Steel Tariffs and Doctors: A Teachable Moment?
Monday, March 12, 2018
By Dean Baker, Truthout | Op-Ed
Donald Trump delivers remarks before signing the 'Section 232 Proclamations'
on steel and aluminum imports with Vice President Mike Pence and Treasury
Secretary Steven Mnuchin in Roosevelt Room the the White House March 8,
2018, in Washington, DC. (Photo: Chip Somodevilla / Getty Images)
Donald Trump's tariffs on steel have elicited near universal condemnation.
In addition to issuing warnings from retaliation by our trading partners,
the media have also been giving us economics lessons on how steel tariffs
will mean higher prices for consumers.
If we pay 10 percent more for our steel, then the price of cars and other
items that use large amounts of steel can be expected to rise. This will
reduce demand for these products and might cause consumers to buy more
foreign cars and fewer US made cars, possibly leading to a loss of jobs in
the auto industry.
This economics lesson can be useful, but perhaps we can extend this teaching
moment to other areas. The basic point economists have been making is that
large segments of the population benefit from having access to lower cost
imported steel even if it means fewer jobs and lower pay for US
steelworkers.
Over the last four decades our trade policy had been quite explicitly
designed to put steelworkers and other manufacturing workers in direct
competition with low-paid workers in the developing world. Trade deals made
it as easy as possible for US corporations to locate factories in Mexico and
other developing countries and import their production back into the United
States.
We can take the same approach to trade of highly paid services, specifically
the services provided by doctors, our highest paid professionals. Doctors in
the United States earn on average more than $250,000 a year. That's more
than twice the average for their counterparts in other wealthy countries.
With more than 900,000 practicing physicians in the country, we could
potentially save $100,000 billion a year by paying our doctors the same as
doctors earn in other wealthy countries. The potential savings come to
roughly $700 per household or 10-times as much as what's at stake with the
steel tariffs.
A major reason that our doctors are able to earn twice as much as their
foreign counterparts is that they are explicitly protected from
international competition. Foreign-trained doctors must complete a US
residency program before they are allowed to practice in the United States.
This means that even a well-established physician in a country like Germany
or the Netherlands would get arrested if they came to the United States and
tried to compete with our doctors.
While it is reasonable to have high standards to ensure that the people who
practice medicine are competent, it is absurd to imagine that the only way a
person can become a competent doctor is by completing a US residency
program. There is a considerable amount of research showing that other
wealthy countries have comparable outcomes, indicating that their training
is as good as ours, at least from the standpoint of treating patients.
Our trade negotiators could be focused on setting clear standards that
foreign physicians could meet and then practice medicine in the United
States with the same freedom as a US-born and -trained physician. We could
do the same with dentists and other highly paid professionals.
The potential gains from this sort of trade liberalization dwarf the gains
from ending tariffs and other barriers to trade in manufactured goods. And,
unlike our prior efforts at trade liberalization, removing the barriers that
protect highly paid professionals would reduce, rather than increase,
inequality.
Don't bet on an anti-tariff drive to lead to a reduction in barriers that
protect highly paid professionals. Very few of the people complaining about
the steel tariffs actually are committed to free trade. They are committed
to a trade agenda that redistributes income upwards. When that means
removing tariff barriers on steel or other items, they will push for "free
trade."
But when freer trade can jeopardize the income of those at the top, these
same people are perfectly fine with protectionism. This point is perhaps
even clearer in the case of patent and copyright protection, where an
explicit goal in both domestic and international policy over the last four
decades has been longer and stronger protection (yes, as in
"protectionism.")
We will spend more than $450 billion this year on prescription drugs that
would cost us less than $80 billion in a free market. The difference of $370
billion is more than 30-times the amount at stake with the steel tariffs.
So let's agree with our "free trader" friends, the steel tariffs are bad
news and will impose unnecessary costs on consumers. And let's ask them to
join us in beating back the much more costly forms of protectionism that
benefit doctors and other highly paid professionals, as well as drug
companies, and the entertainment and software industries. You will see the
commitment to free trade vanish very quickly.
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Dean Baker
Dean Baker is a macroeconomist and senior economist at the Center for
Economic and Policy Research in Washington, DC, which he cofounded. He
previously worked as a senior economist at the Economic Policy Institute and
an assistant professor at Bucknell University. He is a regular Truthout
columnist and a member of Truthout's Board of Advisers.
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