Chelsea Follett: Daniel Griswold is an adjunct scholar at the Cato Institute and a former director of the center for Trade Policy Studies here at Cato, as well as a former co-director of the Trade and Immigration Project at the Mercatus center at George Mason University. He is the author of the 2009 book Mad About Trade, and he has also authored numerous studies, testified before congressional committees, commented for CNBC, C-Span, Fox News, and other TV and radio outlets, and written articles for the Wall Street Journal, the Los Angeles Times, and many other publications. And he joins the podcast today to discuss two recent essays that he authored for Cato’s Defending Globalization Project. Those essays are the Misplaced Nostalgia for a Less Globalized Past and How Trade and Agreement How Trade Agreements have Enhanced the Freedom and Prosperity of Americans. How are you, Dan?
Daniel Griswold: I’m doing great. How are you, Chelsea?
Chelsea Follett: All right. I’m excited to talk about these essays. So let’s start with nostalgia. Many critics of free trade argue that American workers and families were better off in the less globalized past, specifically the 1970s or even earlier decades. Why do you think there is so much nostalgia, and is there anything to it?
Daniel Griswold: Yeah, well, first, it is kind of a specialized thing. It’s a little hard to understand. You know, I, I came of age in the ’70s, graduated from high school and college. We don’t want to go back there. But the only thing better back then, I think, was the music. You know, it’s hard to top Led Zeppelin and the Eagles, but in terms of the welfare of the typical American, we are much better off today than we were back then. I think what’s driving the nostalgia part of it is unions. Our workforce was more unionized back then. I think that’s a very poor measure of the welfare of the typical American, you know, and it’s bipartisan. Right. You hear Democrats and union officials on the left. But JD Vance, you hear that from him and others defending the Trump administration’s approach, talking about how the last 40 years, how many times over the last 40 years all these bad things have happened. And what I tried to do in this paper is examine what is the record. Are Americans better off today than they were back then? There are some intangible measures. Are we better off spiritually or things like that.
Daniel Griswold: We can argue about that in another podcast. But in terms of basic measures of human welfare, Americans are much better off today than they were in the 1970s. And globalization has played a significant role in that enhancement of, of American welfare.
Chelsea Follett: Tell me more about that. Why are Americans better off today than 50 years ago. How does that relate to our integration into the global economy? And what are some of the specific measures by which Americans are doing better today?
Daniel Griswold: Yeah, well, we’re better off for a number of reasons. And the human progress projects documented a lot of those. You know, technology, more efficient markets. But I think we’re better off also because of globalization. What has globalization done for the typical American? Well, as consumers, we have a wider choice of products. Better products, lower prices. Globalization has created more job opportunities in the United States that play to our strengths in technology and services. Sophisticated services just left Americans freer to engage in commerce with other countries. Foreign investment, you know, millions of Americans get up every day and go to work for foreign owned companies here in the United States. And these are some of the best paying jobs, creating products for export. So that’s the many reasons really any economist will tell you why we’re better off because of trade and globalization. Going back to Adam Smith and more recently Milton Friedman and just about any other professional economist will tell you that. Chelsea, the, the measures. One of the measures you hear the people who are promoting nostalgia side is real wages. They say real wages have been stagnant for the last 40 years. That just ain’t true.
Daniel Griswold: One, we tend to mis-measure inflation. And of course that’s the denominator of real wages. We tend to overstate inflation. We do a poor job of measuring new products that are coming in, changing consumer patterns in the face of changing prices. You know, one book I cite in this essay is a wonderful book, a recent book, the Myth of American Inequality by Phil Gramm and a couple of co-authors. And they point out this fact that economists have noted that if you measure inflation properly, the introduction of new products, changing consumer patterns, Real wages are up 74% since the 1970s. That’s significant if you bring in fringe benefits like health benefits, retirement benefits, total compensation, that’s up significantly in that range. Median household income, again, if you measure properly for changes in prices, they’re all up significantly since the 1970s. So the, the key data point that the nostalgia people talk about is just wrong. By these common measures, household income, total compensation, real wages, Americans are better off today than they were 50 years ago. And globalization, trade expansion, I should mention also in that same time.
