Role of Think Tanks in US Policy-making Debate | ||
Role of Think Tanks in US Policy-making Debate
Hamideh Hosseini Abstract The present paper is an attempt to study the role of CNP (Center for National Policy) in promotion of protectionism in the United States in the age of global integration. Although the US is known as the cradle of liberalization and globalization, it seems that certain think-tanks advocate protectionism for the US, while the International Monetary Fund and World Bank advise other countries to liberalize in order to receive their financial assistance. The present paper focuses on the policy recommendations of CNP in the field of trade-related job loss in the United States. Keywords: CNP, trade-related job loss, protectionism, global integration, liberalization, globalization Introduction The United States is known as the cradle of liberalization and integration into the glob al economy. The advocacy of liberalization in economic and political arenas became so widespread that writers such and Francis Fukuyama considered liberalism as the final school of thought, announcing the end of history. Ironically, in the metropolitan of liberalism, i.e. the United States, a think tank, CNP, less than a decade before the recent economic stagnation advocated protectionism – a reversal of liberalization; or the reversal of the end of history. Trade-related job loss According to one of the publications of the CNP in 2002, the authors indirectly and in some cases directly advocated protectionism in order to ward off the minuses of globalization or integration into the global economy, particularly in the field of trade-related job loss. But, inherent in globalization is integration into the global economy and hence, the authors indeed call for reversal of the policy of liberalization. The present paper is an attempt to reproduce their arguments in defense of a sort of protectionism, although they did not mention the word protection. Attempts have been made in the present paper to focus on author’s arguments for opposing integration into the global economy because of its impact on job loss. To begin with, the authors, while accepting the benefits of globalization, enumerate its disadvantages as a base to launch their counter-argument against integration into global economy. Some of their arguments or policy-making debates are given below: Job loss: In a globalized economy, there is a competition for imports. Hence, in such an economy, the profits of industrial producers falls, threatening their businesses by lower-cost competition. Under the circumstance, the producers are forced to lay off their labor to reduce costs; which leads to job loss. Relying on the statistics related to the period 1979-1994, the CNP argues that the said period witnessed widespread involuntary job loss, particularly in manufacturing sector, because of growth in imports. The figure for job loss during the said period stood at 35.5 percent of total permanent job loss (10.2 million workers).
Lack of popular support for integration: The very nature of job loss in fact undermines popular support at home for integration into international economy, because, people feel and practically realize that not only integration does not lead to benefits from other economies, but also undermines domestic production.
Economic dislocation: under the pressure of low cost imports, many economies resort to costly dislocations because the producers try to adjust their economies with the new circumstances, stemming from free international trade. In fact, job displacement is the involuntary termination of employment in accordance with the employer’s operating decisions. The workers do not have any choice in this regard. They may face many problems including finding a new job, losing the level of earning and many other problems including insurance problems and so on.
Merchandise trade: On the basis of what was discussed above, it may be concluded that two major trends affect American perceptions of trade: level of employment in manufacturing sector and volume of merchandise trade. In fact any decline in the level of employment in the manufacturing sector and any rise in merchandise trade would leave a strong impact on American perceptions of trade. The second one too has direct impact on employment and job loss. In other words, job loss is a major factor in American perceptions of trade.
Reallocation of jobs: At the same time, the CNP argues that there is no direct link between trade and number of jobs. Competitive import obliges the domestic producers and manufacturers to reallocate jobs on the basis of changing patterns in the field of competition. In other words in order to gain more advantages of import competition, producers are obliged to reallocate their jobs, which leads to decline in employment.
Job displacement: Employment change due to the pressure of import competition increases the risk of job displacement. It applies in particular to the small industries which are traditionally import-competing industries in the United States.
Reemployment: Anther problem with the job loss resulting from imports is finding a new job for the workers who have lost their jobs. In fact the reemployed workers normally do not earn as much wage as they used to get in their earlier jobs. This is called reemployment earning losses. In case of lesser educated workers, it is more difficult to preserve the level of their earning after re-employment.
Export loss: In order to promote protectionism, the CNP puts forth another argument: Export loss leads to decline in employment. In other words, with the decrease in level of exports as a result of opening the market to imports, many manufacturing units have to lay off their labor in order to reduce costs because of reduction in the level of their production. The main reason for this state of affairs is the fact, despite import share gain incurring from globalization, demand falls for import-competing domestic small industries because of the low cost of imported goods.
Undermining industry’s ability to recruit new employees: According to the findings of CNP, permanent job loss also leads to decline in employment particularly in the industries with above-average rates of permanent job loss. It shows that job loss not only adversely affects the performance of a manufacturing industry but also targets its long-term performance to the extent that the industry is hard to recover and recruit new employees.
Policy recommendations
In order to promote protectionism, CNP has forwarded some arguments based on its findings:
Lower import share: Another argument put forth by CNP is that, the industries that have lower import share and have launched policies to reduce their import share have lower rates of job loss. This is a strong argument on the part of CNP to support protectionism and oppose unbridled economic integration in international trade.
Rise in exports: On the other hand, a rise in exports will lead to a lower risk of job loss. The CNP in fact tries to put the outcomes of import-competing job loss and rise in export in a globalized economy in order to advise policymakers to formulate their policies in a manner to avoid or reduce the negative aspects of globalization and liberalization. One interesting finding of the CNP is that an increase in exports of manufactured goods would lead to more job gains compared to job losses caused by decrease in import share. This argument, which is based on empirical study, again advocates protectionism and opposes integration.
Conclusion
Although free trade and economic integration play an important role in boosting economic growth of a country, an open market does not necessarily lead to boosting of domestic economy, particularly with regard to employment. On the contrary, opening the markets to import-competitive goods, would undermine domestic production which in turn leaves an adverse effect on employment sustainability. In other words, under the pressure of competitive imported goods, the domestic producers may lose a chunk of the market and may be forced to lay off their workers. It is job loss. Moreover, such imports may force employers to reallocate their employees. This may reduce their earning. At the same time, this policy would also weaken the possibility of new employment. On the other hand, boosting of exports prevents job losses. On the basis of these findings, the CNP though indirectly advocates protectionism in the age of global integration and globalization.
Hamideh Hosseini is a MA Student, University of Tehran | ||
Statistics View: 3,217 |
||