Bernard L. Schwartz Senior Fellow, Council on Foreign Relations
Senior Fellow for Global Governance, Council on Foreign Relations; Distinguished Professor, American University School of International Service
Nelson and David Rockefeller Senior Fellow for Latin America Studies and Director of the Civil Society, Markets, and Democracy Program, Council on Foreign Relations
Adjunct Senior Fellow, Council on Foreign Relations; Faculty Director, Master of International Affairs Program and Clinical Professor, National Security Studies, Marxe School of Public and International Affairs, Baruch College
CFR Senior Fellows Edward Alden, Miles Kahler, and Shannon K. O’Neil join CFR Adjunct Senior Fellow Carla Anne Robbins to discuss globalization. The panelists address trade, immigration, global supply chains, and globalization after the financial crisis.
ROBBINS: So I want to thank Irina and I want to thank our panel. We’re very lucky to have you all with us today, three wonderful colleagues at today’s CFR Back to School Event. You can read their full bios and my full bio and their links to their writing and their interviews on CFR.org.
But just a quick reminder, Shannon O’Neil is the Nelson and David Rockefeller senior fellow for Latin America studies and director of the Civil Societies, Markets and Democracy Program—you have a long title, too—
O’NEIL: I’m competing with you. (Laughter.)
ROBBINS: Miles Kahler is the senior fellow for global governance at CFR and the distinguished professor of the School of International Service at American University.
And Edward, known as Ted, Alden is the Bernard L. Schwartz senior fellow at CFR. He has a very short title, but he is also a very well-known journalist, a former colleague.
We’re going to chat up here for about 25 minutes and then turn it over to all of you for your questions, not speeches. (Laughter.) And a reminder that this session is being live streamed and the video and audio will be available on the website, also at CFR.org.
So to start, guys, “globalization” is a very big term and encompasses a lot. It encompasses economics, technology, communications, politics, culture, Amazon Prime two-day deliver. (Laughter.) So I thought we would start with a lightning round rather than leaving that to the end and ask each one of you for a one- or two-sentence summary of the ways we should be thinking about globalization.
So, Miles, you’re first.
KAHLER: The one-sentence description I would give is it’s making one space out of many spaces. It’s a process of integration, and that is accomplished by movement across existing boundaries. They could be national, they could be local. Our national economies have become integrated over time and now the global economy has become more integrated, and that goes for culture and other dimensions as well. So I think thinking about it that way is one way to begin thinking about the different dimensions in one way.
O'NEIL: Well, let me take one dimension, which is goods, the movement of goods. And I would say what’s different this time around from past globalization, which we’ve seen over centuries, is the rise of what is wonkily called global supply chains. And so this is the reality that rather than things being made one place and then sent off to consumers in other places, things are now made in lots and lots of different places, whether across state lines or across country lines. All those pieces and parts and components are brought together and made into a final good that are sent around the world.
And so that has very different ramifications. That’s part of why we’re talking about globalization today and struggling with it, because that’s a very different way of making things than has really ever been in global history before.
ROBBINS: So when we talk about I want to buy things that are made in the USA, we’re not really—there isn’t a lot that’s really just made in one country.
O'NEIL: Right. There’s almost nothing that’s made in one country, right? And that is the really interesting thing that we have. So we get into these trade debates. So much of our exports that go out to the world really depend on us importing other things to make those.
ROBBINS: So you’re a journalist, you can be concise. (Laughter.)
ALDEN: I’ll try. They took away my iPhone or I would have my prop to show Shannon’s point; iPhone is made in 29 different countries. It’s assembled in China, but it’s got components from, you know—
O'NEIL: From everywhere.
ALDEN: —from 30 countries, basically. So one sentence: Globalization is the easier and freer movement of people, goods, ideas and money. And technology and the rapid advancements in technology we’ve seen have enabled all four of those to operate at a pace we’ve never seen before.
ROBBINS: All of those things sound really good, so why does everybody hate it? I mean, that’s sort of—let’s talk about the politics of it and particularly the rage that seems to be building toward globalization.
I mean, I remember, you know, the American unions lobbied really hard against the North American Free Trade Agreement, but in the end of the day it won. There were anti-IMF and World Trade Organization demonstrations and riots, but that was basically sort of a left-wing thing that went on.
And I remember when French dairy farmers burned down a McDonald’s in France, but nobody ever burned down a Starbucks. (Laughter.) So it seems like there’s something new that’s going on these days, certainly with President Trump’s election. He’s constantly talking about how we’re being taken advantage of and that globalization is a bad thing, with Brexit, the Brits getting out of the EU, and a dark, even darker than President Trump’s, election in Hungary and in Central Europe, the rise of these nativist and anti-immigrant groups and governments in places.
The way you guys described globalization, it all sounded very healthy, iPhones and avocado toast and access to cheaper goods at Target. What’s going on here politically? How much of this political shift and the call for a retreat from the world is due to globalization do you guys think? And how much of that is economic dislocation? And how much of that, do you think, is cultural?
Miles, do you want to start with that?
KAHLER: Sure. So in this process that we’ve described, there are winners and losers. We can make the argument that societies as a whole benefit, as the United States has, as China has, but within each society there are those who do not benefit or see themselves as not benefiting.
So think of three possible dimensions. One is winners and losers from trade, which you’ve already alluded to and we can talk about that further, and that’s gotten a lot of attention since the election campaign last year.
But there’s also, and you saw that in the avocado film, there’s an introduction of volatility into prices with globalization. So you may benefit, but the price of your product that you’re selling or that you’re trying to buy goes up and down, or financial products’ prices can go up and down, as they did in the global financial crisis. Right? So we didn’t have the size of financial crisis, the scale of financial crisis in the days before financial integration. So that’s another negative for many people.
And then there’s the identity issue, which is the hardest one to get around. Some people feel threatened by integration of other people and the movement of people across borders. And in many ways in these movements that Carla alluded to, whether it’s in Europe or the United States or Australia, there’s one thread that runs through the anti-globalization rhetoric and that’s immigration. And that tends to be politically, I would argue, the most explosive, even more than trade probably.
ROBBINS: So winners and losers, is it inevitable, economically inevitable? Does it have to be that way? Could it be more equitable?
ROBBINS: That’s for Ted, yeah.
ALDEN: Well, I mean, if you look at basic economic theory, and economists have known this for a long time, trade produces inequality. Right? Trade benefits the abundant factors and it harms the scarce factors. What that means in global trade is if you’re a China and you’ve got a lot of low-wage labor, it’s going to be good, it’s going to eventually bring up wages for your lower-wage workers. But if you’re the United States with highly paid, unionized workers, they’re going to end up being losers because they’re going to be in competition with folks who can do the same or similar work for much less.
I mean, the unions figured this out a long time ago. You know, I wrote about it in my book. Back in the late 1960s, they turned from being pro-trade to being anti-trade because they figured this out really early, that if we’re competing with lower-wage workers from around the world, that’s going to have some negative impacts.
Now, there are lots of ways to mitigate this, right? Smart public policy, you know, progressive taxation, retraining programs, education, there are ways to redistribute within societies to soften these impacts. The Europeans have done this a lot better than we have. In fact, I would argue that the United States has done this probably more poorly than any other advanced economy, which is one of the reasons that globalization is far more controversial here than it is in much of the rest of the world.
ROBBINS: So, Shannon, did NAFTA make things better in Mexico? And was it worse for us and better for them?