Daniel Griswold: We’ve had domestic liberalization. It may not feel like it today with all the talk about regulation going on, but you know, think back over the last 40 years, we’ve had significant deregulation in energy, trucking, airlines, These have delivered lower prices, made our economy more efficient. Milton Friedman would, would be pleased at what’s happened over the last 40 years. And it, it has rewarded Americans with a higher standard of living.
Chelsea Follett: Which is not to say that there isn’t more deregulation to be done. But another criticism some people have is they claim that yes, there has been some progress, but it has all come at the expense of the poor, either in the US or abroad. What do you say to this criticism? That the rise in living standards has only accumulated to a few and has exacerbated inequality?
Daniel Griswold: Yeah, well. Well again, the data just don’t bear that out. And if you go back to the Phil Gramm book the Myth of American Inequality, again, if you take proper measure of prices and apply them to the poor, the real poverty rate in the United States has fallen since then. One, because basic goods have become more affordable, but also because of income transfers. We do have higher taxes on the rich people. So if you account for those income transfers of government and both a more accurate measure of inflation, what they found is that the real poverty rate has fallen. And also the Gini coefficient, that’s a measure of overall inequality, the lower it is, the more equal society is. The Gini coefficient has actually declined slightly in recent years in past decades in the United States. So when you account for all these factors, yes, income inequality has grown somewhat because of our economy that’s more geared towards technology and education. People with those skills are being rewarded and we want them to be rewarded. We want to encourage people to upgrade their skills. But when you look at these other factors, we are not suffering from growing inequality.
Daniel Griswold: I just will point to one thing. You know, poor people spend a higher share of their income on necessities, right? Clothing, food, basic energy, gasoline. I did some analysis in this study looking at Commerce Department figures. And if you go Back to the 1950s, the typical American household spent more than a third of its income on food, clothing, gasoline and basic energy. By the 1970s, it was still more than a quarter. By the 2000 aughts, it was down to 13.5% spent on those necessities. And again, globalization is part of the story. One last data point and here the Human Progress team Marian Tupy whose wonderful book with Gale Pooley Superabundance. If you look at the time Americans spend on the job to buy these basic products, that has fallen significantly over the last 40 years or so. In fact, if I’m quoting correctly from the book, they looked at a basket of 35 basic items, household items, you know, coffee maker, dishwasher, clothing, that sort of thing. The amount of time an American has to work to acquire those has dropped by 72%. The time price of goods has dropped significantly. So by all these measures, Americans are better off, but that those benefits extend very much to people in the lower income brackets.
Chelsea Follett: There are some wonderful charts that I encourage everyone listening to this podcast to check out in your paper where you show how the prices on so many different goods have declined over time and how different technologies have spread to different households. Tell me though, a bit more about some of the, the criticisms, such as the decline of manufacturing jobs. This is something that you hear a lot about when it comes to nostalgia for the past. You argue in this piece that the main driver has actually been rising productivity and not imports. Can you tell me more about that?
Daniel Griswold: Yes. Yeah. And first, just one last point about the products available. Yes, you’re right. You know, it’ll sound like I lived in the stone Age, but back in the ’70s you couldn’t buy a microwave, you couldn’t go on the Internet, you couldn’t even imagine a smartphone. So it isn’t just lower prices, but, but new products made possible by globalization. So that’s the exclamation point on, on that point. Manufacturing jobs. Yes, that’s part of the nostalgia for the, We had higher union membership and manufacturing jobs were relatively more important in the economy. I argue again in the paper that this is a poor measure of the overall welfare of the typical American, manufacturing jobs, the number of manufacturing jobs in the United States has been dropping as a share of the workforce pretty steadily since the 1950s, almost in a linear fashion. And by the way, this has happened in almost all other, virtually all other developed countries. And the reason isn’t that we don’t make things anymore. We make lots of stuff in the United States. In fact, our, our overall manufacturing output continues to grow. Something real manufacturing value added is like $2.6 trillion in the United States annually.
