Globalization Is a Boon for Rural America

Cutting off foreign trade would hurt lots of small towns in the heartland.

Alexey Stiop / Dreamstime

Hancock County, Kentucky, is a quiet place, along the serpentine Ohio River that divides the Bluegrass State from Indiana. It was here that Abraham Lincoln argued his first law case, in his own defense, when he was accused of operating a ferry without a license.

Today this rural patch is one of the most trade-dependent counties in the country, with about 55 percent of its GDP coming from exports. The county is home to one of America's five aluminum melters, an enterprise that supports hundreds of jobs. More than 20,000 people work at Kentucky's 182 aluminum facilities, which have helped replace thousands of coal jobs lost in the past decade.

Aluminum produced in places like Hancock County finds its way to other countries, particularly Canada and Mexico, where it is used to produce auto parts and other goods.

Foreign trade is also essential in St. James Parish, located deep in Cajun country. Known for its tradition of lighting Christmas Eve bonfires on the Mississippi River to help guide Santa's sleigh, this rural corner of Louisiana has a population of 21,567. Over half of the parish's gross domestic product is due to petroleum and chemical exports. China has been Louisiana's top export destination for the past four years, with the state sending about $8 billion's worth of goods there last year. Yuhuang Chemical Inc., a Chinese company, is now investing $1.85 billion in a new methanol manufacturing complex that promises to bring thousands more jobs to St. James Parish. (The Yuhuang investment isn't purely a product of market forces: More than $11 million in state subsidies are involved too.)

According to Drew Desilver of the Pew Research Center, Hancock County and St. James Parish are just two examples of a broader trend. The places most dependent on access to foreign markets aren't coastal metropolises. They're sparsely populated counties that often don't have the population to fill a mid-sized city. Changes to America's rules for imports could easily have an impact on what our country exports as well—and that, in turn, could disrupt quiet corners of the country far from the cosmopolitan urban centers or either coast.

Of the 154 U.S. counties where exports account for more than 25 percent of GDP, Desilver found that only 11 had populations over 100,000. For many of these counties, the goods are exported to either Canada or Mexico, both of which are among America's largest trading partners. The global supply chains facilitated by trade are vital throughout the Rust Belt and the Sun Belt.

Mark J. Perry, an economist at the American Enterprise Institute, has detailed the importance of international trade by looking at the GDP of all 50 states last year and highlighting the total percentage of trade volume—that is, the sum of exports and imports. Michigan is the country's most globalized state, primarily due to the dominance of the auto industry. But Kentucky and Louisiana are second and third, respectively, with Kentucky boasting a surprisingly robust auto industry and Louisiana's energy exports poised for growth in the coming years.

Closing markets, Perry writes, "ignores all of the unseen, delayed and hidden costs of trade protectionism that would make many trade-dependent American states weak again, not great again."

Comments

[timbo]

Of course free trade and free market capitalism is great for everyone. Just image if we had unbridled laissez faire capitalism? the world would not be hovering on the precipice as all of these failed economies continue to drive the wedge deeper between possible recovery and imminent collapse.

In fact, the free trade and capitalism that exist in globalism today is so deflationary that the inflationary costs of living are being held at bay to some degree because of the marvels of technology and efficiency global logistics chains.

[BestUsedCarSales]

For many of these counties, the goods are exported to either Canada or Mexico, both of which are among America's largest trading partners.

I will once again state my fondest wish. All of the Americas unite as peaceful allied nations and tell the old world to fuck off. Wish we could stop paying attention to Europe and start buying Alpaca from Peru.

[BYODB]

If nothing else it would make more sense to be openly imperial in our own backyard, one would think.

[BestUsedCarSales]

I just dislike the old world. They have all these long ingrained systems of royalty and oligarchy that seem to inform many of the ideas from that region. It is old world in that they still seem to believe in an exceptionally paternalistic world-view. That there are masses who the nobles need to condescend to and take care of, they are too shit to know their own good.

People undersell how deep egalitarianism runs in America. It's becoming less influential I fear, but I think we can still recover from that. Imitating Europe is not the means to that end though.

