Nobel laureate American economist Paul Krugman believes that the United States should not have imposed high tariffs on Bangladeshi clothing. Such a decision will disrupt the lives of American buyers. It is unlikely that this will make the lives of American citizens safer, but rather it will increase the cost of living for Americans.
Efforts are being made to bring back production to the United States on the grounds of national security. As important as it is, it is also necessary to produce in friendly and neighboring countries, so that the supply system can be relied on. In both of these considerations, Paul Krugman believes that it is not right to impose high tariffs on products from countries like Bangladesh, Vietnam, Canada and Mexico.
Paul Krugman said these things in an interview given to the American newspaper New York Times.
Paul Krugman mentioned US trade expert Robert Lighthizer in the discussion. He said that this friend of his is known as a trade protectionist in Washington. He is known as a kind of devil in the world of trade, although he understands his job very well, which is why he is respected in all circles. He is an independent-minded person; that is why he has no place in the Trump administration. Otherwise, he might have said that tariffs cannot be imposed on Bangladeshi products.
The rhetoric that has been raised that the production system will be brought back to the United States is the strongest argument in favor of imposing these counter-tariffs. But will it be possible to bring back US production at all? In response to this question, Paul Krugman said that it is really difficult to reduce the trade deficit by imposing high tariffs. There are many things in this that reduce the impact of tariffs—in this reality, it is not possible to reduce the trade deficit much even by imposing high tariffs. There is a possibility that if such a country imposes very high tariffs and stops international trade, it may be possible, that is, if you do not have trade, there will be no trade deficit.
Second, let's say the trade deficit is eliminated; then do we reindustrialize or reindustrialize to a level that is noticeable to others? Germany has a huge trade surplus. Despite this, Germany's manufacturing employment rate has fallen significantly relative to overall employment. Now that the US manufacturing sector has somehow reached Germany's level, people might ask, what happened to the industrial nation we were.
Then let's do a calculation. If you want to think about it, how much extra production would we have if we could eliminate the trade deficit? Then it could be that the manufacturing employment rate would go from 10 percent of total employment to 12.5 percent. The 30 percent of our employment that used to be in manufacturing will no longer be there. The point is that the main reason for the decline in manufacturing employment is automation and productivity growth, not the trade deficit.
Regarding trade deficits, Krugman said, "All countries produce some goods, and the goods that one country does not produce, they import from another country. Now, the point is, there is no question of maintaining a trade balance with each country. Anything can happen. Having a trade deficit with a country does not mean that the country that has a surplus is following unfair trade policies. But from the looks of things, it seems that people in the Trump administration believe this."