Daniel Griswold: And that has been growing, but we’re doing it with fewer workers because they’re so much more productive. They’re more efficient, they’re better educated. We have more capital, machinery. The mix of goods we’ve made in the last 50 years has shifted from clothing and shoes and, and furniture and sort of commodity steel and other things like that to higher end products, computers, chips, jet engines, chemicals. And these are things you and I don’t have in our homes. You know, we, we don’t go out and buy a jet engine or a ton of chemicals. And so we think we don’t make anything. No we’re making lots of stuff just with fewer workers. And by the way, those workers are better educated, better compensated than ever before. So we remain a manufacturing powerhouse. We’re just doing it with fewer workers.
Chelsea Follett: And those workers also you document, are working now in safer conditions. Can you tell me a bit about gains in workplace safety?
Daniel Griswold: Yes. Yeah, and that’s, that’s part of it. You know, an office is safer generally than a, than a factory or a foundry. Yeah, and that’s one of the, the other sort of more humanistic, direct ways that we’ve benefited in our more globalized era. Yeah. If you look at the government figures on the rate of workplace deaths and injuries, they have dropped dramatically. You can look at the exact percentages, but we’re talking 30, 40, 50% in the last 50 years. That’s a good thing. You know, other ways that our workplace has changed, more women in the workforce. And I think that’s a good thing, that there are more opportunities for women, better education. A majority of post secondary degrees today are going to women. This is part of our globalized economy. We should be glad for that. You know, the Human Progress Report itself is documented over the long run. We have some blips along the way, but reduced infant mortality, expanding lifespans, better environmental quality. This is all in the era of globalization. These are important things that enhance the quality of life of Americans every day. And we should thank globalization, not blame it.
Chelsea Follett: You also document in this piece how America’s freer economy delivers in other important ways. You talk about how poverty rates have fallen for various minority groups that have been historically disadvantaged. Tell me about that.
Daniel Griswold: Yeah, and again, I rely on Phil Gramm and his co authors for a lot of this. But, you know, and I don’t want anything I say today to sound like I’m wearing rose colored glasses and think everything is great in America. We have some profound problems in the Cato Institute. The Human Progress Report do a good job of highlighting the progress we still need to make. But let’s take stock of how far we we’ve come in this globalized era. Discrimination has fallen. Minorities, who unfortunately tend to be overrepresented on the lower income. Blacks and Hispanics, they are doing better relative to what they were in the 1970s. So you look at the real poverty rate, inequality, all those things, and the fact that lower income Americans spend a higher share of their income on products that are more heavily traded. You know, food and clothing, furniture, those sorts of things you’d buy at a Walmart or another discount retailer. They have benefited from Globalization, you know, some of our politicians say, oh, you know, well, you can get a cheaper T-shirt but we’ve lost jobs. Well, trust me, every poor person is going out and buying clothing.
Daniel Griswold: A tiny percentage of them would have jobs in the clothing industry. Those jobs have been disappearing for decades. So globalization is almost all upside for the lowest income Americans. And that’s a good thing.
Chelsea Follett: Now if Americans want to expand on this kind of progress that we have enjoyed since the 1970s, what sorts of policies should our leaders be pursuing?
Daniel Griswold: That’s a wonderful transition to my other essay. Yes. Well, the first best thing our government can do and any government can do to increase the welfare of their citizens is to liberalize unilaterally. Get rid of those trade barriers that drive up basic costs for their citizens on food, on clothing, and by the way, tariffs that complicate and raise costs for manufacturing and other industry. Right. On capital equipment and inputs and raw materials, intermediate goods. So unilateral liberalization is always the first best policy. But yes, trade agreements have played an important role in our post war liberalization. You know, our protectionist past kind of crashed and burned with the Smoot-hawley tariff of 1930 and the great Depression. And while those tariffs didn’t cause the Great Depression, they certainly didn’t cure it. And I think they expanded it and deepened it. Congress almost 100 years ago now, 1934, passed the Reciprocal Trade Agreements act, which started to undo the damaging tariffs of Smoot Hawley. And that allowed the Secretary of State to negotiate with other countries to reduce trade barriers up to 50% on a non-discriminatory basis applied to other countries. After the war we had the General Agreement on Tariffs and Trade with on multilateral basis. We started to liberalize trade broadly with other countries.