O'NEIL: You know, that is what we’ve heard, right? We’ve heard from this government, we heard in the campaign actually from many of the candidates. You start looking at the numbers, and it actually doesn’t seem to be true. So you look at—and even these are numbers that came from today’s Commerce Department, a recent report that came out, if you look at it. If you look at the eight years after NAFTA came into effect, the U.S. manufacturing sector grew by 600,000 jobs. So it would seem the after-NAFTA effect for the United States was a huge growth in jobs. The manufacturing jobs in both Canada and Mexico grew about a million each, so they grew a little bit more, but ours grew a lot.
After 2002, manufacturing jobs in all three countries declined. So something happened in 2002 that may or may not have been NAFTA-related, I would argue it wasn’t NAFTA-related, that led to a decline in jobs. So just on the data that’s out there, we don’t see the difference.
Mexico in particular, one, there was a growth in jobs, there was a growth in manufacturing, but I would say what NAFTA did for Mexico was something far beyond and very different than just, you know, did it create factories, did it create jobs. Mexico, for many years, had been a very closed economy, it had been an authoritarian government, it had been a very inward-looking place. And you saw a group of reformers throughout the 1980s, early 1990s and the things that they were putting into place NAFTA really locked in so that future governments couldn’t go back, they couldn’t close back down the economy, they couldn’t nationalize the banks again or nationalize other industries, which had been owned by the government before.
And so I think what that did is really set Mexico on a path where its GDP per capita has doubled over the last 15-plus years, where we’ve seen a democracy, and messy as it can be, you’ve seen a democracy grow in that country and where you’ve seen really a stable, you know, somewhat slow, but still stable growth and a stable country on our southern border. So I think NAFTA helped in a lot of that process. And it’s something that we shouldn’t discount as the United States, especially given that we share an almost 2,000-mile border.
ROBBINS: So, Miles, has this sort of political reaction that we see in Europe, is it just a, you know, limited number of places? We see a remorse in Britain after Brexit. We saw Emmanuel Macron won in France. And even when he was inaugurated, he strode to the platform not to “La Marseillaise” but listening to the “Ode to Joy,” which is the anthem for the European Union. I play that all the time when I get depressed here—(laughter)—but not just because it’s the “Ode to Joy,” but because somebody dared to do that. Could you imagine an American president ever doing that?
Is there political hope there? Or are there darker times still to come in this backlash against globalization?
KAHLER: Well, it’s not clear that all of these political movements are a backlash against globalization, per se, or all dimensions of globalization. Brexit was a backlash against many things, against the current government in London, against people who were concerned about British sovereignty vis-à-vis the European Union, against immigration, once again. In fact, in the British case, it really wasn’t much about trade at all. And the pro-Brexit, those who wanted to leave the EU, actually thought that they could become a bigger trading power outside the EU.
In other cases, I would say if there’s one thread that runs through this, it is that these are areas, voters in areas that have felt left behind in various ways. They feel culturally left behind by the larger urban areas that are thriving and flourishing, New York, for example, Washington in the United States, Los Angeles; think about the coasts in the United States versus so much of the interior of the United States. They might feel economically left behind because of the trade effects that Ted and Shannon were talking about.
So they live in localities, they live in areas like northeast France, the Midlands in Britain, parts of the interior of the United States that feel like everyone else is enjoying this boom from globalization, we are not enjoying that boom. And, of course, the global financial crisis in 2007-08 even made that more severe because they feel like they never recovered from that. They took a big hit from the financial crisis and it’s never come back.
And in Europe, it was complicated, of course, by the eurozone crisis which followed, very slow recovery, high levels of unemployment. And these areas were very, very hard hit. So I think that those are minority areas, but the voters in those areas are very mobilized and very energized and, therefore, they have a lot of weight in elections if those who are in favor of globalization or benefit from it do not turn out and vote in the same numbers.
And that’s exactly what happened in Brexit. One could argue that’s what happened in our election in 2016. And it’s happened in the French case, it was the reverse, so that those who were opposed to the anti-globalization forces, the anti-euro forces, the National Front, were sufficient to defeat Marine Le Pen definitively. And the same was sort of true in Germany, although Germany the outcome is a little more ambiguous.
ROBBINS: What were you going to say?
ALDEN: Can I make just one quick amendment on the Brexit?
ALDEN: I agree with Miles. I think immigration was much the driving cause. But if you actually look at the regions in Britain that voted most heavily for the Brexit, they were those that were hit the hardest by the loss of manufacturing jobs in the 2000s.
KAHLER: Yes, yeah.
ALDEN: So the same research that’s been done in the United States is correlated quite tightly with the Trump vote. If you look at where Trump won the election in the swing states—particularly Ohio, Pennsylvania, Wisconsin, North Carolina, places like that—the map overlaps quite precisely with these areas that were hardest hit by manufacturing job loss in the 2000s. So I do think it’s a factor, even in the Brexit vote, though it certainly wasn’t front and center in the debate the way it was in our campaign debate here in 2016.
O'NEIL: Can I just add one thing? I think one challenge on the political side, which sort of complements what they’re saying, is a lot of these job losses—we’ve seen manufacturing job losses in the United States and across most OECD countries and others. And it’s often all of that is attributed to trade, right, to globalization.
O'NEIL: That is why these jobs have disappeared because they’ve gone to China, they’ve gone to Mexico or you pick your country. But pretty careful economic studies have shown that actually the vast majority of those jobs have not disappeared because of trade, they’ve disappeared because of automation, they’ve disappeared because of changing consumer tastes and new products. I mean, there’s a whole lot of other reasons. But politically, I think it gets focused in on trade and on that other person in the other part of the world that’s taking your job.
ALDEN: Can I argue just a little bit because we want to keep this lively up here? You know, I’ve heard this argument, we hear it all the time.
ALDEN: But you think about it from the perspective of the worker in a factory in the United States. OK? So suddenly the U.S. economy has open import competition. And so you’ve got foreign goods coming in cheaper than you can make goods here in the United States. You’re the owner of that factory. You’ve got three choices. Well, one, you just can’t meet the price, you can’t compete, you go out of business, all your workers lose their jobs. Option number two, you’ve got to find a way to lower costs so you outsource some or all of that work to a lower-wage country and then some of your workers lose their jobs. Option number three, you automate the heck out of the factory.
ALDEN: You bring in robots, you find ways to be so productive that you can meet the lower price. So I think in a way while I agree with you—I mean, I’m not disagreeing; I think technology is a bigger driver. But if you’re looking at it from the perspective of the person who loses the good-paying job that they have, it doesn’t really matter a heck of a lot whether they’re replaced by a Chinese worker or by a robot. The effect on their lives is identical.
ROBBINS: Absolutely true and only going to increase, I mean, that we’re going to get artificial intelligence, we’re going to have more and more technology that’s going to be able to do, serious, going to start teaching my classes. (Laughter.) And she’s a much nicer—
ALDEN: You could still do panels here.
ROBBINS: She’s a much nicer grader than I am. (Laughter.) So is there any serious—you talked about how the Europeans have better social policies to at least do this, but is everybody going to turn into a lotus-eater? I mean, is there serious conversation?
Do you see any government, Miles, that is dealing with this better to figure out what people are going to do as the robots take over?
KAHLER: Well, first of all, there’s a question, are the robots going to take over or are people going to learn to do other jobs in conjunction with the robots, but of a different kind? The optimists would say they will just have to—but they will have to be higher skilled. So a typical factory worker, I think Ted would confirm today, is going to have to have skills that they can run computer-assisted machines of various kinds. It’s not like the old assembly line. And the idea that we’re going to bring back old steel mills and old factories of the old technological kind is never going to happen. It’s never going to happen. So there’s the upskilling, that’s the optimistic view, and Ted’s written a lot about this.
The other thing that’s been mentioned recently, has been tried out experimentally in Finland, I think maybe a couple of other places, is a guaranteed income. So the idea is there will be some people who will simply not have work and we should just give them a share of the goods that come out of this automating process, this technologically advancing project and give them a guaranteed income for everyone.
