Contrary to what Trump believes, globalization is not going to be reversed – Opinion

Hugh Holland is a retired engineering and manufacturing executive now living in Huntsville, Ontario.

By Hugh Holland

Fair Trade or Protectionism? – Views from Canada and America

Chrystia Freeland was elected as the Member of Parliament for Toronto-Rosedale and appointed Canada’s Minister of International Trade in November 2015. She was appointed Minister of Global Affairs in January 2017. She was born in Peace River Alberta in 1968 where both of her parents were lawyers and ranchers. She holds a BA from Harvard University and an MA from the prestigious special studies program at St Anthony’s College, Oxford University.

As a Liberal Cabinet Minister, she supported and led the final negotiations for Canada’s recent trade agreement with the European Union; an initiative started by the previous Conservative government. That is how politics should be done. No party has a monopoly on good ideas.

Prior to entering politics, Ms. Freeland worked as a journalist in a variety of positions at the Financial Times in London and Moscow, The Globe and Mail in Toronto, and as a Global Editor at Thomson Reuters in New York.

During her time in Moscow, she began to study the rise of the Russian Oligarchs (multi-billionaires) and the super-rich around the world. As a result of writing about Russian interference in the Ukraine, she was placed on Putin’s list of people banned from visiting Russia.

She has written two books: “Sale of the Century” about Russia’s journey from communism to capitalism, and “Plutocrats: The Rise of the New Global Super-Rich and the Fall of Everyone Else”.

Freeland’s insightful views on the rising income inequity that is behind the Populism movement now sweeping much of the world are less critical of the billionaires themselves than of the systems in which they work. She observes that most billionaires became billionaires because of their ability to foresee opportunities for revolutionary change, and their sacrifices and tenacity in exploiting these opportunities; which include the collapse of communism, globalism, the rise of computers, the Internet, and robotic automation. Certainly the biography of Steve Jobs, the founder of Apple Computer, now the world’s highest-valued company, attests to his sacrifices and tenacity. Bill Gates, founder of Microsoft, has a similar story.

These revolutionary trends are fast-moving and unstoppable, and a large group of people in many countries have indeed been left behind by the trends. In the USA in 1980, top-executive income was 42 times average worker income. In 2012 it was 354 times average worker income.

But banks are not going to rehire the thousands of tellers they had before computers and credit cards, because today most individuals and companies do computerized and Internet banking. Auto industry jobs are not going to return to $50 per hour Michigan plants from the new and automated non-union shops in the southern USA, and the $5 per hour wage rates in Mexico.

Contrary to US election rhetoric, globalization is not going to be reversed. According to a Georgetown University professor, US trade data has not kept up with the complex supply chains in our globalized world and counts 100 per cent of a product’s value as imported. He uses the IPhone as an example. In reality, only 5 per cent of the value of an IPhone is added during assembly in $5 per hour Chinese factories. 70 per cent of the value is in the software engineering and the microchips that come from the USA, and 25 per cent is added by materials and components that come from several other countries. A 20 per cent US tariff on IPhones imported from China would shift some US buyers to Samsung phones from South Korea, reduce sales to disenchanted customers in China’s huge market, and reduce sales for the Iphone contributors from other countries. Everybody losses and nobody wins.

It is inaccurate and unfair to say that Mexico and China are cheating when people are happy to do a good job for $5 per hour because it is much better than the $1 per hour they were getting a few years ago. The jobs that President Trump complains about were not moved to China and Mexico by Chinese and Mexican companies. They were moved by US companies. More Chinese and Mexicans are now able to buy products from developed countries than ever before.

While recent political rhetoric in the US tends to be protectionist, a workshop sponsored by the American Foreign Policy Association, that I was privileged to attend, concluded that instead of protectionism and punitive tariffs, what is needed is:

• Equal-opportunity education for all young people; particularly in science and technology that drives innovation.
• Better retraining and mobility programs to help displaced middle-aged people make the transition to the new jobs.
• A health care system in which you don’t lose your health care when you lose your job.
• Adequate compensation for laid off senior employees who are unlikely to get another job.
• A livable minimum wage for people who simply lack the ability to access better-paying jobs.

These measures could be paid for by:

• Additional business resulting from fair and effective trade strategies based on quicker response to accurate trade data.
• Closing tax loopholes in which corporate tax is based on profits reported in the home country, but owner/investor and executive compensation is based on profits booked both offshore and in the home country.

While Canada may be closer to having these measures in place than the US, we still have some work to do.

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