Daniel Griswold: And then rounds of that, the Tokyo round, the Uruguay around. I’m compressing a lot of history in short fashion here, but basically we engaged in negotiations with other countries to lower trade barriers on a reciprocal basis. And despite it being the second best option, it still has benefited the United States greatly. Just, I mean the basic reasons we benefited from those lower barriers at home so our consumers could go out and buy more products at an affordable basis, more export opportunities for US companies to sell into growing markets, more foreign investment here in the United States and Chelsea. We haven’t talked about this that much so far. But also broader foreign policy benefits from trade agreements. Take GATT for example. It helped to revive Europe and Japan after the war, give them more vibrant economies, fuel their middle class, give their fledgling democracies More of a foundation, but it’s also knit us together as allies in NATO and other other things against communism and now other threats to the civilized world. So trade agreements have served America’s interest in the post war era and can continue to serve our interest into the future.
Chelsea Follett: You have a map early on in this essay on how trade agreements have enhanced freedom and prosperity for Americans showing the current state of free trade agreements that the United States has enforced with 20 different countries. Tell me a little bit about the current state of free trade agreements.
Daniel Griswold: Yes, yeah. America has signed free trade agreements with 20 other countries. Some of our major trading partners, you know, Canada and Mexico in the, in the NAFTA, now the United States-Mexico-Canada agreement. We also have free trade agreements with South Korea, Singapore, Australia, some smaller countries in the Middle east, much of Latin America, virtually the whole Pacific coast of the Western hemisphere is tied to the United States and free trade agreements, including Chile, Peru, Colombia, Central America and, and what these agreements have meant is that today 47%, almost half of US exports go to countries that we have signed free trade agreements with. They enter those countries virtually tariff free. Even the mercantilist critics of trade agreements need to acknowledge that’s what they’re always asking for. Duty free treatment of, fair treatment of US Exports. We have that with almost half of our, the, the trading world. 38% of imports that come to the United States come from countries where we’ve committed to accept their exports at 0% duty. I think that’s a good thing. Most economists would, would agree for all the reasons we’ve talked about. And so yes, we have significant agreements.
Daniel Griswold: The catch is, and we can expand on this, is that we haven’t signed one for more than 10 years. The last three trade agreements we signed were with Panama, Colombia and South Korea. We have stood still while the rest of the world has continued to move ahead.
Chelsea Follett: Now you also say in this essay that both the critics and proponents of free trade agreements can sometimes overstate the effect of these agreements. You say trade agreements are actually not the simplest or the most efficient means of reducing US trade and investment barriers, although they nonetheless do enhance freedom and prosperity. Tell me a little bit about those nuances.
Daniel Griswold: Yes, and I’ve, you know, in my Washington policy career I’ve been witness and back writing editorials for a daily newspaper. I’ve been witness to a number of debates going back to NAFTA. You remember the famous debate with Al Gore and Ross Perot over NAFTA. And it’s almost a kind of script the opponents say the world’s going to fall apart. Ross Perot famously said there’s going to be a giant sucking sound if we pass NAFTA of jobs and investment going to Mexico. And you hear it again more recently with the Trans Pacific Partnership. But also, proponents of trade agreements have tended to oversell them one by sort of promising things that trade agreements really aren’t intended to address anyway, one being the overall number of jobs. Trade is not primarily about creating more jobs, it’s about creating better jobs. So I don’t think we should promise a specific trade agreement. It’s going to create, you know, x millions of jobs and lower the unemployment rate. What it’s going to do is allow Americans to shift into what they’re better at, create better jobs, higher incomes, bigger GDP, all that. Also the trade deficit, bilateral trade balances issue for another show.