And the economists who have done the work on that, here in this country at least, are very skeptical because the cost is enormous. And the United States is not exactly a high-tax country in terms of what the population is likely to accept, even if everyone gets a share of it.
But, you know, if you’re a pessimist, you have to turn to solutions of that kind, it seems to me, because there would be individuals who would not be able to find work of the kind that’s required in this new, more technologically advanced economy.
ROBBINS: So I want to move on to the specific trade deals that the U.S. seems to be tearing up with wild abandon and what the impact is going to be on the U.S. economy as well as on the world.
But we’re going to talk a little bit about U.S. leadership and the perception of retreat. First of all, if you look at the polling data, one, it doesn’t show that Americans want to retreat. I mean, if you ask, it depends. You should all study polling, it depends on how you ask the question. There are poorly crafted polls, there are well-crafted polls. Nobody wants to be the policeman of the world, but people don’t generally want the U.S. to give up its role as a leader.
That said, President Trump won saying that the U.S. does too much, even certainly campaigned in the beginning on the notion that we were getting ripped off by NATO and all these other things. What’s the impact on the rest of the world, this perception of U.S. retreat? Are people, do they feel like we push them around too much? Is it a salutary impact? Is it a negative impact? Are people frightened? What are you guys hearing out there?
ALDEN: I’m going to let Shannon and Miles because I’m a bit more U.S. focused. They listen more to what people in the rest of the world are saying. (Laughter.)
O'NEIL: You know, I think there’s a real frustration with the United States and pulling back. I think in particularly places, and, for instance, Mexico, which we’ve been talking about with NAFTA, you know, Mexico used to be a country that felt most warmly to the United States. When they do these “thermometer” and, you know, who likes us most, well, Mexico was always near the top of the list. And today, Mexico is in the bottom of the list and they are the country that likes us least, or at least our government least.
And, you know, for those of you that were here during the campaign, you can understand why Mexico feels the way that they do. You know, you wouldn’t want to be called this on your campus so they don’t want to be called it at home. So that is, to me, particularly with that particular country, and you can talk maybe more about Europe, but that particular country, there are a lot of things that we do with Mexico. And it’s not just trade, right?
We have so many different issues on the table with Mexico. We have border issues. We have environmental issues. We have water issues. We have security issues. We have, you know, the people that are on both sides of the border, there’s so many different things that we do with them. And we make it really hard for them to trust us in good faith. Right?
And the other thing that you have is, you know, we know about our politics here and we think a lot about our politics, but they have their politics as well. And you can imagine when the leader of another country is calling you bad names that that doesn’t play so well with your general population.
And so what is happening here is feeding into their domestic politics as well and influencing what their politicians can do, right? Their politicians want to win elections. Mexico is going to have a lot of elections next July. The president is going to be elected, but so is every single senator, every single representative, many of the governors. So this has become really an issue that will shape the politics of that country, you know, maybe for a generation or more.
So that’s a little bit of a focused view, but I do think the United States stepping away from this role of providing a public and, yes, it was costly for us, though I think we benefited often from that stability and that prosperity, given who we are and given our economy and given the like. But as we step out of that role, we leave a lot of bad feelings, I think, in many places that have then these domestic ramifications that could change the dynamic, even if our government started singing a different tune down the road.
KAHLER: I think the usual line that people take is that there are countries out there that re quite delighted that the United States is stepping back. So I would say probably Russia very happy that the United States is stepping back, without qualification.
ROBBINS: They made it easier for us.
KAHLER: Yeah. China is another story. The phrase I heard in China last year was China wants to be a leader, but not the leader. They don’t feel they’re prepared to be leader globally, and I think it makes them slightly nervous in a way that the United States is pulling back.
Also, we should be aware, and this gets to Shannon’s point about thinking about what’s going on inside countries, there are reformers in China who actually would have been very happy if the United States had stayed in TPP because it was setting—
ROBBINS: The Trans-Pacific Partnership.
KAHLER: The Trans-Pacific Partnership which was one of the first things that President Trump pulled out of when he took office, literally within the first days of taking office, because TPP was setting standards for trade in data, for example, data flows across borders where we have no rules internationally, and in other areas as well, which were much higher than China could have met and it was specifically set that way. But if you were a reformer in China, it set a standard that you might want China to meet someday, right? It gave you a lever inside China to say this is where we have to go, this is the direction we have to move, which is in a more market-oriented, open direction. That lever is now gone, right? We don’t have, the United States and its partners, in TPP do not have that lever anymore.
In other cases, like our allies and our economic partners, like Japan and South Korea and Asia or Australia, I think the mixed signals coming out of Washington are making them very, very nervous and anxious as they well might feel because, on the one hand, you have a president who’s saying one thing one day and one thing the next and all of it pointing in the direction you suggested, which is we’re doing too much, we’re going to pull back, you should pay for more, you should bear more of the burden, and then a group of officials under him, the secretary of state, the secretary of defense, the vice president, going around the world saying nothing has changed, nothing has changed, it’s all just the way it was.
And then you have to ask yourself, well, who speaks for Washington in this case, right? We’re not sending out clear signals in this regard. And I think that’s creating a lot of unease and anxiety and causing some of these countries to think about, what are their options, right? What are their options? Does it mean they accommodate to China? Does it mean they join RCEP, which is China’s TPP? Does it mean that in Europe they make an accommodation with Russia somehow or they deal more closely with China to push forward issues like climate change.
So they do have options, as Shannon pointed out. It’s not as if they’re completely at the mercy of the United States. So I think those issues, that’s still in the background, they’re still waiting to see what happens in the United States. But if this kind of mixed signaling goes on, I have a feeling they will be looking for other alternatives, as they must.
ALDEN: Let me make just one very quick point. And there are a lot of political science and IR students here. You know that nature abhors a vacuum. And if you look at the times in world history when we’ve had the greatest stability, it was either balance of power, a number of countries that were roughly equivalent, size and power, or set up alliances that were roughly equivalent, or hegemonic systems, which is largely what we’ve had now for the past at least 25 years since the breakup of the Soviet Union.
As the United States pulls back, we’re moving into something and we don’t know what it is. Is it a new balance of power system? Is it a modified hegemonic, something? Those “something” periods tend to be particularly dangerous because there becomes a lot of jockeying for power among countries and bad things can happen when you don’t know who’s up and who’s down. And that’s the period we’re moving into I’m afraid.
ROBBINS: So before, and I do want to get to NAFTA and TPP, but that raises a very interesting question, which is, if, as we retreat and if we do retreat, you know, the Russians helped us, they sort of held our coat as we step back, what were they looking for, do you think? And is it that they want to take our place? They certainly don’t have the economic capacity to do that, they really don’t have the military capacity to do it. They have been a declining power for a very long time. They would like to be able to control their neighbors. So who’s waiting in the wings? And let’s just even start with the Russians. What do you think they were looking for in the first place?
ALDEN: I mean, you know, we don’t have any real Russian experts. Maybe Miles wants to—
KAHLER: Well, the Russians have been quite clear. They want the kind of world that Ted was referring to. They want a multipolar world in which the United States is no longer the hegemonic power. And they would be happy if they have a world in which China and maybe a weakened EU that has been separated from the United States and a disengaged United States are all kind of competing with one another and Russia has a sphere of influence in the former Soviet Union and Eastern Europe probably or East-Central Europe, and that’s the world that—Putin understand they’re not going to become a superpower again, but they are going to become a more influential power than they are now, as you said, not a declining power, but a more influential power in this multipolar world. That’s what they would like.
