The Hidden Costs of Trade Policies

Kimberly Clausing, professor of economics at Reed College

Economics professor Kimberly Clausing explains how protectionist policies leave Oregon vulnerable

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Skepticism of free trade has become an increasingly popular political stance. From the president’s trade wars and anti-immigration platform to Bernie Sanders’s rejection of key trade agreements such as the Trans-Pacific Partnership, ‘globalism’ is a dirty word in American politics.

Reed College cconomics professor Kimberly Clausing is the author of Open: The Progressive Case for Free Trade, Immigration, and Global Capital. Citing fear and misinformation on both the left and right, Clausing’s book argues that the benefits of international trade and immigration are too great for either side of the aisle to ignore.

While conservatives have generally favored trade agreements, her book makes the case for free trade? from a progressive perspective, and offers strategies on how to train workers, improve tax policy, and create partnerships between labor and business.

This interview has been edited for length and clarity.

What trade issues impact Oregon most significantly?

Business uncertainty is a problem for any company with a global supply chain, and there are a lot of those companies in Oregon.

We have companies that make railcars and cutlery that are locally sourced and then shipped all over the world. We also have Columbia Sportswear, Nike and Intel. You’ve got many businesses, both large and small, that depend on the global supply chain for imports and exports.

Every time there’s a tariff or tariff threat it creates uncertainty. Take steel, for example. You don’t know what price you’re going to pay or if there will be a quota in place and you won’t get the materials you need to make your product at all. That impacts how businesses behave.

How much have protectionist policies affected household income?

The typical household has paid about $800 worth of additional cost per year.

Can tariffs and other protectionist policies help Oregon brands compete with international companies?

There was a brewing company I spoke to that said the tariffs increased the price of imported beer, which did make them more competitive. But when they factored in the steel tariff they couldn’t stay at a competitive price point unless they ate the production cost.

There are hidden costs associated with these trade policies.

Plenty of liberals also espouse protectionist policies. Are Oregon Democrats more trusting of international trade?

Congressman Earl Blumenauer specifically has shown he understands the importance of international trade. He has shown a willingness to sit down with the business community to talk about these costs.

There are some members who are less enthusiastic, but everyone understands that a lot of trade flows through the state. Many of the products that are central to the economy wouldn’t be possible without international trade.

How is Oregon more connected to the international trade than other states?

Take Intel. They make chips that go into things, and they don’t even make the chips here, they design them here. All those really good jobs built around designing and planning chips wouldn’t be possible unless you can ship them elsewhere.

If Nike tried to compete making shoes in the United States they would be even more expensive than they are now, and everyone would be wearing Adidas.

I think it’s important to remember everyone’s lives are interconnected with everyone else around the planet and that’s okay. In some ways it’s a good thing.

How do immigration restrictions affect Oregon?

At the high-skill end, a lot of those chip designers and shoe designers are foreign-born workers who are in-demand professionals.

If you go into the agricultural sector and see who is picking the grapes in the Willamette Valley or picking the pears in Hood River, a lot of those workers are immigrant laborers.

It’s true that if you cut off immigrant labor you would have to pay more for homegrown workers to pick those things, but the other option is you might just not have those things.

There was a study from North Carolina that found that foreign-born agricultural worker retention rate was much higher, and when immigrant workers weren’t allowed, the farms switched over to crops with a harvesting process that could be mechanized.

If your goal is to mechanize agriculture then maybe you should stop immigration, but you’re giving immigrants a livelihood and a path to a better life, and that can pay off in the long run.

How can offering immigrants a better life pay off?

You know the famous Sriracha sauce that’s made by Huy Fong Foods? The company is named after the ship that brought the company’s founder to America. He was coming from Vietnam and no other country would take him at the time.

He founded the company and has kept it in Irvington, California, ever since. People have offered him opportunities to manufacture the sauce abroad, but he refused, saying he was forever indebted to the United States.

Moreover, immigrants move into the workforce fairly quickly. They also begin to pay more in taxes than they collect in benefits in their first year.

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