Daniel Griswold: But trade agreements aren’t going to have much of an effect on that for reasons I’ve written about multiple places for Cato, trade balances are driven by the specific goods that countries sell. Overall trade balance by investment flows, not really trade agreements or trade barriers. So proponents have tend to oversell them in certain ways. Of course, that still doesn’t make them a bad idea. The fact that they may have exaggerated some of the benefits doesn’t mean that they aren’t on net better for the United States. There have been studies done by the US Trade Commission, the Peterson Institute. They all show the same thing with these trade agreements. They have a modest effect. We’re a $25 trillion economy. A trade agreement with South Korea or Australia isn’t going to have a huge effect or with Mexico for that matter. But they have modest positive benefits. Higher GDP, gross national product.
Daniel Griswold: A bigger workforce, better jobs, higher real wages. We started this conversation talking about real wages. All the evidence points to trade agreements in a modest incremental way, enhancing the real wages of American workers.
Chelsea Follett: If America gets involved in trade wars, competition, upping tariffs and getting retaliatory tariffs enacted in return, how can we expect that to affect living standards for the average American?
Daniel Griswold: Yes, negatively, for lots of reasons. One, the the tariffs. Our government. If we impose sweeping tariffs on imports from China, it’s going to raise the cost of living of Americans on a daily basis. If we raise tariffs on steel and softwood, lumber and other products like that, you and I don’t buy those directly, but the automobile companies, other manufacturers buy those products. Their costs go up, they become less competitive in global markets. They pass costs on to consumers, so we lose in that way. But also when, when we engage in tit for tat trade wars, you know, wars takes two to wage a trade war, and it often is two. We were told early in the Trump administration when they, the Trump 1.0, when they started imposing tariffs, oh, other countries won’t dare retaliate. They did pretty massively. You know, we lost a lot of agricultural exports to China. We lost exports to Europe and other countries because of retaliatory tariffs. So our exporters lose. Trade wars don’t have any winners other than a few selected industries. And Chelsea, that’s yet another reason to sign free trade agreements. All the benefits we’ve talked about. Another benefit it is, Another benefit is you get it in writing.
Daniel Griswold: You, you governments commit themselves not only to liberalize, but to maintain that liberalization. So when you run into economic downturns and things like that, there’s always a temptation to reach for that snake oil of protectionism that looks like you’re doing something about it, but you’re not. You’re actually making things worse. Trade agreements have helped us one, avoid the kind of disastrous global trade war we had in the 1930s that deepened and prolonged the Depression. But also tit for tat skirmishes with major trading partners. And that’s why I think talks of winning a trade war have not proven true in the past. And trade agreements help us prevent those trade wars. We can resolve things through dispute settlement rather than destructive tit for tat protectionism.
Chelsea Follett: And you also write that one of the most important advantages of free trade agreements is that they lock in trade liberalization gains and prevents backsliding during times of economic stress and political tensions. You give the example of the Great Recession of 2008 and 2009. Tell me more about this advantage of free trade agreements.
Daniel Griswold: Yes, that is a major advantage of it. Again, we saw it in the ’30s, but also more recently in the 2008/2009 recession made the Great Recession here, right. Maybe there were things government could do to get us through that. Protectionism would have been one of the worst choices. And of course, when you look at the origins of the 2008, 2009 downturn, it had nothing to do with globalization and free trade. It had everything to do with monetary policy and with the housing bubble, which was, it was purely a domestic created recession. And our network of trade agreements helped the United States and our other major trading partners avoid descending, compounding the downturn with a destructive trade war.
Chelsea Follett: Now, all of this progress that we’ve seen in lower costs, better, safer jobs, that sounds great. To those who have experienced that progress. But what do you say to someone who lives in an area where the major industry has gone away and the area is now in economic devastation? These tend to be the areas that have the most nostalgia for that pre-free trade past. Right?
