Dallas Fed casts anti-globalization views as misguided. But that's no Trump critique


By Howard Schneider

DALLAS, Sept 26 (Reuters) - In the world according to President Donald Trump, immigrants and globalization are stealing U.S. jobs and ruining U.S. growth.

In the world according to Robert Kaplan, president of the Federal Reserve Bank of Dallas deep inside Trump country, globalization and immigrants are needed for the United States to thrive.

His take: Politicians worried about American workers should focus more on ensuring they are well educated and able to adapt to technological change, not try to wall them off from the rest of the planet.

"The narrative in the last several years has been that if your job is being disrupted in Wisconsin or Ohio or anywhere it is probably due to globalization. Either an immigrant may have affected your wages or taken your job. Or trade is the reason," Kaplan said on Wednesday at a two-day Dallas Fed conference on trade and immigration.

But “if you think you are actually going to cut the number of immigrants and grow GDP, those two things do not quite go together," in an aging population where the domestic-born workforce is shrinking, Kaplan said. "Globalization is an opportunity for the United States...If we get that diagnosis wrong, we are going to make poor policy decisions regarding trade and immigration and grow more slowly.”

Discussing such issues is always sensitive for the Fed. In a sort of unofficial but well understood pact with politicians, the unelected policymakers of the central bank get wide berth to set monetary policy as they see fit.

But in return they don't give specific recommendations about other areas of economic and social policy like spending, taxation or trade law.

Those policies are treated as "given" in the Fed's deliberations, and anything beyond generic statements of concern about issues like the federal debt or the risks of "policy uncertainty" are rare.

Some subjects are particularly touchy under a president who has disrupted the global trading system in the name of bringing back factory jobs and made immigration a centerpiece of his campaign and first term. He has also put the Fed under a spotlight for not lowering interest rates to bolster his hand in fighting a trade war with China.

But research is a different matter altogether and one where the Fed's technocrats have room to run.

In recent weeks the Fed has produced estimates that the disruption around trade policy may cost the world economy a percentage point of economic growth. This week a Fed paper quantified the amounts by which U.S. consumers benefited from trade with China at about $400,000 for each displaced job, and with prices that were 1.9 percent lower for every percentage point of Chinese import penetration.


Kaplan steers clear of Trump’s name and is careful to say that what he regards as a mistaken "narrative" around trade and immigration has adherents in both major political parties and among workers and businesses. He stops short of recommending solutions, and thus giving policy advice.

Any comment he offers, he said, is merely meant to provide politicians and citizens the Dallas Fed's best research findings, which naturally gravitate to trade and immigration issues because of the bank's location at the border and Texas' position as the country's largest exporter. He would have done the same in analyzing a deal in his former jobs at Goldman Sachs or as a Harvard Business School professor.

But his critique, particularly on politically fraught issues that framed the 2016 presidential election and may do as well in 2020, has become both pointed and frequent.

At a two-day conference on trade and immigration, he was blunt - even while anonymizing the advice.

"People assume I am pointing to this person or that. I don't think this narrative is confined to one segment," Kaplan said. "It is not a critique...All we are doing is sharing what our research indicates."

"Proposals have come out from various people to say we are actually going to cut the number of immigrants and that is going to be great for the United States. Our comment is not if you want to grow."

(Reporting by Howard Schneider; Editing by Cynthia Osterman)

((howard.schneider@thomsonreuters.com; +1 202 789 8010;))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


More Related Articles

Sign up for Smart Investing to get the latest news, strategies and tips to help you invest smarter.