ALDEN: And let me just add, I do think unfortunately there was some historical payback here. The Russians were furious that the United States pushed NATO right up to their borders after the collapse of the Soviet Union. And I think Putin’s nursed a grudge about that for many years. And so I think there was some payback in the last election I’m afraid.
ROBBINS: So is this sort of disruptive world a world without rules? Is that ultimately sort of the goal of a guy like Putin? So much of what’s happened since the end of World War II and so much of the role that the United States has played in it, whether it’s been on questions of human rights or treaties that we’ve tried, whether it’s been on arms control or intellectual property agreements or other trade agreements, environmental agreements, it has been the notion to regularize relationships between countries, to come up with sort of standards and rules. Is the goal, really, of a guy like Putin to just have a world in which there are fewer rules so he doesn’t have to worry about them, do you think?
ALDEN: Can I say it’s more worrisome than that. And it brings us back to the globalization piece. That also happens to be the goal of a guy like Trump, right? I mean, what we have had since the end of the Second World War is the greatest outbreak of rule-building in human history. And Miles can talk about, you know, the human rights and the U.N. and other pieces.
But on the trade side, it’s extraordinary, right? The creation of NAFTA, the World Trade Organization, these institutions that have binding international mechanisms for resolving disputes among nations, that have a whole set of rules for how the commerce in this new global order is going to be carried out.
Trump has made it very clear he doesn’t like any of that. He thinks that all works against the interests of the United States. So I think we are moving into a period of rule deconstruction and I don’t think we know exactly what the consequences of that are going to be.
KAHLER: Well, that depends on whether you think the United States is, as we like to believe, the indispensable nation.
ALDEN: That’s a good point.
KAHLER: Because I think most of the rest of the world on economic globalization, even the Russians are happy, the Russians have now joined the WTO. So they’re, you know—
ROBBINS: The World Trade Organization.
KAHLER: The World Trade Organization. The elites in most of the developing world and Russia and China are quite happy with the globalized world and they’re basically rather conservative, I think, at the present time. They like the world the way it is because they have benefited enormously from it in the last few decades. It’s the United States that’s discontented.
And the question is, if we become a rogue nation in trade, for example, and try to overturn these rules, what will happen? Well, it’ll make life more difficult for other countries, but that doesn’t mean that the rest of the world is going to stand still. There are new trade agreements being negotiated all the time.
The EU and Japan are nearing completion of a free trade agreement. Right? The EU has become much more active in trying to—they’re forging an agreement with Mercosur at the moment, or trying to. It’s going to be not such a great agreement, but it’s going to be a free trade agreement, it’s something. So the EU sees itself as moving ahead. China sees itself as moving ahead, once again, with fairly thin trade agreements. But the rest of the world is not going to stand still.
I think it’s going to be a real shock, especially to my colleagues in Washington, when they discover that maybe we aren’t as indispensable as we think. That we can create trouble, we can create disruption, but the rest of the world will just say, OK, well, we’ll take that into account and keep moving.
ROBBINS: So what’s going to happen with NAFTA? President Trump called it the worst agreement ever. Of course, he called the Iran deal the worst agreement ever. (Laughter.)
ALDEN: TPP, too.
ROBBINS: Yeah, he called TPP. He also called—
ROBBINS: —the deal with Cuba and Korea the worst deal ever, but let’s just focus on that one right now. (Laughter.)
So, Ted, you were saying that you were walking around the Hill, listening to people talk about NAFTA. What do you think is happening on NAFTA?
ALDEN: Oh, it’s a big mess. I will let Shannon talk a little bit about how the Mexicans and others are looking at it. But the Trump administration has put forward proposals that Canada and Mexico cannot possibly accept. I mean, we’re in the fourth round of negotiations right now, they’re going on in Washington, you know, supposed to be done by the end of the year, nobody believes that that’s going to happen.
And what we’ve seen just happening in the last week or so in Washington is that the big companies in the United States, which were all kind of, you know, they had all their eggs in the tax reform basket, oh, boy, Trump’s going to give us this big tax cut, we love him, they’re suddenly waking up to the fact that it’s quite likely he’s going to blow up the North American Free Trade Agreement and that’s going to have enormous consequences for commerce in North America. So they’re suddenly flooding Capitol Hill and saying to their members of Congress help, you know, do something to stop the guy in the White House. But things are not looking good at all in the negotiation.
ROBBINS: So, Shannon, walk us through what happens if NAFTA really gets blown up. I mean, you talked about supply chains.
ROBBINS: I gather we had a near-death experience on NAFTA before and what the reporting said is that the agriculture secretary walked into the Oval Office with a map and said, sir, these are the counties where people voted for you and these are the farmers who are going to get hurt and they’re all your voters, and that stayed his hand for a while. It’s a little frightening that he’s only concerned about his voters, but that’s another issue.
But walk us through, it’s not just the farmers in those counties. If we have so much supply chain integration, what happens if that deal collapses or the U.S. pulls out?
O'NEIL: I mean, this is what it seems they’re not considering, right? And so the hardest hit and the fastest hit will be agricultural producers, in part because if tariffs go back to what are called most-favored nation status, so what you pay if you’re not part of a free trade agreement between countries, if they go back to the old standard, U.S. tariffs are pretty low overall, so Mexicans that sell into the United States will pay some tariffs and some sectors are a bit higher than others, but it’s pretty low, probably 2.5, 3 percent on average that they would pay, so pretty manageable.
But particularly agricultural products that are going into Mexico will get really hard. And so you will see pork and corn and soy and a couple of other, beef, and other products be hit incredibly hard to the point where producers from Argentina or Brazil or Australia or Canada and some of these areas will be much more competitive in the Mexican market.
And Mexico, we hear a lot about, you know, Mexico takes our job or Mexico floods us with imports, and actually, Mexico is the second-best consumer of U.S. goods. They like our products more than almost anybody else in the world and especially per capita. They don’t make as much as we do or as Canada does, which is our number-one buyer. But for the money that they do make, they buy more from us than anywhere else. And so you’ll start seeing that decline.
So, one, you’ll just have the straight-out companies that sell into Mexico, a lot of their products will be more expensive there, Mexicans will buy less of it or they’ll search for other aspects.
The second thing that’s going to happen, and we’ll see how it all shakes out because there’s a lot of uncertainty, even if Trump says I’m done with NAFTA, we’re pulling out, there’s a lot of uncertainty if he actually can do that without Congress going along. And to Ted’s point, a lot of people in Congress have constituents that are going to be really upset if NAFTA ends and so it’s much more granular, there’s a micro level where they won’t want it to end.
But let’s say he is able to do that, you are going to have these production platforms that have formed. So the making of a car today goes between these three countries. You have pieces, you have steel that comes from Canada that goes to a plant that’s in Montpelier, Ohio that makes the brakes, which then go down to Mexico and are put together with lots of other parts into a car that comes back into the United States that you’re able to buy here for only $30,000, right? And that won’t happen anymore. Either that car will cost $50,000, which fewer Americans will be able to buy or buy as often, or with this whole production platform that’s formed, with it no longer being protected through rules of origin through NAFTA, we’ll just import that whole car from China and it’ll still cost $30,000, but none of it will come from the United States anymore or from Mexico and Canada. And that’s more medium- to longer-term future.
But one thing that has already happened—and I’ll just give you as this anecdote—is in Mexico during—Trump was very against autos moving. He called out Ford. He called out GM for moving things to Mexico. There was a plant that was going to be built by Ford in San Luis Potosi, which is a city and a state in Mexico, that was going to make the Ford Fusion, which is a small car. And Trump called them out and said you shouldn’t do that. So Ford said, OK, we won’t build it in that plant. What we’re going to do is move all of our Fusions, starting in 2019, all of the production to China because, one, Chinese buy smaller cars and they are a bigger market. There are more cars bought every year in China than there are in the United States, so that’s really where the big market is.
