How Trade Policy Failed U.S. Workers —And How To Fix It



Sandra Polaski, Sarah Anderson, John Cavanagh, Kevin Gallagher, Manuel Pérez-Rocha, and Rebecca Ray | The Groundwork Collaborative, Boston University Global Development Policy Center, and Institute for Policy Studies

As COVID-19 spread around the world— upending lives, health care and economies on every continent—the massive faults of existing systems were laid bare. The U.S. has fared especially badly and the immediate requirement is to repair the gaping holes in the public health system and economic safety net and create jobs to replace the millions of livelihoods that were destroyed. But now we must also make political choices and start to rebuild for the future. This is the right moment to reflect on the unfettered financial and investment globalization that has shaped our lives over recent decades. More recently that version of globalization has morphed into a geopolitical rivalry between the U.S. and China, threatening to pull the world into a new cold war.

COVID-19 will bring many changes, but whether the change is for the better or worse is indeterminate. What we do next will depend on how well we analyze the causes of the current health and economic disaster; whether we correctly understand the roles played by different policies, values and countries; and how honest we are in setting out alternatives and pursuing those that can create a viable, fair and humane system for the future. As we start to rebuild we need a coherent understanding of why the U.S. economy—the largest in the world, with enormous wealth—left its working people so vulnerable to such harsh health and economic fallout. One important aspect of this analysis, and the purpose of this report, is to understand the role of trade and international economic integration in order to ensure that trade and investment rules are aligned with urgent and longerterm needs, rather than standing in the way.

The report begins with an examination of U.S. trade policy before the pandemic and reveals an approach tilted heavily toward the interests of the financial sector and large and concentrated U.S. corporations, with negative impacts on many workers and households. U.S. trade policy created perverse incentives for U.S. corporations to move jobs, production and investment overseas, where they enjoyed huge profits and often avoided taxes. As these firms destroyed jobs and pushed down wages and regulations in the U.S., the government failed to change course and did little to help those who lost from its unbalanced policies.

 These failures were a campaign focus of then-candidate Donald Trump in 2016, but once in office he doubled down on the procorporate approach. While throwing on some tariffs and blaming other countries, the core of his trade policy aims to increase profitability and privileges for firms and investors. Despite bombastic rhetoric, the data in the next two sections of this report show that he did nothing to improve the quality, security and wages of U.S. jobs. We review his main trade actions and agreements, including his deal to replace NAFTA and his trade war with China, and examine their impact on U.S. workers and hard-hit regions. The report then discusses Trump’s overall approach to China and what it means for jobs, wages and security in the U.S. and beyond. We propose constructive ways to develop a U.S.- China relationship that benefits both of the world’s two largest economies and thus the world economy as a whole and avoids the risk of dangerous confrontations or even a war that nobody could win.

The report then focuses on the future and how trade policy should be changed to recover the ground lost over recent decades and rebuild on a sound basis after the pandemic-induced recession. As we face a long and difficult recovery it is critical that every U.S. public policy must contribute to a revival of the economy, with a focus on empowering and lifting working households out of the recession and providing the public goods and services needed for health and social wellbeing. The U.S. should also be a leader in establishing the minimum rules needed to stabilize the global economy in a way that allows each country to participate in trade as a component of its own recovery, recognizing that a hostile, us-against-them attitude toward the world jeopardizes our own welfare while increasing the likelihood of serious conflicts. The report sketches out a new trade policy built to achieve equitable outcomes within the U.S. and across countries, prioritizing the interests of labor over investors and recognizing that labor exploitation anywhere undermines fairness everywhere. Curbing corporate power and shifting power to working people is a necessary part of a strategy to create quality jobs and broadly rising living standards across the world, making everyone better off. The proposed new trade policy also takes into account that we are facing a climate crisis in addition to the health crisis and includes steps toward a cooperative international system that builds health, stability and resilience across the world—now and sustainably into the future.