Globalization has been good to Seattle.
The companies headquartered here spread their links across the planet. Starbucks, with “ethical sourcing” from developing nations and stores in scores of countries. Microsoft, with a contact office for nearly every country and its largest R&D center outside the United States in China. Amazon, perhaps the biggest single driver of the 10,000-mile supply chain.
Natural deep-water ports here and in Tacoma, operating together as the Northwest Seaport Alliance, anchor a maritime industry heavily dependent on trade with Asia. Washington is America’s most trade-dependent (and vulnerable) state.
Tourists come here — or did — from around the world. The region’s strong performance against national peers is powered by being a magnet for international talent.
Now the novel coronavirus pandemic is bringing globalization’s future into question.
Market analyst Gary Shilling wrote, “The coronavirus’s depressing effects on the global economy and disruptions of supply chains is no doubt driving the last nail into the coffin of the globalists.”
Nor is the sentiment confined to some in the United States.
On learning that President Donald Trump had invoked the Defense Production Act to prevent 3M from selling N95 respirators to Canada, Manitoba Member of Parliament Niki Ashton tweeted, “This disturbing news is a sign of how neoliberal globalization, including job-killing free trade deals, have left us desperate.”
I won’t join the cottage industry predicting how the pandemic will “change everything” from workplace design to cities. It’s too early to say.
But given the importance of world commerce to our region and state, it’s important to make enough of an exception to lay out the state of play, the stakes and some markers to watch.
Criticism of globalization long predates the argument that it accelerated the spread of the pandemic.
It’s been blamed, often rightly, for the hollowing out of American manufacturing and middle-wage jobs.
This goes back to H. Ross Perot’s early 1990s warning that NAFTA would create “a giant sucking sound” decimating U.S. jobs and factories. The fairest assessment of the agreement is that it rearranged jobs in Canada, the United States and Mexico, for an overall plus but plenty of pain for individuals.
The complaints were more on target with the “China Shock,” when that nation entered the World Trade Organization. A team led by MIT economist David Autor argues that China is the biggest reason American manufacturing declined by 5.8 million jobs between 1999 and 2011.
China refused to play by conventional trade rules, requiring foreign companies to make products there and often to share technology. To be fair, these companies willingly complied, partly to take advantage of a cheaper workforce.
And not only China was to blame for the shift from offshoring and outsourcing. Entire sectors were decimated (e.g. textiles and apparel, backbones of the U.S. Southeast) as their work was moved to nations in Asia.
As wages stagnated for many Americans, we were treated to the rise of “Davos Man” (and woman), the rich and powerful people who gather each year for the World Economic Forum at the Swiss resort. To critics, this was the wealthy, out-of-touch elite pushing globalization.
No wonder Sen. Bernie Sanders so torched the Trans-Pacific Partnership, the signature “high standard” trade agreement of President Barack Obama, that it was disavowed by 2016 Democratic presidential nominee Hillary Clinton. Donald Trump also opposed TPP and for the first time since the end of World War II, America was not a leader in “free trade.”
I use quotes, because the American effort in trade was more complex than the theories of British economist David Ricardo (1772-1823).
Post-World War II U.S. policymakers partly blamed trade conflicts for the Great Depression, the rise of fascism in Europe and the war. They were determined to craft an international order of rules-based trade, steadily lowering tariffs. This was remarkably successful.
Also, NAFTA and TPP are more “managed trade” — governed by complex, sector-by-sector arrangements — than pure free trade.
Still, this part of globalization wasn’t a complete disaster. Far from it. The World Bank estimated that it raised a billion people out of poverty. American consumers flocked to cheap goods made overseas. Complex supply chains, including those used by Boeing, proved efficient and cost-effective.
Nevertheless, Trump’s nationalism marks a historic break in American leadership.
His trade wars with China and other nations helped drive Washington state’s merchandise exports down 23% last year compared with 2018. As of February, the latest month for which data is available, they were down nearly 31% compared with the same period a year earlier. They failed to return manufacturing on any scale; indeed, American manufacturing has slumped.
No matter. Trump trade adviser Peter Navarro is a leading China hawk who has pushed for “decoupling” the world’s two largest economies. Democrats have grown more disenchanted with Beijing, too.
All this was before the pandemic.
It’s impossible to say what happens next. Eras of globalization can meet sudden ends — this happened with the onset of World War I.
But our world remains hyperconnected, with more than 7.6 billion people. Short of war, I can’t imagine the assembly of most iPhones and the like coming back from China and elsewhere in Asia.
And, as I began this column, Seattle and Washington have been in the winner’s circle of globalization. That was at least before this calamity. And before the abrogation of American leadership.
One thing is certain: The most vulnerable people will suffer first and most from dismantling the globalized trade order without a serious Plan B. And we don’t have one.