Also, completely off comment. The current ad is for the Washington State Election and their byline is "Democratic Majority At Stake." Sad that this is considered an important viewpoint to advertise on election day.

[BYODB]

It is old world in that they still seem to believe in an exceptionally paternalistic world-view. That there are masses who the nobles need to condescend to and take care of, they are too shit to know their own good.

While I find that view distasteful as a matter of philosophy, I actually do need to admit that it isn't an inaccurate picture of people when considering them as groups. There is a real herd mentality in humanity that can't be entirely ignored, and frankly I'm not sure there's any good answer in Libertarianism on what to do with people who don't want to be independent and desire the state to control them.

The 'Nanny-State' didn't come into being on it's own, after all. It's a willful creation of the populace.

[John]

Man cannot be perfected through government nor can he be perfected by being left alone. Libertarians sometimes forget that second part.

[BYODB]

True that. Man is simply not perfectible. We're not even capable of saying what a perfect person would look like, in truth.

[John]

No we are not.

[mad.casual]

True that. Man is simply not perfectible. We're not even capable of saying what a perfect person would look like, in truth.

Says you. [Trigger Warning: Obnoxious amounts of White not-Brown Nationalism]

[Chipper Morning Truthjammer]

Perfection is not attainable. However, improvement is. And improvement by being left alone is much more likely than improvement through coercion.

[Diane Reynolds (Paul.)]

Libertarians sometimes forget that second part.

We don't forget it, we know all to well that we're surrounded by very scary people who want to "perfect us", so we own guns.

[Sevo]

John|11.7.17 @ 2:36PM|#
"Man cannot be perfected through government nor can he be perfected by being left alone. Libertarians sometimes forget that second part."

We don't need "perfection".
We need people to leave other people alone and not steal their stuff.
Religious righties forget that second part.

[mad.casual]

All of the Americas unite as peaceful allied nations and tell the old world to fuck off.

Oceania has always been at war with Eastasia.

[John]

I don't want unite with Mexico. What we should do is form an Anglosphere with the UK, Ireland, Canada, New Zeland and Austrailia and then tell the rest of the world to fuck off. Mexico is closer to the "old world" you describe than any of those countries.

[Chipper Morning Truthjammer]

The UK is more different from us than Mexico.

[EscherEnigma]

What we should do is form an Anglosphere [...]

I'm curious what happens to all the folks in America that don't fit into an "Anglosphere".

[BestUsedCarSales]

Or the fact that Britain has an incredibly paternalistic view point quite distinct from ours.

[Diane Reynolds (Paul.)]

They're going to be surrounded by much, much better looking women.

[John]

You fit in by speaking English. Since anyone who can't speak English has very little prospects anyway, they likely won't notice.

[vek]

Seriously, FUCK joining with Mexico. That sounds like a nightmare, and I'm part Mexican! It's a godforsaken hell hole filled with mostly middle school graduates statistically, so no thanks.

If the rest of the Anglosphere adopted our laws, and had a 20 years of no voting rights while we reeducated them on what it means to be truly free I would be down. Sadly after the US the UK probably has the greatest and most pronounced history of "liberty" oriented thinking/action in the world... But they're a very distant second place. Hence the time out while they learn to become real men.

[BYODB]

But couldn't all those aluminum jobs be offshored to, say, China or Somalia for greater gains? Doesn't basically every other place on the face of the Earth (except for, say, Europe) have a greater comparative advantage in labor than the United States?

Yuhuang Chemical Inc., a Chinese company, is now investing $1.85 billion in a new methanol manufacturing complex that promises to bring thousands more jobs to St. James Parish. (The Yuhuang investment isn't purely a product of market forces: More than $11 million in state subsidies are involved too.)

Oh, nevermind we're paying them to ignore their own comparative advantage. That's par for the course these days, isn't it?

[Francisco d'Anconia]

Stil many downsides to relocating overseas. Language barriers, property ownership, security, shipping costs, finding competent management willing to live in Somalia, foreign regulation... It's a lot to overcome. Which goes to show just how bad it's gotten here when the bottom line still drives US companies out.

