated, who find employment in relatively low-wage service sectors such as medical services, education, retail, and hospitality.”[3] 

Readers may question the argument that “towns” came back, while “workers” did not.  “Those communities experienced higher unemployment, lower wages, higher use of food stamps, higher disability payments, higher rates of single parenthood and child poverty, and elevated mortality.”[4]  Would make a good movie if John Sayles was still working.[5] 

The natural response is to connect all this distress to the rejection of globalism and—eventually—to the rise of Donald Trump.  What stands out, though, is the failed hopes of the people who set China policy and their failed sense of social solidarity when the choices they made had a harmful impact on ordinary people.  Now US AID is on the block. 

[1] That’s how it had worked in Western Europe in the 18th and 19th Centuries.  Why wouldn’t it be the same with China? 

[2] Justin Lahart, “How ‘China Shock’ Upended U.S. Workers,” WSJ, 5 February 2025.  Lahart is reporting on a National Bureau of Economic Research working paper by David Autor, et al. 

[3] Places versus People: The Ins and Outs of Labor Market Adjustment to Globalization | NBER 

[4] Justin Lahart, “How ‘China Shock’ Upended U.S. Workers,” WSJ, 5 February 2025. 

[5] See: “Sunshine State” (2002) and “Casa de los babys” (2003).   

Semi Automated Weapons.

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Machines want your job!  Well, they would if they could feel desire.[1]  I guess I really mean that your employer wants your job.  Not for him/her self, or even for some idiot nephew/niece.  S/he wants it for a machine.  Liable to get it too.  Only about 13 percent (1/8-1/7) of job losses are the result of foreign competition.  The rest are the result of automation cutting the need for workers.[2]

Thus, in 1962, about 530,000 people worked in the American steel industry.  In 2005, about 130,000 people worked in the American steel industry.  That’s a 75 percent drop in employment.  However, steel production did not fall.  New technology of steel production just cut the need for workers.  More recently, computer and electronics manufacturing shed jobs thanks to automation.

However, in spite of the headlines in the New York Times, foreign competition really has taken away a lot of jobs from Americans.  China’s accession to the World Trade Organization (WTO) led to the loss of 2-2.4 million American jobs since 2000.  Apparel and textiles—the most basic products of any early-industrializing country—have suffered heavy inroads from foreign competition.

It isn’t likely to stop with manufacturing jobs, nor is it isolated to the United States.  In January 2016, one of those “we’re here to help” groups, the World Economic Forum, predicted that 5 million jobs in the top 15 economies world-wide will be lost to computer systems and robots by the end of 2020.  Two-thirds of the lost jobs will be in “office and administrative jobs.”  Already existing technologies could allow machines to do 45 percent of current work activities.  [NB: I don’t think that means 45 percent of jobs, just 45 percent of the work that many people do.  It wouldn’t be difficult to sell this as an improvement for anyone whose work includes a lot of drudgery that prevents them from doing higher-order work.]  “Work that requires creativity, management of people, and caregiving is least at risk.”

What are some of the implications of these changes?  They are both social and political.

Workers cast aside as a result of Chinese competition have had a difficult time adjusting.  As a group, they have a higher unemployment rate and reduced real income for the rest of their lives.  Also, apparently, they feel an impulse to vote for Donald Trump so as to send a wake-up call to the two mainstream political parties.  Trump and others have pandered to this by blaming immigration, and out-sourcing, and foreign competition for huge job losses.

In the past, workers flowed from declining sectors to growing sectors.  This didn’t go seamlessly: new workers who saw their parents displaced chose other lines of work, but the displaced parents had a hard time getting jobs in the “new” economy of that era.  In the past, economic change created new forms of manual labor for those without a lot of education.  This time, however, new jobs for men without college degrees have not arrived to help those displaced by change.

Perhaps more importantly, it isn’t clear that displaced workers want to adapt to new conditions and there is a policy interest in some quarters that wants to facilitate not adapting.  Thus, a story in the NYT says of one displaced worker that      “Many of the new jobs at factories require technical skills, but he doesn’t own a computer and doesn’t want to.”  [NB: That is, he doesn’t want to adapt.]  The policy proposals of many labor economists would accommodate this resistance to adaptation: strengthen unions (so that they can obstruct employer efforts to modernize production until foreign competition does what automation was not allowed to do); create more public-sector jobs (regardless of need); raise the minimum-wage (although this seems to contribute to the search for more automation); and increase the earned-income tax credit (essentially a form of welfare for the unadaptive).  Basically pay people to be unadaptive.  That is, create a market for people who resist change.  “If you build it, they will come.”

[1] “The bottom line,” The Week, 29 January 2016, p. 32.

[2] Claire Cain Miller, “What’s Really Killing Jobs?  It’s Automation, Not China,” NYT, 22 December 2016.