And so what that means is all the suppliers that were in Omaha and Kansas City and everywhere else that sent parts down to San Luis Potosi, those contracts are gone and those workers will be fired because it’ll all move to Asia. And also, American consumers, there will just be fewer Ford Fusions. So if you’re going to buy a pickup truck you’re still good, you can buy that, but you won’t be able to buy that smaller car because it won’t be made here. Or, if you want to buy, it will be more expensive because they’ll be shipping it.
So that is one little example and we haven’t even broken NAFTA yet, right? But that, I think, will become more and more what happens if you end NAFTA. There won’t be this benefit for making things in the United States anymore.
ALDEN: Can I just say, trade is fascinating. One of the little peculiarities, if you want to know why so many cars are foreign made, but so many trucks are American made, the U.S. MFN tariff on cars is 2 1/2 percent, our tariff on pickup trucks is 25 percent. That’s why Ford and GMC dominate that sector of the market. Yeah.
ROBBINS: So we want to go—there’s so many more things we could do, TPP, everything else, but I’m sure the students will have it. So we have microphones, so wait for the microphone. When you get it, hands up, who has a great question? Come on, there’s so many of you. (Laughter.)
Right here, the young woman right here.
Stand, state your name and school.
Right here in the second row, that’s great, next to the Yalie.
Q: Hi. Yeah, I’m actually a Yalie. My name is Veronica, I’m actually a visiting student at Yale. I’m from Mexico, so I find this really interesting.
Just continuing on with this NAFTA conversation, one question: How do you believe that since Americans have a lot of immigration workers coming in from Mexico and these workers are usually in the agricultural sector and the manufacturing sector and they’re probably going to be kicked out with this U.S. policy or the immigration exactly reversing and they’re coming back to Mexico to actually have a stronger agriculture sector in Mexico with everything that’s happening with Trump, how do you believe that the U.S. is going to balance the cost of losing all these workers in all these different sectors and what policies he’s going to do?
O'NEIL: I mean, this is a good question, right? And you already see in the U.S. economy, you see us at, you know, very low unemployment rates, you see something around 400,000 manufacturing jobs that have not been filled that they’re searching for workers. And you see from Mexico, you have seen a shift. Since 2007, 2008 on, the flow of immigrants coming into the United States from Mexico has either been net negative or zero.
So, basically, over this last decade we’ve seen a decline of 140,000 Mexicans, so Mexicans going back. Some still come, of course, but more are going back than are here, and partly that is Mexico’s economy, partly that’s the way things work here in the United States and sort of the hostilities that have grown towards Mexicans. A big part of that is demographics. Fewer and fewer people turn 18 every year looking for a job in Mexico, so fewer look for a job there or here. So all of that dynamic is changing.
And I think the real question is—there’s sort of two things. One, we need workers in this country. Right? We need people to go in and work. We also need people who are willing to move around. And traditionally, immigrants are more willing to go where jobs are than Americans who were born here, in part because, you know, if you’re already leaving your own country it doesn’t really matter to you if you go to Kansas City or New York or Iowa or wherever you go, right? If you’re born in upstate Michigan, it’s really hard to think about, should I move to Alabama maybe because there’s a job there, right? And it’s understandable, but it’s a big part of it.
One thing that I think is really interesting is, if the Trump administration carries through on some of the more, I would say, draconian immigration policies is that we will see—we have this issue of the Dreamers. And a good portion of those, anywhere from two-thirds to three-fourths of them are Mexican of origin. So you would have hundreds of thousands of young, bilingual, fairly well-educated Mexicans coming back into Mexico, and this could be, in many ways, a big opportunity for Mexico with all this human capital that’s coming back.
But it also would be a challenge for Mexico because, can they absorb these people who many may not speak Spanish or speak it very well, they don’t know the culture there, they don’t have the connections and ties? But can you harness, if all of these individuals end up going back, can you harness that for the betterment of Mexico to sort of, you know, drive its economy?
I do think it is a loss for the U.S. economy because, again, these are, you know, people who have dedicated their lives here, they’ve gone through school, many of them are in college or graduated from college. They are Americans in all but the color of their passport. And so losing that group, especially when we are reaching this labor challenge, right, where we don’t have people who are willing to move to the places where we have jobs, in many cases.
ALDEN: Can I say one quick thing?
ALDEN: I know I keep doing this—(laughter)—but the Trump administration—I apologize.
ROBBINS: It’s because he’s a journalist.
ALDEN: Yeah, I know, I’m always interrupting. The Trump administration has a very clear theory on this, which you should understand, which is, you know, I talked at the outset about how globalization creates competition. Well, trade creates competition, competition for lower-wage workers in China and Mexico and elsewhere. Immigration also creates competition for American workers. And the Trump administration’s theory is that if we reduce that competition then American wages are going to go up. And the fact is American wages have been flat for a long, long, long time. And there’s lots of analysis that suggests that immigration and trade are not the primary drivers of this, that there’s a lot of other stuff going on.
But there is, you know, genuine grievance out there among a lot of Americans who haven’t seen their paychecks go up in a long time. And the Trump administration says, well, if we have fewer immigrants and we have less trade, your wages are going to go up. So I don’t agree with what they’re arguing, but they do have a coherent way of thinking about it.
ROBBINS: Yeah, Miles?
KAHLER: Well, also, just looking at this internationally, I mean, one of the great advantages of the United States looking forward as you see countries like Germany and Japan where you have a tremendous demographic cliff ahead of them, they’re going to fall off that cliff. I mean, you’re going to have a very, very large, aged population which is going to be cared for by a very small, relatively small, young population.
One of the advantages of the United States, even as compared to China interestingly, if you look far enough out, is that we did not have that demographic cliff. But the reason we didn’t, in large measure, was because of immigration and fairly liberal immigration policies.
And now the Trump administration is not just cracking down on illegal immigration, they have put a very low cap on refugees, the lowest since 1980 I believe, and they want to reduce the legal immigration—
ALDEN: By half.
KAHLER: —by half.
KAHLER: That seems to me giving up the very advantage we have demographically going forward and making all of our policies for the aged more questionable going forward, right, because we will then have a smaller young population demographically looking ahead two, three decades. So it really is a very, very self-defeating policy just in terms of our competitiveness and our national well-being looking out to other countries that have this demographic problem, which it’s too late for them to deal with, frankly, even if they cared to. And Japan historically has never wanted to care, you know, to deal with it.
ALDEN: This is Miles’s way of thanking you all for paying for our retirements. (Laughter.)
KAHLER: And mine’s closer than theirs.
ROBBINS: Not that much closer than mine, thank you. And it also goes to this core identity question for all of us because all of us are only a generation or two away from being immigrants ourselves. And to talk about somehow slashing the number of immigrants in half just sort of denies who we are as Americans. And it is a very odd narrative for the United States.
So next question. So I want to call on a guy. I hate doing that. (Laughter.) Oh, there are no men with their hands up. Yes, there’s one right there. (Laughter.)
ALDEN: Just talk loud.
Q: (Comes on mic.) There we go. Thanks for being here today. Assuming that the—
ROBBINS: You are?
Q: Oh, my name is Josh. I’m also from Yale. I’m a senior. Sorry about that. (Laughter.)
ROBBINS: State school next. (Laughter.)
Q: If the 46th president of the United States is more of the mold of the 43rd and the 44th, to what extent do you think that—(laughter)—the damage that Trump has inflicted on America as a leader of the post-war internationalist order is irreparable? And to what extent can it be salvaged in some way?
