Waning support of free trade: The hobgoblin of stagnating economies, or poor supply chain management?
By Ryan Skinner (email)
So I recoiled at a recent Wall Street Journal headline "Americans Sour on Trade", in which a Wall Street Journal/NBC News poll cites a majority of US respondents saying that free trade hurts the US economy. WSJ explains the numbers thus:
The rising hostility seems a delayed reaction to a slow economic recovery and high unemployment. To many, China has replaced Wall Street as the villain du jour. Opposition to trade is fueled by reports that many U.S. multinational companies, sitting on huge stockpiles of cash, are reluctant to invest in the U.S. and are looking overseas, and by the fact that China has pulled out of the global slump much faster than the U.S.
Data from the Pew Research Center on the same topic paint a more favourable long-term trend. Specifically, they show a slight improvement in sentiment towards world trade from 2009 to 2010, and an increase from a nadir in 2008, when only one in two Americans saw trade as a good thing. In fact, it seems that views on trade correlate with people's view on future employment.
That is, if I feel confident that I will have a decent job in the medium-term future, I will be positive to trade. If I feel like I may lose my job, or if I don't have a job and despair of finding one, I will be negative to trade.
At least, this appears to be the case for net importers of products, like the United States. Net exporters of goods seem to be relatively unaffected by economic swings; they are pretty much always in support of increased trade.
Though this study highlighted factors related to the economy as the cause for skepticism, I wonder if this is a bias of the Wall Street Journal, which is keen to spin the results into a political story tied to the upcoming US elections. I would argue that an equally strong issue with respondents was the quality of regulation in source countries.
The recent problems at Apple supplier Foxconn, issues related to sustainable manufacturing and safety faults in Chinese toys are all matters that sour both Americans and other importing countries' attitudes towards free trade. That is, people who would otherwise support free trade will oppose it when it is clear that production abroad may be unsafe, either to the workers, to the end consumers or to the planet.
Ironically, and perhaps sadly, a quick review of efforts to increase sustainability in supply chain management shows that there was a peak in interest and activity in 2007-08, then pretty much a full stop. As the economy ground to a halt, so too did efforts to ensure the health of the supply chain strings that pull world trade.
A world of buyers and sellers will naturally tend to a world of open commercial borders, with some ups and downs as the result of economic cycles. However, the failure of brands to ensure the ecological viability of their supply chains creates a negative net impact on attitudes to trade, which has a far greater risk than the brands' own product risk. That is, Apple's Foxconn debacle hurts world trade more than it hurts Apple. That's something for the smart Americans to chew on.
Photo credit: Reuters/Bobby Yip/Files
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