[BYODB]

My comment was mostly snark, but there is truth to the idea that we're essentially paying other countries to ignore their own comparative advantage while rigging our own markets in such a way that it incentivizes them to come here because they must do so as a prerequisite. ('X' % of parts must be sourced in America type laws, for example, count even if the manufacturer is technically Chinese if they're on American soil. Or at least that is my understanding.)

The simple fact is the American labor pool has been protected right the fuck out of the global market, if markets were allowed to actually function. We distort them because we can, but if those distortions were allowed to correct it is close to certain that American jobs would evaporate overnight in most industries.

[John]

Every government protects its native labor. If anything we probably protect ours less than most other countries. We certainly don't distort the market to encourage over-investment in exports like many countries do.

Beyond that, if as you claim getting rid of these distortions would cause most of American industry and the jobs that come with it to "evaporate overnight", maybe those distortions are not so bad? Isn't people having jobs and prosperity the entire point?

[timbo]

BYO is right though. The problem is that people don't have the guts to stomach market forces. That's why they always vote for the guy that protects their wallet most.

What courageous people would do is trust market forces and accept the inevitable relocation of labor and wealth at times. It all comes full circle when developed economies become wealthier and their employee costs rise.

The funny thing is that the AI revolution is going to displace the majority of jobs that these weasel politicians have protected through these tax schemes, land giveaways, and outlandish incentives to attract jobs to uncompetitive areas. The truth is that with globalization and mature supply chains, all manufacturing should be done right next to ports and/or near only large population centers and inland ports.

[John]

That is the theory. But the theory hasn't worked out like that. The problem is that people are not fungible. The theory behind these global trade agreements was that the US would ship off all of its lower wage manufacturing jobs to low wage nations and instead concentrate on higher wage service sector jobs. That sounds great except that it is not so easy to just transition to a service sector based economy. Only so many people are cut out for such an economy. No one ever pointed that out or cared because the people making the rules were all in the service sector. But imagine it in the reverse.

Suppose a mad dictator took over the country and decreed that America was going to get out of the service sector business and contract such things out and concentrate on heavy manufacturing. So everyone in the service sector needs to retrain to become welders and pipefitters and such. The idea of the egg heads at AEI being told to retrain and become welders is comically absurd. But, that is exactly what the people at AEI told many people working in manufacturing in this country only in reverse.

[BYODB]

The theory behind these global trade agreements was that the US would ship off all of its lower wage manufacturing jobs to low wage nations and instead concentrate on higher wage service sector jobs. That sounds great except that it is not so easy to just transition to a service sector based economy.

Maybe it isn't easy, I couldn't say, but that is exactly what the United States has done. Then they went ahead and shot what low-skilled labor was left in the gut with effectively open immigration that flies under the radar (the plan of never-ending Amnesty being what I refer to as effectively open immigration).

I'm not saying America doesn't produce anything anymore, far from it in fact. Merely that what we do produce is so distorted it can only exist on the backs of overly complicated and inherently protectionist trade policy that closely resembles a centrally planned economy in some respects.

It's one reason we have Trump, in my view.

[vek]

"I'm not saying America doesn't produce anything anymore, far from it in fact. Merely that what we do produce is so distorted it can only exist on the backs of overly complicated and inherently protectionist trade policy that closely resembles a centrally planned economy in some respects."

I don't know that I would say that's true. I think our one sided against ourselves trade agreements are far more of a factor in screwing us over. I'd say the stuff we make here still is due to a couple main reasons:

Some people simply refuse to outsource because they control their small/midsized companies, and do it for ideological reasons.

Military contractors HAVE to produce here.

And finally some industries are just THAT competitive. Lots of stuff with low man hours required is simply cheaper to make here than import, at least for our own domestic consumption. Look at how many small plastic doo dads are made here next time at the store. Like Rubbermaid stuff or whatever. You know they aren't doing it to be patriotic, it's just cheaper to make here.

