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International Newsmaker Q&A: Marina Whitman, University of Michigan

Professor: Trade wars typically a 'disaster for all concerned'
Saturday, June 1, 2019 - 07:00
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Professor: Trade wars typically a 'disaster for all concerned'

Dr. Marina Whitman is professor emerita of business administration and public policy at the University of Michigan. Previously she was also chief economist at General Motors and the automaker’s first female group vice president.

Widely viewed as an expert on international trade issues, she recently answered a series of questions pertaining to the global economic arena:

Regarding the tariffs on steel and aluminum imports, President Donald Trump has stated that trade wars are “good” and “easy to win.” What are your thoughts on that?

Trade wars are a disaster for all concerned, as the one that escalated during the 1930s attests. It was a misguided attempt to alleviate widespread depression but, instead, contributed to making it worse. Since a trade war is a lose-lose proposition for all concerned, I don’t know what “win,” let alone “easy to win,” means.

In the current case, Trump’s tariffs are likely to raise prices of consumer goods containing aluminum or steel and, more important, will raise them for manufacturers whose products use aluminum and steel, making them less competitive.

Marina Whitman

When we have imposed tariffs on imported auto parts or steel and aluminum it has turned out contrary to what President Trump says – they are being paid by U.S. businesses and consumers.

A lot more people are employed in the U.S. in companies using aluminum and/or steel in their products -- e.g., cars and trucks, airplanes, heavy machinery -- than in those making them. As for retaliation, other countries are skilled in hitting us where it hurts, such as agricultural products.

Finally, it is a major step toward undermining the international rule of law in trade, which the U.S. took the lead in creating ever since World War II.

How is the Trans-Pacific Partnership (TPP) different from the agreement backed by the U.S. during the Obama era and later rescinded by Trump?

First of all, the TPP is really an attempt to have a modern international trade agreement. It’s called a trade agreement but it covers a lot of things, for instance, the digital universe. It attempts to have fairly stronger protections for labor and the environment. It was designed under the leadership of the United States as a 21st-century multilateral trade agreement.

With the United States having pulled out, it’s obviously smaller and won’t have quite the same clout. The two biggest countries in the world by gross national product, the United States and China, are not in it but it still will have some significant impact on trade among the 11 countries that are signing.

I think the United States will suffer some from being on the outside rather than inside.

There has been speculation about the U.S. rejoining the agreement down the line. Do you think that’s possible?

That’s so hard to tell. It seems somewhat unlikely under the present administration but you can never tell. Of course, it’s possible. It’s complicated because typically it was the Republicans who favored these multilateral trade agreements and the Democrats who opposed them. Now things seem to have sort of flipped.

It was President Obama that pushed for the TPP. And at that time Republicans were still supporting it. But now the majority of the Republican establishment has joined in President Trump’s position: That we should not join because he believes that it is in some way unfair to the United States, which is what he says about all multilateral trade agreements.

What about China and the agreement it is creating with several countries?

China is creating its own multilateral trade agreement with quite a number of other Asian countries plus New Zealand. It’s a much more restrictive agreement. It applies only to trade in goods but they are going to have their own arrangement with a great many countries, although some of them are quite small.

So you have the United States, which is not part of any of these agreements, and my guess is it will suffer economically from it. I think it will suffer even more diplomatically or in terms of soft power. Not being part of the TPP will be regarded quite negatively by the countries who are joining since it was the United States that took the lead in getting it going.

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