Marshall v. Ross & Navarro
POLICIES FOR THE NEXT ADMINISTRATION. PART 2: TRADE
Authors from Part 2 of our policies series respond. (Previously: Will Marshall, "Detoxifying the Trade Debate;" Wilbur Ross and Peter Navarro, "The Trump Trade Doctrine: A Path to Growth & Budget Balance.")
Response to Wilbur Ross and Peter Navarro
By Will Marshall
Donald Trump calls the U.S. economy a “disaster” and blames trade for sapping America’s industrial might. Neither claim is true, but it’s hard to refute someone who offers no evidence or economic analysis to support his hyperbolic assertions. For that we must turn to his campaign’s economic advisers, Peter Navarro and Wilbur Ross. Unfortunately, their defense of what they grandly call the “Trump Trade Doctrine” is rife with dubious logic and funny numbers.
Let’s start with a basic economic error. Messrs Navarro and Ross apparently see the U.S. trade deficit in goods as proof that trade is killing U.S. jobs. They simply ignore America’s big trade surplus in services, including fast-growing digital trade. More fundamentally, the relationship they posit between trade balances, jobs, and growth doesn’t exist.
After all, the fastest way to cut the U.S. trade deficit is to go into recession. In 2009, the deficit plummeted from $709 billion to $383 billion. Obviously, we didn’t create more U.S. jobs as a result but lost them by the millions — especially in manufacturing. The right way to reduce trade deficits is to save more and export more, something that won’t happen if a President Trump erects protectionist walls around the U.S. economy and sparks trade wars with China and Mexico.
The Ross-Navarro article is riddled with bogus stats — the claim that flawed trade pacts are responsible for shuttering “70,000” U.S. factories is particularly risible. So is their assertion that the U.S.-Korea Free Trade Agreement killed 95,000 U.S. jobs. In fact, our economy has added 10.8 million jobs on net since the pact was signed in 2012, including a net of 170,000 auto vehicle and parts jobs.
Finally, there’s the disingenuous claim that Trump isn’t really against trade per se, just “bad trade deals” that allegedly kill U.S. factory jobs. So we are asked to believe that U.S. trade negotiators in both Republican and Democratic administrations over the past quarter-century have been either: a) uniformly incompetent, as Trump has said; or b) part of a vast conspiracy by financial and corporate elites to maximize their profits by depriving U.S. factor workers of their livelihood.
Paranoia is a poor guide to policy. In reality, U.S. trade negotiators are intelligent and diligent public servants who have adroitly advanced U.S. economic interests by building a rules-based global trade system that allows our country and others to grow together. And if our trade negotiators routinely get taken to the cleaners by wily foreigners, how is it that the United States actually runs a trade surplus in manufactured goods with the countries with whom we have Free Trade Agreements?
The “Trump Trade Doctrine” is profoundly reactionary. It looks back nostalgically to the industrial order of the 1950s, promising to “bring back” yesterday’s jobs. It takes no account of the central role economic innovation plays in accelerating productivity growth, which is the key to raising U.S. wages and living standards. And its adoption as national policy would be a calamity for the tens of millions of U.S. workers whose well-paying jobs — in manufacturing, services, and the digital economy — depend on open markets and trade.
(For the opposing view, see Wilbur Ross and Peter Navarro, "The Trump Trade Doctrine: A Path to Growth & Budget Balance.")
Response to Will Marshall
By Wilbur Ross and Peter Navarro
Mr. Marshall’s adjectives, adverbs, and rhetorical flourishes are no match for these unfortunate facts of trade deal life. It is not a “demonization” of trade to point out that Bill and Hillary Clinton’s NAFTA, which was supposed to create 200,000 jobs, destroyed 850,000 jobs; or that China’s entry into the World Trade Organization facilitated by Bill Clinton shuttered over 50,000 US factories; or that Hillary Clinton’s 2012 South Korean deal has been a hammer blow to Michigan’s auto industry.
Prior to NAFTA, the U.S. regularly enjoyed $4 to $5 billion of annual trade surpluses with Mexico. Post-NAFTA, our trade deficit soared to over $60 billion a year, and by the end of 2016, our cumulative trade deficit post-NAFTA will top an astonishing $1 trillion. If instead of exporting that huge sum to Mexico, we had invested it to rehabilitate some of our crumbling infrastructure, we would have been far better off.
Mr. Marshall’s fervent support for the proposed Trans-Pacific Partnership (TPP) is yet another example of the triumph of hope over experience. At least we now know from Mr. Marshall’s musings why the progressive wing of the Democratic Party has been so happily shipping our jobs and factories overseas.
Mr. Marshall also reaffirms that Hillary Clinton is Janus-faced when it comes to TPP. While she opposes it on the campaign trail, Marshall seems to think she will support TPP — which she has described as the “gold standard of trade deals” — once in office. Maybe he’s right: as WikiLeaks has revealed, Clinton has a “private position” for her Big Donors and a “public position” for her betrayed voters.
The Trump plan cuts taxes, reduces regulation, unleashes our energy sector, eliminates our growth-killing trade deficit, and thereby stimulates growth, creating millions of new jobs and trillions of dollars of additional income and tax revenues. Clinton’s plan does just the opposite. That’s all voters really need to know.
Will Marshall is President of the Progressive Policy Institute.
Wilbur Ross is a private equity investor. Peter Navarro is a business professor at UC-Irvine. Both are senior policy advisors to the Trump campaign.