KAHLER: Well, that’s a very good question. Let me give it a slightly different cast than what we’ve been talking about. We’ve been talking about governments and what governments do. One of the advantages of a liberal society is that society can do things. And I’ve been working a little bit on climate lately and this becomes very clear in the case of climate change. Trump has also pulled out of the Paris agreement, as many of you know, on climate.
We had a workshop last spring at the Council in Washington, and the people who work on climate were actually less pessimistic than people in other areas like economics and that, because a lot of what’s happening in climate is being carried out by corporations, by NGOs, by citizens’ groups, by states like California. So, you know, we don’t have to stand still, the rest of society can do things whatever the government in Washington. So in some sense we’re taking what typically is a conservative line and giving it a different twist, which is saying, you know, you run against Washington. And Jerry Brown, the governor of California, is doing that quite visibly right now.
So I don’t—that’s the way I would portray it, which is don’t just constantly think, as people at Yale tend to do—(laughter)—that everything happens in Washington in the executive branch. Lots can happen in our society that’s outside of—I got a degree from Harvard, so I’m just saying—(laughter)—lots can happen in our society that can move forward the causes, whether you’re a conservative or a liberal, can move forward the causes without the national government intervening at all.
So I think in some areas like trade, clearly, the national trade policies mean a lot. In other areas, if we think about it, other levels of government, other actors can play a big role.
ROBBINS: So where are the state school people? (Laughter.)
KAHLER: Oh, yeah, Berkeley, right.
ROBBINS: It’s a state school.
From over here, I’m moving really far away from—yes. Right in the back there, the gentleman, yes.
Yes, with your pen up. Yes, thank you.
Q: Thank you so much. My name is Saeed (sp). I’m a student from Baruch. (Laughter.)
ROBBINS: That wasn’t a plant. I actually—
Q: No, no, no. So as you know, a big chunk of the GDP is the government spending. And most of those spendings are, like, defense budget. So a government having that huge amount of defense budget, now that the president as a chief executive officer, most of the time they declare some war in an unnecessary battlefield, such as, let’s say, Afghanistan right now. Thirteen years of presence with that much spending and the outcome or the result is, let’s say, nothing, still most of the countries in the hand of the terrorists. And Osama bin Laden was found in Pakistan after 10 years of U.S. Army being in Afghanistan. So what policies do you believe to have a control on that spending, especially unnecessary spending, what affects the economy and the spending of the government? So how do you control that?
ROBBINS: You mean controlling defense spending?
Q: Yes. All that the government is spending at all, but especially defense budget, that’s sort of being abused in unnecessary battlefield.
ALDEN: I mean, if you want, I can answer that question in a broad way, which is that there is a central challenge that any government faces, and that is over spending money on things that are essentially current versus investing in the future in things that will create future prosperity. And our government, the U.S. government is actually, compared to a lot of governments, doesn’t spend a lot of money in comparison to the overall size of the economy. But almost all the money it spends are on what we call entitlements, so that’s Medicaid for senior citizens, the Medicare program for the poor, and Social Security, which is also retirement pay.
O'NEIL: It’s the other way, reversed.
ALDEN: Oh, sorry, excuse Medicare, Medicaid. Thank you, Shannon.
O'NEIL: All good, keep going. (Laughter.)
ALDEN: But continue—what we call entitlements. So that takes up the largest chunk of the budget. And defense is the next largest chunk. And the parts that are getting squeezed are all the parts that have returns in the future. So, you know, building roads and bridges and railroads, what we call infrastructure, investing in education, supporting research and basic science to create new products, those are all the smallest parts of the government’s budget and they’re the parts that are getting squeezed.
And so we are making a decision as a society, whether we know it or not, to maintain a very large military because we think we need it to protect ourselves in the present and the cost of that is investing in all of your futures. And it’s one of the reasons you ought to get out there and vote, right, because this really does—you know, these decisions, the decisions that get made on how to spend that money will affect your lives, you know, my children’s lives, your children’s lives. So it’s a big issue.
KAHLER: And just to add onto the question, military spending, I mean, you would think, given the logic of Trump’s desire to disentangle from the world and play a smaller role, that he would be sympathetic to your view, which is to cut defense spending as compared to these other things that Ted was talking about. But in fact, Trump’s program is to increase military spending.
ROBBINS: He’s calling for a 10 percent increase in the defense budget and a 30 percent cut in the State Department budget, yes.
KAHLER: Right. So you think, why, how can that—well, the military leadership actually is scratching its head because you can’t disentangle and spend more on the military because we depend on allies for bases a whole host of other things, there’s a real contradiction there. But the make “America first” view of the world is you build up America’s defenses in the United States and then what happens in the rest of the world you don’t have to worry about as much. I think that’s kind of the logic of it.
But, you know, withdrawing from the world in some sense or disentangling from the world does not mean, in this case, a reduction in defense spending and favoring other forms of spending, quite the contrary.
ROBBINS: So next we have the young woman right there. Yes, thank you. Great.
Wait for the mic.
I’m sorry, I’m confusing you guys.
Thanks, but you’re next. Thanks.
Q: Hi. My name is Dominique McCoy and I’m studying at the graduate program at NYU global affairs.
My question is—so I’m a child of an immigrant and most of the time when we talk about immigration in America it’s geared towards Hispanic Americans, but my family is Jamaican. And whole parts of New York are English-speaking Caribbean, especially in England as well where they have Brexit. And I wanted to know, there’s this tension about jobs being taken away, but many of the jobs that immigrants have, no one is really competing for that as American born. Like, my mother worked as a nanny around here, right, so a lot of the kids growing up in the Upper East Side have Jamaican nannies or Caribbean nannies. No one is really competing for those jobs. So how do we come about or what are your policy solutions to Democrats or more left-leaning parties to try and help people understand that immigrants are not fighting them for their livelihood? Because I guess Hillary’s strategy, her slogan was “better together” or something like that, but does that go far enough? Like, how are we going to combat nationalism? How do we make policy situations that do address the actual grievances of these countries while still educating them on how immigrants add to their nations?
ROBBINS: Good question.
ALDEN: Do you want me to take a crack at that?
O'NEIL: You start and I’ll follow on.
ALDEN: You go first, please. (Laughter.) It’s a good question.
O'NEIL: So getting the reality and what we know about immigration, one is, what do we know? And we know, actually, and almost every careful study shows that immigrants complement often more than compete. Immigrants are more entrepreneurial, they’re more likely to start a business, they’re more likely—the income that they pour back into the economy through, you know, sales taxes and other kinds of taxes, that the home prices go up in the areas where they come because they buy or they rent and things go up. So there’s a lot of great things that immigrants do for communities. And we have a lot of data on that. And we have a lot of economists and others who have done great studies. But that doesn’t get translated into our political debates, right? And that is the challenge.
And I think we’re coming down again to some of the things Ted was talking about where there is a worldview, I think there’s a worldview of many Democrats and many Republicans, frankly, who are pro-immigrant, right? They see the benefits to the economy, they try to push through a comprehensive immigration reform that those that are undocumented here to find some sort of path for them to become more regularized or legalized or become citizens, depending on the plan. It would allow the flows of immigrants to come in in different ways to fill job needs. And whether it’s sort of the skills that you’re talking about that your mother has done or whether it’s other skills in other industries, how can you fill in the holes that we have? There are people who have proposals out there.
But back to sort of this administration that won the election has a very different worldview, right? And it’s the one that you portrayed, which is, to me, a much harsher view, which is that every immigrant that comes in or that is here is competing with an American. And there’s an American who would do your mom’s job, but your mom is there taking that job from this hypothetical American that would want to move to New York and do the job that she does.
And I think the challenge there is the worldview. And so, how do you move to this, to me, a more compassionate and, if the research backs it up, a more accurate worldview? And how do you get that into the political dialogue? And there, I think the Democrats have been trying, but, you know, people are divided on these issues.