Daniel Griswold: Yes. No, that’s a, that’s a fair point. And you have to say some of the success of our incoming President has to do with discontent in certain areas of the United States. A feeling that people have that the modern economy is doing well for maybe a majority of Americans, but it has left some people behind. And, and I would just say we can’t ignore that. There’s things we can do to help people realize a better standard of living in our modernizing, more open economy. But turning back the clock on trade policy isn’t the answer. You know, Youngstown, Ohio is a good example, was a big steel producer in the first half of the last century. People there still remember a day, they call it Black Monday back in 1977. A big steel maker there had announced massive layoffs. Well, think of that, Chelsea. That was 50 years ago, well before NAFTA, China’s entry into the World Trade Organization, the signing of the Uruguay Round. You know, that was not primarily a globalization phenomenon that had to do with changing technology. We’re just consuming less steel per capita as we, as we modernize. So I think the answer for these communities, you find coal producing towns in Appalachia and things like that, farm dependent communities in the Midwest, small towns, counties in Iowa and other places that are depopulating.
Daniel Griswold: Raising trade barriers is not going to help those places. It may help certain companies in certain places, but it’s not going to help the overall economy there. You know, for reasons we discussed, the manufacturing jobs that we’re creating in our economy today require skills, education. They’re just of a higher order than they were 30 or 40, 50 years ago. The answer, I think is improving the skills and the education of Americans. We need to equip younger generation Americans and sadly our public school system is not succeeding very well in this. But we need to equip them with the skills they need to be valuable and to gain good jobs in our more high tech, modernizing, globalized economy. That, that’s the answer. Not trying to recreate a past that wasn’t that great to begin with. But we can’t go back there.
Chelsea Follett: While the US has not entered into a new free trade agreement for some time, you contrast that with the approach taken by various other countries around the world. What can we learn from these Examples abroad.
Daniel Griswold: Yes, that’s a great point. While the US Free trade agenda basically stalled with the Trans Pacific Partnership and the Trump administration withdrawing us from that. So it’s been more than 10 years since we’ve negotiated agreements. But if you look around the world, you know, the WTO database shows there are 370 bilateral and regional trade agreements in force around the world, 100 of them negotiated in the last decade while we’ve been standing still. What these agreements have done are all the good things that US agreements have done for the United States. It’s just we’re not a part of them anymore. You know, when we dropped out of the Trans Pacific partnership, the other 11 members went ahead and signed it anyway because they knew it was a good agreement. In their interest, they renamed it the Comprehensive and Progressive Trade Trans Pacific Partnership Agreement. They tweaked a few things, but they’ve gone ahead and deepened their relationships. We’re left out of that. 47 African countries have signed an agreement to engage in freer trade and that’s going to yield benefits for them. Even China, it was a less ambitious comprehensive agreement. But China and other countries have signed an agreement in East Asia.
Daniel Griswold: And what it’s done is it’s increased export opportunities, brought in more imports at lower tariffs and benefited their consumers, and they’re producing import consuming industries and knit them closer together. And this is the foreign policy implication of being on the sidelines. As the rest of the world moves forward, they’re more deeply integrating, increasing their ties with each other. And we basically dealt ourselves out of that game. And we’re losing influence in Africa, in East Asia, because we’re sitting on the sidelines, not only not signing agreements, but unfortunately promoting more trade frictions with strategic rivals like China, but also with our, our, our friends, Canada, Mexico, Europe. This is a losing policy that’s starting in an incremental way to undo all the progress we’ve made in the post war era.
Chelsea Follett: We’ve talked quite a bit now about the effects of free trade on the poor in the United States. But of course some also claim that modern prosperity comes at the expense of the poor in developing countries. But what has actually been the effects of free trade on poverty globally?
Daniel Griswold: Yeah, this is something I don’t address directly in the paper, but Chelsea, you’re exactly right. This is an important point. And you and your colleagues, Marian and others at Human Progress have done a wonderful job of documenting this. But globalization has been one of the best things that’s happened to poor people around the world, it has created Some of the best jobs in those societies. And we can talk dismissively about jobs in sweatshops. They don’t consider them sweatshops. They’re not sweatshops. Factories in Cambodia and Vietnam and Africa and other places that are making what we would consider low tech items, T-shirts, other manufacturing products, bobbleheads, things like that. These are the best paying jobs in those societies, sometimes paying two, three times what people could earn in the local marketplace in their village. It’s especially important for women in those societies. Women are able to get jobs in those factories, get some economic independence, get off the farm and start earning more income. And if you look at the global poverty figures, you know, this is something one are more left of center critics of globalization who normally say they care about the poor. And I think they do in a kind of misguided way.
