Editor’s note: President Donald Trump has pushed an America-first agenda that seeks to reshape the country’s trade policies and relationship with the rest of the world. NewsHour economics correspondent Paul Solman spoke with the economist and historian Adam Tooze about Trump’s approach to trade and globalization for a Making $ense segment airing Thursday. Their conversation is published here, edited for length and clarity.
PAUL SOLMAN: Of all the countries in the world, what country, besides the United States, could essentially operate on its own?
ADAM TOOZE: One of the deeper logics behind the Trump program is [the idea] that for the United States, of all the economies in the world, this makes the most sense. That’s not saying that most economists would agree that this is, indeed, an optimal economic policy. But it’s one which in the American case, the costs and benefits are relatively favorable. It’s not an option, for instance, for Singapore or Hong Kong. It’s not an option, even, for a society like Germany, which is fundamentally reliant on trade. In the United States, a relatively small fraction of jobs are dependent, fundamentally dependent, on export.
PAUL SOLMAN: So then, what is the economic historian’s argument against doing it?
ADAM TOOZE: I think the main argument against doing it is one orientated towards the future. The question really is the role of trade in long-run economic development. It’s a question of the role of trade, and foreign investment, both imports and exports, the entire metabolism, if you like, of America’s relationship with the world economy in any future vision of the United States in the 21st century. The idea that the United States economy could subsist within the bubble — the very ample bubble of American resources — deep into the 21st century, I think strikes most people as frankly surprising that that’s even [considered as] an attractive vision. The United States has done well, on average, in general, with globalization. There have been losers, but there have been more winners than there have been losers, and most people I think continue to regard a strategy of globalization as a winning strategy for the United States.
PAUL SOLMAN: Is there not evidence from history that globalization can be a losing strategy?
ADAM TOOZE: There are societies arguably for which it has been very difficult, but they tend to be middle-income societies, societies which get caught, if you like, between the powerhouse tech centers of Silicon Valley, and the powerhouse, low-cost manufacturing sectors of China. It’s not a comfortable place to be in that middle zone. But the United States, as a whole, has what it takes in terms of technology and resources to comfortably position itself at the top of the value chain. The questions for the United States are really about internal distribution, how the United States, as a society, as a political system, copes with the difference between the winners and the losers internally.
One way I think to describe the program being offered by the new administration is to say we want to opt out of that difficult problem, we want to opt out of that challenge of arbitrating and balancing within the United States between the winners and losers of globalization. That’s going to be our first move, is we’re actually going to force a renegotiation of the terms of globalization, and if necessary, step back from it altogether. That’s going to be the ultimate threat, that we will opt out. As opposed to engaging in the creative politics of trying to balance between the two sides.
If you think back to the first phase in which America really systematically promoted globalization, from the 1930s onwards, it was never without challenges, but the response of the American government was to engage in the difficult business of balancing between winners and losers in that process. Whether it was through unemployment insurance, or whether it was through various types of structural support, for agriculture for instance, or whether it was through heavy investment in R and D or heavy investment in education. And I think historically speaking, what’s interesting about this moment, is that this administration seems to want to pull back from that entire process.
PAUL SOLMAN: And so what do we lose as a consequence?
ADAM TOOZE: There are very large parts of the U.S. economy which have benefitted enormously from globalization. The sorts of sectors which feature so largely in the Trump program. [But they] account now for perhaps only about 15 percent of the American workforce. Manufacturing, industry, mining, construction, heavy, manual, blue collar work — the kind of image that defines a certain image of middle America. But it’s 15 percent of the workforce.
The vast majority of Americans are employed in service sector industries, they’re overwhelmingly female rather than male workers, and many of those sectors are highly internationalized. The most high value-added sectors, notably the tech sector, is massively globalized. Likewise, various types of financial services, and those are export industries, sectors in which America dominates global trade, and global commerce, and for them it will be a disaster if America’s trade policy was to go down, spiraling down towards protectionism.
PAUL SOLMAN: Well, but won’t the rest of the world still want those products, those cutting edge products?
ADAM TOOZE: There’s no doubt that America has leverage in all of those sectors, but the world is globalizing incredibly rapidly over the last 20 to 30 years. Looking back historically, we’ve seen an extraordinary transformation in the global division of labor. There are very few sectors now in which the United States, or any other western economy, has an absolute lock on the technology that can’t be replicated anywhere else in the world. And so this is not a setting in which you necessarily want to get into a tit for tat, beggar-thy-neighbor, trade war style situation.
This is a world which is highly competitive, in which we need to be thinking about complex balances in which rich countries import manufactured and agricultural product from lower and middle-income countries, in exchange for a flow of high tech, high value-added manufactured and service exports. Those complex negotiations also [play out] across supply chains — so we no longer manufacture the entire car in one place, but we manufacture some of the parts in Mexico, and some of the other parts in Europe, and then they’re all assembled, perhaps, in a factory in Kentucky. Those kinds of complex supply chains are all jeopardized if you engage in a tit for tat, aggressive protectionist trade policy.