America can’t compete globally without training(Read article summary)
Signing trade agreements is not enough. Only with a robust national competitiveness agenda will America continue to lead in the global trading system.
Imagine the men or women of America’s national basketball teams getting ready for the best competition the world can offer this summer at the Olympic games in Rio de Janeiro. Now imagine that, instead of training in high-quality gyms, the players have to make do on cracked blacktops with broken backboards and rims without nets. And rather than having top-notch coaches like Duke University’s Mike Krzyzewski and the University of Connecticut’s Geno Auriemma, they are stuck with a parent whose only previous experience came in shepherding their kid’s 6th-grade rec league. We’d be lucky to win the bronze. Thankfully, that is not how we do things when it comes to Olympic sports. But it’s not a bad analogy for the casual way we compete in the global economy.
While America has one of the most open economies in the world, we stubbornly refuse to “train” by adopting a robust national competitiveness strategy. No wonder we have racked up a trade deficit of more than $6 trillion over the last decade while losing one-third of our manufacturing jobs since the turn of the 21st century. And no wonder an increasing share of Americans no longer support new trade agreements, or that candidates such as Donald Trump get showered with applause when they say they will roll back existing pacts, such as the North American Free Trade Agreement.
If you don’t train, you can’t win. If policymakers want Americans to once again support trade and globalization – as they should, because it’s ultimately in almost everyone’s best interests – then they have to give the country more than empty promises and happy-talk bromides about why trade is good. Only when we start training for the global competitiveness race will Americans view trade as something that’s good for everyone.
The country’s lack of preparation for global competition isn’t middle America’s fault; they understand there’s a problem. It lies in the failed “Washington Economic Consensus,” so named in 1989 by economist John Williamson to describe 10 specific economic policy prescriptions that institutions such as the World Bank and the International Monetary Fund should impose on developing nations – and it has become the de facto view about what the United States also should do internally.
Widely held and reinforced at think tanks, among congressional support organizations, and in the media, the prevailing view holds that the United States is the world’s economic leader, and we don’t need a competitiveness agenda. All that such an agenda would do is distort the workings of the free market. If there is a role for government beyond going out and signing more trade agreements, the conventional wisdom holds, then it is to hand out dollops of aid to workers unfortunate enough to lose their jobs to the tides of trade. The last thing government should do, they argue, is develop a robust and proactive competitiveness strategy, for this would be dangerously close to the dreaded “industrial policy” and would involve “picking winners and losers.”
But it gets worse. Many elites deny that America is even in competition with the rest of the world. They think that if we lose at “basketball,” then surely we will automatically win at something else, such as golf, where we have a natural comparative advantage, since we have many beautiful golf courses. Paul Krugman is among august company when he advises that “it is simply not the case that the world’s leading nations are to any important degree in economic competition with each other.” By this line of thinking, it doesn’t matter if we lose Boeing because of unfair European subsidies to Airbus, or the even larger and more unfair subsidies that China bestows on its state-owned aircraft maker, Comac. Or if we lose other high-paying jobs in industries America is strong in, such as semiconductors, bio-pharmaceutical production, software, and movies. Hey, not to worry! We’ll just find something else to do – maybe specializing in call centers or trash recycling (one of our largest exports, by volume, to China). The wages may not be all that great, but it’s steady work.
So when research groups such as the Pew Center find that, by a 4-to-1 margin, Americans think trade lowers wages rather than increases them, and by a 3-to-1 margin they think it leads to more job losses than gains, the defenders of the Washington Consensus are puzzled, assuming these know-nothing yahoos just don’t understand what’s going on. But perhaps the American public is clued into a reality that the flag-bearers of the Washington Consensus can’t admit: Trade is only good for America if America trains to win.
So what would an Olympic-class training program look like? First, just like the US Olympic Complex in Colorado Springs, American infrastructure (including roads, rails, airports, and other assets), skills, and science and engineering research all would be uniformly world class, which they are not now.
Second, just like we make sure that America’s Olympic athletes are treated well, we’d treat companies in America well. We would lower the corporate tax rate (now the highest in the world); expand tax incentives for them to invest in research and development, new equipment, and upgrading their worker’s skills; and make sure that regulations impose the least-possible burden on companies while still achieving their public purpose.
And third, just like we make sure there are rules and impartial judges at Olympic events, we’d make sure that everyone on the global playing field competes fairly. Imagine how many medals America would fail to win if many opposing athletes were on steroids and referees turned a blind eye to cheating. That’s what it’s like today for too many American competitors trying to win in global economic competition. Too many nations manipulate their currencies, close their markets, provide massive subsidies to national champions, and steal U.S. firms’ intellectual property. All the while the followers of the Washington Consensus warn against action because it might throw a spanner into the works of globalization. But it’s the competition that has already thrown in the spanners. If America fights for real enforcement of trade rules, then we’re the ones fighting for free trade.
We won’t restore the country’s faith in trade by yelling louder that “TRADE IS GOOD!” Nor will we do so by giving more money to those who have been hurt by trade. We will only restore faith when we begin to train. And the first step in that regime is not drinking a raw egg shake or running up the stairs in front of the Philadelphia Museum of Art. It is getting both political parties to work together to craft a robust global competitiveness strategy. In that effort, each side will have to compromise. As such, the next president should call on key leaders from Congress, along with a small number of experts and business and labor leaders, to spend a week at Camp David, and they should not leave without agreeing on a 10-point action plan for US competitiveness.
Democrats will have to accept reduced taxes and smarter regulations on business in America that are fighting for survival in global markets. Republicans will have to accept more public investment in the building blocks of competitiveness: infrastructure, science and engineering research, and skills. And the defenders of the Washington Consensus will have to acknowledge its time is long gone. Only with a robust national competitiveness agenda will America continue to lead in the global trading system.
Robert D. Atkinson is the founder and president of the Information Technology and Innovation Foundation, a think tank focusing on the intersection of technological innovation and public policy. Follow him on Twitter @RobAtkinsonITIF.