Then there are SOME things that fall into your category of only being left because we subsidize it. BUT most of those would probably be competitive if China etc didn't subsidize their competitors overseas too! So it's all just a big ass mess really...

[vek]

You know John, I never thought about it from the angle of desk jockeys essentially dictating that people had to become desk jockeys, or the brilliant and hilarious reversal of that policy. I'll have to remember that one 🙂

[John]

The fact that AEI said "this is what the market decrees" doesn't make it any less comical or any less unrealistic. It doesn't take any "courage" to do that. The people who advocated for this did so out of pure self-interest knowing full well they would only benefit from it. That doesn't make them wrong. Maybe telling everyone who isn't cut out to be an AEI egghead or a freelance graphic designer to go fuck themselves is the path to prosperity. But, don't kid yourself into thinking there was anything courageous about it or it involved anything except self-interest and rationalization.

[Rhywun]

Maybe telling everyone who isn't cut out to be an AEI egghead or a freelance graphic designer to go fuck themselves is the path to prosperity.

I don't know if that's any worse than what we actually do, which is pay them to sit around and do nothing.

[BYODB]

^ Rhywun seems to get what happens to displaced labor without the skills or intelligence to 'smart' their way out of structural unemployment in these United States.

[vek]

"^ Rhywun seems to get what happens to displaced labor without the skills or intelligence to 'smart' their way out of structural unemployment in these United States."

Here's the thing though, and one reason I am no longer as "all in" on free trade as I have been in the past... Once you factor in the costs of welfare, the "social costs" of fucking up communities, the trade imbalance etc etc etc Are we ACTUALLY coming out ahead by allowing ourselves to be bent over in international trade? Or is it in fact a very well hidden through convolution net loss???

I've been thinking after reading a lot on the subject over the last several years that in the REAL WORLD, not in a book using a half dozen variables (half of which don't even apply anymore) that we're basically coming out way worse off with our current trade regime.

I DO believe if we forced true free trade on China and co. we'd be far better off than now, and that might indeed have worked out well, but allowing them to retain protectionist policies while we opened up was one of the most inexcusable things in the history of this country IMO. It's suicide, and there was no reason for it. They would have opened up if we'd forced them to to gain entry to our market.

[Diane Reynolds (Paul.)]

I don't know if that's any worse than what we actually do, which is pay them to sit around and do nothing.

That's why god invented Oxy.

[BYODB]

Stating facts doesn't necessarily indicate a proper response, it's merely an observation that American labor is non-competitive in a global market for a variety of reasons.

I can't say what a freed market in labor would do, I can merely observe that American labor is protected to an extent that makes it non-competitive without interference from the same entity that legislated us into non-competitiveness.

The Federal Alphabet alone, not even considering issues like the minimum wage, price us out of the market. Why pay an American $15-$30 per hour when you can pay a foreign laborer half that (at least) with none of, or far less of, the regulatory costs of hiring an American? (Workmans comp, OSHA, minimum wages, etc. etc. etc.)

It's a no brainer to hire a foreign laborer if we were free to choose to do so in plenty of, but obviously not all, industries. Americans do it every time we hire an illegal immigrant to mow a lawn or do some day laboring and it partially, if not mostly, drives the market for illegal immigration in these United States.

This isn't an issue that we're unaware of, it's just that we're too NIMBY to give a shit about it as a society. Black markets for labor don't come from nothing, after all, and America's black market of labor is several million people at this point. Likely double digit millions, in fact.

[John]

The federal regulations are distortions going the other way. When you think of it the way you put it in this post, we really don't protect our labor. In fact, we unfairly handicap our labor by making it artificially expensive in ways that in no way benefit the people it is supposed to help.

I think the conclusion to be drawn here is that if you want to get rid of the distortions that help American workers, you better get rid fo the distortions you mention that harm them first.

[BYODB]

In fact, we unfairly handicap our labor by making it artificially expensive in ways that in no way benefit the people it is supposed to help.

