Today, two seemingly opposite trends are gaining steam. The latest version of globalization is accelerating. Yet, at the same time, the United States and other countries are becoming more protectionist by erecting trade barriers at an alarming rate. What is the impact on the American economy and jobs?

Over the last several decades advances in telecommunications, transportation and finance led to the integration of national markets through trade and investment. This process, known as globalization, has lifted millions of people out of poverty and significantly boosted American and global standards of living. In fact, it may have benefited the United States more so than any other country.

A major feature involves supply and distribution chains that manage the flow of materials and components from supplier countries to low-cost manufacturing destinations, then to export markets. Although this model of globalization is still very relevant, it is being replaced by a new version driven by fast-evolving digital technologies many call digital globalization.

It is empowering more organizations of all sizes to provide solutions worldwide. For example, telemedicine is linking American-made ultrasound machines in developing country clinics to specialists in the United States who quickly analyze results. And with approximately 4 billion people connected to the internet, tremendous numbers of entrepreneurs, suppliers and buyers can collaborate to create new value through e-commerce.

The benefits of globalization far outweigh the costs. But it has not benefitted all of us equally.

Another aspect involves advances in automation, which have reduced the demand for cheap labor. In turn, large scale manufacturing operations located in low-cost countries are being replaced by multiple smaller digitally connected facilities located near fast-growing consumer centers. They are more flexible, better able to respond to local tastes, and positioned to bypass trade barriers.

What’s more, U.S.-based engineers can program robotics in other country facilities to produce high quality goods faster and cheaper. And due to on-site 3-D printing technology, components and parts can now be created right in manufacturing and assembly facilities when needed.

Combined, these technological developments are boosting efficiencies while reducing supply chain costs and production times. They also are contributing to a decline in merchandise trade.

In The Spotlight

According to the World Trade Organization (WTO), world merchandise trade is predicted to slow from 4.7% in 2017, to 3.9% in 2018 and 3.7% in 2019. Noted above, technological advances are an important cause; slower projected U.S. and global economic growth is another. But the biggest impact on exports and imports may be rising protectionism.

WTO Director-General Roberto Azevêdo recently warned that new barriers to trade constituted a source of serious concern and called for immediate action to de-escalate the situation. And a new WTO report said a proliferation of trade-restrictive actions and resulting uncertainty could jeopardize economic growth, while further escalation would negatively impact jobs.

Traditional globalization, as well as its latest version, generate substantial economic growth. According to the Peterson Institute for International Economics, a Washington, DC-based think tank, international trade has increased U.S. gross domestic product by $2.1 trillion and household income by more than $18,000 annually. It also accounts for more than one in every five American jobs, says the Business Roundtable, an association of chief executive officers.

International engagement continues to be essential since markets outside the United States represent 80 percent of global purchasing power, 97 percent of economic growth, and 95 percent of world consumers, reports the U.S. Chamber of Commerce.

The benefits of globalization, no doubt, far outweigh the costs. But it has not benefitted all of us equally. Simply put, globalization is like fire: it can keep you warm, cook your food or burn your house down.

It has been tremendous for companies that produce products and services rich in intellectual property, and for workers engaged in life-long learning. However, it has presented new challenges for companies that manufacture low technology products and for employees with limited skills.

The impact of globalization has become confused with the greater impact of automation.

But for many, the impact of globalization has become confused with the greater impact of automation, which has been eliminating American blue-collar jobs and some lower-paying white-collar ones for some time. In fact, automation accounted for more than 85 percent of job losses in manufacturing from 2000 through 2010, according to the Center for Business and Economic Research at Ball State University.

Recent improvements in artificial intelligence have made even more jobs vulnerable. As a result, over the next two decades, nearly half of existing jobs will be lost through automation, report Carl Frey and Michael Osborne of the University of Oxford. This is not surprising since advanced technology has empowered 177 workers to generate as much output as 1,000 could in 1950, according to William Strauss, senior economist at the Federal Reserve Bank of Chicago.

The good news: history reveals that after waves of innovation destroy jobs, more new ones are created. This time is no exception. Although we don’t know what the jobs of the future will be, we do know they will require highly skilled workers.

Protectionism will not bring back the jobs of the past. And it presents real dangers to traditional globalization, as well as the latest digitized version if countries place restrictions on data flows.

On June 17, 1930, President Hoover signed the Smoot-Hawley Act that raised tariffs nearly 60 percent. Within two years following the act’s implementation, U.S. exports decreased by nearly two-thirds.

In anticipation of Smoot-Hawley’s passage, France, Italy, India and Australia passed their own protectionist legislation. Others, such as Spain, Switzerland and Canada, followed suit. The result: export markets dried up, domestic industries slowed down, and the unemployment rate in the United States rose to 25 percent in 1933. Protectionism may have put the “Great” in the Great Depression.

The key to future U.S. economic growth and job creation lies in our ability to innovate new products and services, and deliver them worldwide. To do so, Americans need to champion — not fear — global engagement, more companies need to expand internationally, and workers need to commit to life-long learning. Importantly, policymakers should resist protectionism, implement better strategies to confront bad trading partners, and pass more pro-trade legislation.

This article was nationally syndicated by Tribune News Service/Tribune Content Agency and appeared in papers across the U.S., including the Chicago Tribune.

John Manzella
About The Author John Manzella [Full Bio]
John Manzella, founder of the Manzella Report, is a world-recognized speaker, author of several books, and an international columnist on global business, trade policy, labor, and the latest economic trends. His valuable insight, analysis and strategic direction have been vital to many of the world's largest corporations, associations and universities preparing for the business, economic and political challenges ahead.

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