What is good about global trade? It brought jobs to millions of people in poor countries around the world such as Mexico, China and India.
What else is good about global trade? It brought great profits to some of the world’s biggest companies. The profits helped people who worked in those companies. It was also good for people who owned shares in company stock. It brought prosperity to the financial industry that funded the trade.
What is bad about global trade? The US and other developed countries lost thousands of jobs. They went to workers in those poor countries. Elected officials ignored the impact of the loss of those jobs. Tea Party candidates won elections. They did not want to create new spending programs that might have helped the people who elected them.
Great Britain voted to leave the European Union (EU). Many of the voters expressed concern about migrants coming into the country. The vote revealed a real problem. Low-wage workers are flowing into Europe and America. At the same time, Jobs are flowing out of Europe and American to countries where wages are lower.
Voters in Britain said they were in a lose-lose situation. Voters in America seem to feel the same way. They do not want new trade agreements. Hillary Clinton and Donald Trump both oppose new trade pacts.
One trade agreement is an example
The EU has 500 million people. All the countries in the EU must approve any new trade agreements. Here is an example of why global trade may be fading.
Canada wanted to make a deal with the European Union. The goal was to make it easier for Canada to sell dairy exports in Europe. One small province (3.5 million people) in Belgium was able to stop the deal. How? The province vetoed Belgium’s approval of a dairy agreement.
The result is no agreement. Observers say this may be the future. Two governments – Canada and the EU – could not make a deal. It reveals a trend that may spread like wildfire. The world may turn back to tariffs and other ways to protect local markets. That outcome could lead to trade wars. That could result in higher prices and slow-downs in economic growth.
The world needs trade to grow. The workers need assurance that there will be new jobs. Political leaders need to lead.
Source: The New York Times October 21, 2016