I generally leave the discussion of political issues that affect logistics to my colleague Adrian Gonzalez. But one issue that I have been tracking is the “reset economy,” the idea that once we emerge from this recession, certain industries may not bounce all the way back. In other words, they may not have the same growth and profitability they had before the recession. One scenario that could negatively affect both the logistics industry and the electronics industry (which conducts a large percentage of its manufacturing in Asia) would be public opinions turning inward, turning against global trade as a way of protecting and growing their home economy. You might expect that attitudes against global trade and for imposing more restrictions would increase during a global recession. Surprisingly, according to recent research by the Pew Research Center, this is not occurring.
Support for free trade agreements has actually increased over the past year (from 35% to 44%) among Americans, based on a survey conducted between March 31 and April 21 of over 3,000 adults. In some ways, it is surprising that the U.S. has continued to be a free trade nation for as long as it has. If you examine historical data from the Pew Research Center, you discover that many more Americans say that free trade destroys American jobs, rather than creating them, or that it lowers wages, rather than raising them. However, the past several Presidents have resisted rolling back free trade, perhaps in the belief that a strong economy is more important to their long term electoral prospects than short term gains in popularity. When one looks at these historical survey results, it is surprising that more presidential candidates have not come out against free trade.
Cap-and-trade also has global trade implications. In early March, Energy Secretary Steven Chu suggested the possibility of instituting a “carbon tariff” on countries (e.g., China) that do not mandate greenhouse gas emission reductions. Frankly, I was surprised that it took so long for this trial balloon to drop. Not surprising, Li Gao, China’s top climate change negotiator, thinks such a tariff would be a “disaster” that could trigger a trade war. In short, as Adrian wrote in “The Road to Cap and Trade,” the prospect of a carbon tariff compounds the trade concerns already sparked by “Buy American” and the current NAFTA dispute with Mexico.
This March, when Pew asked respondents “Do you favor … or oppose… setting limits on carbon dioxide emissions and making companies pay for their emissions, even if that means higher energy prices,” 59 percent of Americans favored setting limits on carbon dioxide, while only 33 percent opposed it. However, in the latest survey results, it appears that the recession is causing environmental issues to slip lower on Americans’ list of priorities. As the Pew report states, “In the new poll, 51 percent agree that protecting the environment should be given priority even if it causes slower economic growth and some job losses, down from 66 percent in 2007. At the same time, the share saying that people should be willing to pay higher prices in order to protect the environment has dropped from 60 percent in 2007 to 49 percent currently. This represents a 17-year low point on this measure.”
Politicians analyzing these survey results are apt to conclude that restricting trade using trading partner carbon tariffs is not likely to be a winner in the political marketplace, at least not at this point in time.