ALDEN: I’m going to give a slightly different answer, which is not mutually exclusive, which is there’s a lot of pain out in this country and it’s particularly intense in the places where a lot of these manufacturing jobs disappeared. These were the ticket to the middle class for people with modest levels of education. And the research on what has happened to these places and the writing is very troubling. We should all be troubled about it as Americans what’s happening in places like Ohio and Pennsylvania and parts of Wisconsin and, you know, a lot of the Rust Belt, Appalachia.
You know, read “Janesville” by Amy Goldstein, what happened in Paul Ryan’s hometown after the General Motors factory went away. Read “Our Kids” by Robert Putnam from Harvard about, you know, it starts with his hometown of Port Arthur, Ohio which was a prosperous place when he was a kid and what’s happened to it. Read Charles Murray’s “Coming Apart” about basically what’s happened to the white working class in this country. Read the research by Angus Deaton and Anne Case about what they called deaths of despair among a lot of people in their 40s and 50s, deaths from opioid overdoses, deaths from suicide. U.S. life expectancy for the first time I think ever fell last year.
So there is a serious economic crisis that, despite the low, headline unemployment figures, continues in a lot of this country. Unless we can find a way to bring jobs and hope back to those communities, they’re going to look for scapegoats, you know, for scapegoats in immigrants, they’re going to look for scapegoats through trade. So I agree with Shannon, but I also think we’ve got to do this other piece.
KAHLER: So what are the—you asked what you can do. And take it even down to a more micro level, the communities that seem to have voted most heavily for Brexit, for example, in the U.K. in many cases voted for Trump in the United States, who had these anti-immigrant views, there are two types. One were communities where there were no immigrants or virtually no immigrants, and what they had heard were stories about cities where immigrants lived and they had these strange, dark visions of what immigration meant.
ROBBINS: The no-go zones.
KAHLER: Yeah, that’s right. And then the other type of community was communities where there had been recent and very rapid surges in immigration, which people had not accommodated to. They really saw suddenly their towns were changing. For example, meatpacking plants in the Midwest, which often has large immigrant workforces, suddenly, you know, there are people who are speaking a different language, that look different on the street, and it takes people time to accommodate to that.
But places where there are lots of immigrants who have been there for a long time are actually tremendously pro-immigration, right? So there’s a lot of evidence for contact theory, which is that, you know, California as recently as 1994, there was a governor who won an election in California on an anti-immigration platform. That would be unheard of today in California, right? It would be political suicide for anybody to do it and that’s because, basically, people have lived with immigrants, they have learned that immigrants are valuable economically to their community, culturally, and in other respects, and have accommodated to it.
So partly, things have to be done at the micro level. I think Shannon is saying that. It’s something political parties can help with, but it does have to happen at the community level because, as Ted said, that’s where many of the problems are.
ROBBINS: So the cultural displacement, one could argue, one would hope in the optimistic notion, is that we are in a particularly disruptive time and that people have to adjust. Because one of the things about globalization is that, you know, borders disappear and communications disappear and people right now, a certain group of people, feel as if the old ways, the things they knew are going away, and people much more your age are so much—look at how diverse even this group is, if you look around, and I certainly see my students and so much more comfortable with that.
And one hopes that, you know, 20 years from now, but how do we get from here to there? That’s the optimistic, but that still doesn’t deal with the economic dislocation question.
ROBBINS: And so the question is whether there is the cliché of the perfect storm right now or whether we’re going to get past it. And we don’t know because we don’t have the economic component of it worked out yet.
ALDEN: Just one item that supports that. You know, you and I were born into the least-diverse America that ever existed. We had very high levels of immigration the end of the 19th and into the 20th century. For a variety of reasons, immigration plummeted in the ’20s and recession and World War II. You know, by the ’50s and early 1960s, foreign-born population in this country was about 4 1/2 percent. Today it’s 13 (percent) and rising. So the people in power grew up in a world that looks really different from the world you’re growing up in.
KAHLER: That’s right.
ALDEN: So that does lend support to the transition pieces.
ROBBINS: And your world looks better. So, yea.
So over here we have—right here, directly—yes, red tie, directly right here.
Q: Hi, thank you all for being here. I’m Devin Maljug (ph). I’m a student at CPET, Columbia University.
So in recent years, we’ve seen a lot of regional trade agreements come up, EU-Mercosur, Europe and Canada concluded on, RCEP is happening in Southeast Asia. I see them as anti-free-trade because they limit free trade to a certain set of countries who are inside the agreement and they cut out free trade on a global level. And I see a part of that as being due to the lack of progress on the Doha Round because that’s been stuck for, like, 15 years. What proposals would you say for kickstarting the Doha Round, which can actually mobilize free trade on a global level?
ROBBINS: So the question, of course, for those of you who don’t know all the acronyms, which is there used to be global trade agreements, the last one, they were named after the places where they were negotiated, the last one being the Doha Round. And now we have all these regional trade agreements because they basically gave up on the ones because we couldn’t get global trade agreements. The question is, are these regional trade agreements actually anti-free-trade because they are limited to, you know, a certain number of countries, like NAFTA is just three countries? Or is there hope for reviving a global trade agreement?
Am I translating right for the uninitiated on trade? And I did well on that for not being a trade person. (Laughter.)
So you tradies, go.
KAHLER: Well, you’ve just expressed the view of one of the most famous economists who taught at Columbia.
O'NEIL: Who’s there, right? Who used to be here with us.
ALDEN: Yes, yeah.
KAHLER: Professor Bhagwati who, you know, who took a very hard view about regional trade agreements.
ALDEN: Termites in the trading system, he called them.
KAHLER: Yes, yeah, termites in the trading system. (Laughter.) But, you know, this idea of building blocks, stumbling blocks, I think we’ve kind of gotten past that. I think most of us would agree or even most economists would agree that many regional trade agreements are building blocks. They are imperfect, they are discriminatory, as you say, because they’re clubs of countries, but sometimes countries are prepared to cooperate and liberalize faster than other sets of countries. And so the question is, why should you hold them back if these other countries don’t want to cooperate?
But you’re absolutely right. The ideal solution would be to do much of this at the multilateral WTO level. OK. Well, we know that the current administration in the United States is not very sympathetic to the WTO and WTO rules, even as they currently exist. So the idea that they should be updated, which they should be, and moved forward is very unlikely while this administration is in power.
But even with a more sympathetic administration, like the Obama administration or the Bush administration before, there’s a real clash of interests in terms of what should be accomplished, right? So I think many of the emerging economies are pretty satisfied with the rules as they are. China joined the WTO and they’re quite happy with the way the rules are, they don’t want any more international rules really, but they could be coaxed into thinking about some in certain areas.
So I think probably the idea that—and there’s a big clash on agriculture always, always, which led to the breakdown you describe—so I think the likelihood that anything is going to happen in the WTO in terms of another major multilateral trade negotiation is very, very unlikely in the near term or even medium term. But I can see more of these club-like agreements, either in terms of particular sectors, like information technology, environmental goods, moving forward or other regional agreements moving forward. And I don’t think that’s an entirely bad thing. As long as the movement is in a liberalizing direction, I’m not unhappy. Given what we’ve been talking about earlier with the breakup of NAFTA, you know, I think we should be happy with whatever we’ve got.
O'NEIL: Hold it, hold on.
KAHLER: Hold onto what you’ve got.
ROBBINS: Because at least the termites are alive. (Laughter.)
KAHLER: That’s right, yeah.
ROBBINS: OK. Next, we have the young woman right here in the front. Yes, right there. Thank you.