Daniel Griswold: They never talk about the progress we’ve made against global poverty. It’s just something you don’t see on the headlines. But if you look at absolute poverty, which, what is it These days, about $2.15 a day, adjusted for inflation, the number of people living in absolute poverty around the world in the last 30 years of globalization has dropped by a billion or more. Yes, a lot of them in China, which is fine, China’s moved towards a market in those 30 years, but also in India, in Africa, in developing Asia. This is one of the great stories of our time. And globalization has been an essential component of raising hundreds of millions of people out of the worst kind of poverty around the world. The worst pockets of poverty remaining are in precisely those countries that have the least participation in the more globalized global economy.
Chelsea Follett: And many people don’t realize how much global poverty has fallen. But you also cite some polling that is more positive about how the majority of Americans feel about trade. Tell me, what does the polling say that the public believes on the topic of free trade?
Daniel Griswold: Yeah, that’s a great point. And I, I tried to end my essay on a kind of positive note. These can be kind of challenging times for those of us who favor a more open globalized economy, both in trade and immigration. But I think the policy window remains open for policymakers in Washington and other countries to pursue trade agreements and to continue to liberalize our, our economy both internally and externally. One, trade is almost never a central issue in campaigns. I know President Trump talked about it, but the issues that were most important to America, if you poll Americans and ask what’s the most important issue on their mind, trade is never near the top. It’s always 8, 9, 10, number 11, it’s other issues, right? You know, jobs, inflation, things like that. And so there is policy space for our politicians to pursue trade agreements. And yes, the polling, you know, Gallup asks Americans, I think every year about their attitudes of trade. And they’ve asked the same basic question for a number of years now. When you think of trade, do you see more opportunity for the American economy and Americans as workers or more of a threat? And a majority of people say they see trade as more of an opportunity.
Daniel Griswold: You have to nuance that a little bit. They want to know that people put out of work by trade and other things are looked after with unemployment insurance and that sort of thing, but generally it’s positive. So if, if you think of the Overton window, right, this policy space that politicians have to do, implement certain policies, I think the Overton window is still open pretty wide for the United States to re-engage in mutual discussions with other countries to lower trade barriers on a reciprocal basis and realize all the benefits we’ve been talking about today.
Chelsea Follett: The Gallup polling that you cite in the piece specifically shows that over 60% of Americans view foreign trade as more of an opportunity for economic growth than a threat to the economy. Now, is this contradicted by other polling on how the public feels about tariffs or what do you make of some of the mixed messages that we’ve gotten from pulling on public opinion on these matters?
Daniel Griswold: Yeah, and I, I don’t spend a lot of time, look, looking at those polls, they all tend to tell a pretty, pretty consistent story. A lot of it depends on how you ask about a question. If you say, do you support tariffs to save industry X, a lot of Americans will be open to that message. They want to save a particular industry. But of course, it’s a more nuanced argument. Do the tariffs actually save that industry? I would argue, for example, that tariffs on steel, on sugar, on other things have actually made those industries less competitive long term. We, we had high tariffs on imported clothing and textiles in this country for decades and that didn’t stop the long term decline of those industries. I think it even accelerated them by making them lazy. They postponed investment and that sort of thing. So it doesn’t even actually save industry X, but when I think when they become aware of the broader costs, you know, would you support tariffs, higher tariffs on this particular good if it meant Americans needed to pay more for these things and X dollars more, then the support starts to drop off pretty significantly.
Daniel Griswold: If Americans realize that they do have to pay more for a T-shirt for food items, for other things. Because of tariffs, they react like they do with lots of other taxes. I mean, tariffs are taxes on imported goods that are important to American consumers and American business. And they have the same effect that taxes do in all other areas. People consume less, they pay higher prices, their standard of living drops.
Chelsea Follett: And one of the top issues consistently for voters that you mentioned earlier is inflation. What would be the inflationary effects of reeling back free trade?