Are you only just now understanding what I'm talking about? In fairness, perhaps I wasn't clear, but this is exactly my point if I wasn't clear before.

[BYODB]

I think the conclusion to be drawn here is that if you want to get rid of the distortions that help American workers, you better get rid of the distortions you mention that harm them first.

You're smart enough to realize that a distortion can help some people and hurt others. It's definitely not an either/or scenario, it's a maximization problem.

Those workers who remain benefit from those distortions, but those who lose their jobs are a result of those distortions are hurt. When considering our labor participation rate and real unemployment numbers, not to mention the costs of our social welfare programs, I would say taken as a whole they hurt more than they help.

That's just me though, and I'm not a professional economist just someone that's taken some classes. Most of the "professional economists" in this country take basically the opposite view from what I've read so it's more than likely that I'm a crank.

[vek]

The sad think is that you're not a crank, they're just all lying hacks!

I think if we had a true free market, with true free trade, and without a heavily manipulated currency you would see many changes of course... I think we would be manufacturing a LOT more here, but it wouldn't be of the $30 an hour union persuasion. It would be more like $10-20 tops, with so so benefits. We'd probably not run a trade deficit anywhere near the size we do. Burger flipping would probably pay less than the current minimum wage. BUT we'd drastically cut down on welfare, and the labor force participation rate would probably be way the fuck higher!

[Diane Reynolds (Paul.)]

It's a lot to overcome. Which goes to show just how bad it's gotten here when the bottom line still drives US companies out.

It's awful here, that's why China is so much more attractive on almost every metric you mention.

[NoVaNick]

Both aluminum smelting and petrochemicals are industries that the progs want to shut down, further sending rural America into a death spiral. The only time they seem to care about the yokels is when they take their kids to a pumpkin patch or farmers' market.

[CE]

It was here that Abraham Lincoln argued his first law case, in his own defense, when he was accused of operating a ferry without a license.

Nice ferry boat ya' got there. Be a shame if somethin' happened to it.

[timbo]

Missoura boatriiide.

[Brandybuck]

Free trade across borders? What kind of liberal rubbish is this! Damned Hillary voters. Trump will make Murica grate again! Put bubblewrap around the country! Walls between each state! Border control between the counties!

[EscherEnigma]

Globalization can be a boon for some parts of "rural America". But as we've seen in practice over the last few decades, it's a bane for most of "rural America".

Sure, the people of the world, on average

[Sevo]

"Globalization can be a boon for some parts of "rural America". But as we've seen in practice over the last few decades, it's a bane for most of "rural America"."

Cite missing.

[Citizen X - #6]

Well, people might be advised to move from their familiar, dying rural community to one where jobs are at, which is literally white genocide according to some folk.

[SIV]

St James Parish is going to be fucked when the Morganza Spillway fails and all those jobs move, with the Mississippi River, to Morgan City.

[KBeckman]

Wow it's nice to see my state on here and not because it some how fucked something up.

I always like to mention to people who complain about free trade that I work for a Mexican company that built a plant up here.

[tommhan]

We are not going to destroy foreign trade, we just don't want it so lopsided.

[vek]

This author is a moron though... One of the articles he linked to mentioned that 17 aluminum smelters have closed since just 2000, and there are only 5 left in the entire country... So BAD for the industry and jobs and said rural communities. And then went on to mention that just within the last year that the smelter in question had to lay off more than half its employees due to Chinese dumping!

So it's making the exact OPPOSITE point he's trying to make, which is that globalism has been good for rural America. This plant is just one of the last few struggling along, probably almost exclusively off of military contracts if I had to guess since they make aerospace grade aluminum, the LAST plant in the country that does.

I think we need to force open foreign markets to our goods and deregulate our industry to see where we sit with something close to a true free market first... But this idea that it was genius to destroy ~20% of our economy and outsource it all while running up massive trade deficits just doesn't hold water with me. The way things have gone down were a HORRIBLE idea. We should have forced open markets as a precondition of allowing them in. That alone would have likely preserved millions of jobs and made trade ACTUALLY freer globally.