Q: Hi. Thank you for having us here. My name is Myrna (sp). I’m a graduate student at NYU. I’m from Egypt.
So for me, I’m more interested in the macro level of what we’re talking about in globalization. It’s about the polarity. So you were talking about how by the end of the 20th century the world moved from being unipolar, with the U.S. being the unipolar hegemon, to a decline in that. And now we see a rise in new regional hegemons like China, Brazil, Russia, what’s going on between Saudi Arabia and Iran or something in the Middle East. And on the other hand, Trump is doing the whole “America first” thing, trying to close and realize that America is no longer, you know, indispensable to the world. But at the same time, what you were just saying, that he’s increasing military power and apparently America still is blocking this rise of new hegemons in the world. And my question is, would a balance of power or an increase in multipolarity not actually be better economically and, thus, also socially and politically for the world or for globalization in general?
ALDEN: Yeah, I’m—yeah.
O'NEIL: I guess—go ahead.
ALDEN: I will just offer a quick response. The answer is yes, possibly, but getting from here to there is very difficult. I mean, balance-of-power systems historically have not tended to be terribly stable because nobody’s particularly happy with their position in the balance. You know, when you have a dominant military power like the United States that nobody else is seriously willing to challenge, they may be annoyed about it and upset about it, but there’s a stability imposed by it. And so that’s what I said before, I fear we’re moving into a world that could eventually be better, but getting from here to there may be very challenging.
O'NEIL: I think your other point of wouldn’t it be better sort of if everybody rose when you see more prosperity, and I think that is true. And I think the challenge—I mean, we’re seeing this in the NAFTA debates, and just to take it down to that level, the Trump administration is saying, you know, Mexico relatively sends more things to us than they did before and so we’ve lost. Right? But they’re not looking at absolute numbers, they’re looking at relative numbers. But, you know, if your percentage has gone from 30 percent to 25 percent, but the overall pot has grown four times, you’re better off. Right? The absolute number is much higher, but yes, the relative number is lower.
And so I think what you’re seeing, I think you’re seeing this as a worldview, that the worldview comes out as it’s somebody wins and somebody loses. And so they’re looking at relative not absolute where there are areas where I think there’s a win-win. And so, yes, I think the idea of the whole world growing faster is a win-win because, you know, 90-plus percent of the consumers in the world are going to live outside of the United States as we go forward. And if we could sell to those people, then our companies would do better, even if a bigger percentage of what those companies put together is made in other countries. Right?
If P&G or you think of sort of these big, iconic American companies, yeah, a lot is made in other places, or parts of that car are made in lots of different places, but if we can sell to more consumers around the world and they’re better off and you see a rise of a global middle class, that should benefit us, that should be a win-win. But that’s not the worldview of this administration, at least as they look at these free trade agreements. Right? It is about relative gains and losses. And any little relative loss on a percentage is seen as that.
ALDEN: And part of the problem, because there are probably some Sanders folks in the room, is that our companies are doing very well. American companies are doing tremendously well in the world, but Americans are not doing so well. Right? And if you look at the sort of corporate share of income versus the labor share of income, corporate share keeps going up, labor share keeps going down. So there are complicated distributional issues as well.
ROBBINS: Pass this to Miles. Pass that down to Miles. Thank you.
OK. Someone in the back. We have—yes. I can’t call on another Baruch student. Oh, yes, I can. (Laughs.) Yeah.
Q: Hi. My name is Nancy Bonilla (sp), and I go to the High School for Arts and Business.
And my question is, what do you think the future holds for us, especially now that our president is taking on these actions? So do we expect mostly pessimistic results, or can we think about the broader, more optimistic view to this, technologically speaking, and socially, politically?
ROBBINS: I think it’s a good question because I think, to go back to your question, a lot of this has to do with perception and optimism. I mean, the notion that the pie is growing, but you still see it as a zero-sum game, a lot of that is perception itself, raising the question, would voters see this so negatively, would people see this so negatively if we hadn’t gone through the 2008 crash so recently? Or is there such a fundamental economic dislocation going on here that it is impossible, at least for these groups, to feel optimistic?
So can you give these young people some optimism? Is technology going to make their world better or not?
O'NEIL: You know, I’ll say something and then I’ll pass it over to you.
You know what? I think the great thing or a great thing about the United States is, well, you know, back to the sort of first comment we made, is not everything depends on Washington, right? We see vibrancy in all these different places and growing all over. And I will say, I great up in rural Ohio, so I grew up in a place with pain, right? And my parents still live there and it is very painful. You go back and anybody who is sort of young and ambitious, as I was now a long time ago—(laughter)—left, right? And now I live in New York. And many of the people I grew up with who went into college then didn’t go back.
And you go back and you see that, you see sort of the withering of these towns and these, you know, beautiful old Main Streets of these brick buildings and they’re empty, right, there’s nothing there. And so there is this pain and this hollowing out of places that were once these vibrant, small cities.
But then you come to other places around the United States and they’re booming. You go to New York, you go to Washington, but not just those places, not just the coasts, right, there are these other places that are fascinating and growing. And we’re seeing this movement within the United States. And, you know, I think one of the great things about the U.S. economy is that it is pretty innovative, that there is this creative destruction, that people, you know, they say in Silicon Valley you’re allowed to “fail fast” and all those sort of terms and stuff, and that’s a great thing in terms of sort of those overall economic numbers. But it leaves people behind, right? It doesn’t feel good to have failed fast upon, right? And that’s what’s happened to some of these towns.
So, you know, the future of the United States, I see great optimism and I see this sort of path out. And I see, we were talking about demographics, we are changing in ways that I think are good and maybe this is the last gasp of a, you know, a society or a generation that was, you know, very white and very male and very hierarchical and maybe not so merit-based and the like. But there are these pockets that are still there and getting left behind.
So I’m optimistic on the one side, but I am worried about these places. And I see my parents still live there and nothing has changed in 30-plus years. Right? They haven’t been able to try as they want to rejuvenate themselves and try to create sort of economic development plans. They haven’t been able to define this formula to reignite themselves. And so that does worry me. I see both in the United States.
ALDEN: I’m going to make just a quick argument for political engagement, right, because our world has changed dramatically. I think technology is making our lives better, it’s going to make them a lot better, but it’s changing a lot of stuff. Like, it’s radically changing the nature of work. We have all these contingent jobs, you know, Uber is sort of the classic, but there are a lot of good contingent jobs, which is fine, right, people can work more flexibly, they can do different things, except our entire benefit system, health insurance, retirement benefits, everything else was built up around full-time work. And it’s going to take action in Washington to change that sort of stuff.
The world that you’re moving into, the world of work, from a legislative perspective, from a regulatory perspective, wasn’t designed for the world you’re moving in. And the people who run Washington are an old generation. You know, Nancy Pelosi, the speaker of the House, is 78, Mitch McConnell looks like he’s about 104. (Laughter.)
And, you know, I mean, I mentioned earlier, you know, how much of our federal budgets are going to older people in retirement. Well, they get out and vote. Right? Old people all vote. You people don’t vote; they vote. And what are they going to do when they vote? They’re going to grab a bigger piece of the pie for themselves.
And so I do, much as I support my colleagues in saying Washington isn’t everything, there are all these great things happening in the country, there are ways to make a difference, if you don’t engage at all those very big decisions which really are going to affect the quality of your life, whether you can look forward to a steady paycheck and to a good retirement and to be able to afford to have kids, Washington really does matter for that stuff. So I would urge you not to get discouraged, despite what we’re going through, but in fact to get mobilized and to say, look, you know, we can’t let these folks run the country anymore, we’ve got to get serious.
ROBBINS: I couldn’t think of a better way to end than that. So I’m going to end on that. Thank you guys so much all for coming. (Applause.)