Without exaggeration or fear of contradiction it can be said that recent American foreign policy has been a disaster for the American worker. Not long ago, good manufacturing jobs were plentiful. One hourly wage earner could feed and house a family. His daughter could get a university education without acquiring a lifetime of debt. His son could own a home before he was 30. Today, many of these college educated children are working as cashiers and living in their parents’ basements. The causes of this crisis are manifold, but foreign policy failures have contributed significantly.
The primary role of foreign policy is to provide security and prosperity for the American people. This involves more than nuclear disarmament negotiations and Middle East peace talks. It includes trade, immigration and energy policies. In all of these areas Washington has intentionally pursued policies that benefited some Americans at the expense of others. Salaried professionals with their soaring stock portfolios and state-subsidized Teslas have prospered while hourly workers paying off a loan on their Ford have struggled with unemployment, inflation and stagnant wages.
Both Republican and Democratic administrations embraced the benefits of free trade which Adam Smith and David Ricardo clearly described over 200 years ago. Bill Clinton signed the North American Free Trade Agreement in 1993 and George H. Bush allowed China to join the World Trade Organization in 2001. These agreements were expected to promote economic growth and lower consumer prices. In many ways they did. By giving American firms access to a vast pool of low-cost foreign labor they created huge corporate profits for firms that moved their factories abroad and then shipped cheap foreign goods back to America.
Drew Angerer/Getty Images
The volume of international trade grew rapidly, but in a very lopsided fashion. Trade deficits arise when one nation sells more to another nation than it buys from it. Between 1994 and 2023 America’s trade deficit with Mexico grew eight-fold from $19 to $154 billion, while America’s trade deficit with China soared from $80 to $380 billion between 2004 and 2023. Mexican and Chinese workers prospered as well-paid American manufacturing jobs moved overseas. Since the creation of NAFTA, the United States has lost 350,000 jobs in the auto industry while Mexico has gained 450,000. According to the Economic Policy Institute, China’s entry into the WTO has cost 3.5 million American jobs. It is increasingly hard to see how these trade arrangements benefited the American worker.
In fact, it has become increasingly clear that things did not work out as Adam Smith expected largely because free trade must also be fair trade and in the case of China it has not been. China has long been engaged in currency manipulation, intellectual property theft and selling goods below cost. Its centrally planned economy remains riddled with subsidies for “national champions.” Hopes that China would eventually change course and play by our rules have proven to be a costly illusion.
The United States has lost control of it borders. Anyone who tells you that this does not create problems for the American worker doesn’t understand basic economics. When the supply of labor goes up, the price of labor goes down. Numerous studies have found that an increase in the number of workers in a specific sector will lower wages in that sector. Undocumented immigrants cannot legally work in the United States, yet they comprise a significant portion of the labor force in the agriculture, construction and hospitality sectors.
Because most illegal migrants have few skills, they compete directly with lower-skilled American workers. It is these less-skilled Americans, including many people of color, who have suffered most from the falling wages illegals generate. These less-well-off workers are also the ones who suffer most when public health, transportation, education and social services are strained by an influx of illegal migrants who have never paid taxes.
These difficulties for one group of Americans has proven advantageous to another. Lower wages for those Americans competing with illegal labor has simply meant larger profits for those who employ illegals. Moreover, like the threat of moving factories abroad, the presence of cheap, illegal labor has held down wages and made organizing labor more difficult. Like unbalanced trade, illegal immigration essentially redistributes wealth from one group of Americans to another, from workers to employers, from labor to capital.
But that is only part of the story of America’s new malaise.
Nothing does more to boost prosperity than cheap energy. No tax is more regressive than high energy prices which pummel those for whom heating and transportation costs are major expenses. Without inexpensive energy there can be no rapid expansion or reindustrialization of the American economy. Our debate should not be between renewable and fossil fuels. A sound policy would seek to make all sources of energy less expensive.
Nevertheless, the United States has imposed a wide range of restrictions on domestic oil drilling, refining and transportation. These restrictions have not reduced global demand for oil which continues to grow by more than 1 percent per year. They have, however, curtailed domestic oil production making energy more expensive and the United States more dependent of foreign oil producers.
While restricting domestic oil production we have pursued a foreign policy that antagonized major oil exporters and failed to protect international shipping lanes. For example, when Saudi Arabia tried to topple the illegal Houthi regime in Yemen, we criticized them on human rights grounds, cut off their arms supplies and took the Houthis off our terrorist list. Now the Houthis are back on the terrorist list and we are unsuccessfully trying to combat them ourselves, all while the Saudis stand aside. The result of this policy failure has been the collapse of shipping through the Suez Canal and thus a sharp increase in shipping costs for everything from oil to imported electronics. Together our domestic and foreign energy policies have contributed to an 87 percent increase in the price of oil since 2019 and a doubling of the overall inflation rate—all at a time when trade and immigration policies have helped keep wages flat for many wage earners.
On the whole—and it is on the whole that such matters must be judged—America’s foreign policy has done more good for more people on this planet than that of any other nation in history. So, it is sadly ironic that these policies are now undermining opportunities for a substantial portion of America’s own population. It is largely the children of wage-earning Americans who fought our forever wars. It is their votes that put our politicians in office. Yet they are the ones who suffer most from failed trade, immigration, and energy policies. Foreign policy plays a pivotal role in all of these matters. The next president and secretary of state need to more aggressively defend the American worker.
David H. Rundell is a former chief of mission at the American Embassy in Saudi Arabia and the author of Vision or Mirage, Saudi Arabia at the Crossroads. Ambassador Michael Gfoeller is a former political advisor to the U.S. Central Command and a member of the Council on Foreign Relations.
The views expressed in this article are the writers’ own.