Daniel Griswold: Yes, this is where I think proponents on both sides go a little too far. You know, we’ve cited Milton Friedman earlier. Milton Friedman’s right. Inflation is always and everywhere a monetary phenomenon. So I think if, if President Trump implements his Full Promise plan, and I hope and pray he doesn’t, you’ll see a significant increase in daily prices for Americans. This may feed into monthly data for a month or two or three. But once those prices are up, inflation isn’t going to increase further. Right. Inflation is an overall increase in the price level. Tariffs bump prices up at a moment in time, and then they stay up and people start consuming other things. So.
Daniel Griswold: Higher tariffs certainly aren’t going to lower inflation. They’ll temporarily make it seem worse. But in the long run, inflation has to do with monetary policies. So I would argue against tariffs, not that they’re inflationary. I hope I’m never tempted to make that argument, but that they just raise the cost of living for Americans. You know, you think of Americans complain about the cost of housing, right? Very important. I think the answer is we need to build more housing.
Daniel Griswold: But if you start raising tariffs, you know, what are major components of housing? Steel, softwood, lumber. These are all targets of proposed Trump tariffs. You’re going to raise the cost both of the supplies for a house if you start mass deportations of illegal immigration. And my Cato colleagues have some great proposals for reducing illegal immigration, but mass deportations are not the answer. But you’re going to cut into the supply of labor to build those houses. So turning back the clock on globalization, on trade and immigration, is going to raise the cost of housing for average Americans.
Chelsea Follett: And that’s something that almost everyone cares about, too. Now, if someone even looking at all of this data that you’ve put forward about rising prosperity, falling poverty, rising access to different household goods, falling prices for common items, still remains skeptical of free trade. And obviously many people do feel that way as well, that is what your nostalgia essay is responding to. What would you say as a sort of closing argument to those who remain skeptical of the incredible power of free trade to promote progress.
Daniel Griswold: Well as it has throughout history, trade is a easy issue to demagogue by politicians. And we’ve suffered a lot of demagoguery over the last 30 or 40 years because it’s that political science conundrum. Right. The benefits of protectionism are concentrated. You can say I’m saving industry X in this town. In fact, I don’t think you are over the long run, like the steel producer in Youngstown, Ohio showed. But the costs are diffused. Millions of Americans paying higher prices every day for it. So one, I think we need to educate people. We need to point to the opportunities of trade, how trade has made our lives better by more products at lower prices every day, but also export opportunities for US companies. I think politicians need to talk more about the export success US Companies have enjoyed. Foreign investment in the United States, which is the flip side of trade. If you complain about the trade deficit. Well, part of the reason we have a trade deficit is money is coming back to buy our goods, but also to invest in the United States. So I would point to those automobile factories in Tennessee and South Carolina and Alabama that are producing BMWs and Nissans and Mercedes, a lot of them for export, by the way.
Daniel Griswold: So I talk about those things. But also I would appeal to the average American that protectionism is not going to solve our problems. It didn’t in the 1930s. It hasn’t more recently. The answer is let’s engage in the global economy and let’s focus on making the American workforce more able to enjoy the benefits of a more globalized and more technologically sophisticated economy. The last point I’d make is, you know, the effects of trade, they’re significant on the US Economy. And on net positive, technology has a far higher impact on the US Economy. Everything we’ve said about trade, the pluses and the minuses, can be said about technology. Technology puts more American workers out of work than trade ever will. But it also creates tremendous opportunities for consumers, for workers.
Daniel Griswold: So I would just say let’s think about trade the same way we think about technology. Yes, it has a downside. Certain communities, certain workers are not better off because of it. More of them are better off, and we’re better off as a society. Let’s let trade, like technology, yield its huge benefits for America and the large majority of Americans. And we can address the specific problems that are created by it with more targeted domestic measures, job retraining, helping people afford housing and move to places where there’s more opportunity. There are a lot of good things going on in this world today. Let’s take advantage of them and equip people to live more prosperous lives in our more developed, open, technologically sophisticated economy.
Chelsea Follett: Thank you so much for talking with me, Dan. We will link below both essays in the description for this podcast. Everyone check them out. There are so many great data points in them that we didn’t even get to, and I highly recommend them.