Detoxifying the Trade Debate
POLICIES FOR THE NEXT ADMINISTRATION. PART 2: TRADE
This is the second in a series on the majory policy ideas — from Left and Right — that should guide the next presidential administration's agenda. (For the opposing view, see Wilbur Ross and Peter Navarro, "The Trump Trade Doctrine: A Path to Growth & Budget Balance.")
The 2016 election seems destined to go down as the least edifying presidential contest in U.S. history. Facts, evidence, and rational argument have been routed by the visceral power of populist “narratives” drenched in cultural resentment, economic demagoguery, and tinfoil-hat paranoia.
Donald Trump’s slurs, compulsive lying, and ignorance of public issues make him by far the worst offender. Yet the other populist in the race, Sen. Bernie Sanders, did little to lift the level of debate. In a strident, one-note performance, he caricatured a visibly improving economy as a nightmare of predatory capitalism, falsely claimed the rich were hogging all the gains from growth, and indulged in old-timey socialist moralizing against profits — leaving practical voters to wonder how working Americans would be better off if their employers lost money.
The issue on which Trump and Sanders have done most to confound public understanding is the one where today’s right- and left-wing populism intersect: trade. In their telling, bad trade agreements are to blame for America’s eroding industrial might, shrinking middle-class jobs, and growing inequality. It’s all part of a conspiracy by Wall Street and corporations to globalize markets and thereby amplify their profits, even if that means allowing other countries to “steal” U.S. factory jobs.
This cartoonish tale of victims and villains tells us little about the true sources of today’s disruptive economic changes. It doesn’t account for the digital revolution, which is changing the kind of work we do and how we do it; the impact of automation on middle-skill jobs; a dearth of skilled workers in fast-growing sectors; and the slowdown in productivity growth across all the world’s advanced economies, not just ours. It also omits the inconvenient fact that America has been losing factory jobs since the 1970s — well before NAFTA and other supposedly ruinous trade pacts came along.
The populist demonization of trade, which is really a nostalgia-infused attack on economic openness and progress, will create difficulties for the next administration, no matter who wins. If it’s Trump, he will quickly discover there’s no appetite in Washington or among our trading partners — or among businesses that employ millions of Americans — for unwinding intricately detailed trade agreements forged over years of hard bargaining. And unless he wants to instigate a trade war that would tank the U.S. economy, Trump will have to renege on his vow to slap massive tariffs on Chinese and Mexican imports.
Hillary Clinton is not fundamentally anti-trade. In the heat of an unexpectedly tough primary challenge from Sanders, however, she repudiated her previous support for the Transpacific Trade Partnership (TPP), one of President Obama’s top priorities. To be fair, she’s hardly the first Democrat to throw trade overboard to appease labor and anti-globalization activists. Obama promised to renegotiate NAFTA on the stump in 2008, but quietly dropped the idea after he’d won. At any rate, Clinton’s awkward flip on TPP — after calling it the “gold standard” of trade agreements — may have done her more harm than good by reinforcing doubts about her trustworthiness.
If Clinton wins, Congress could take this hot potato off her plate by passing TPP in the post-election lame duck session. Otherwise, Clinton will eventually have to find a way to get the agreement back on track, as a matter of national interest. Having served as Obama’s first Secretary of State, she knows that TPP isn’t just a commercial deal; it’s also integral to America’s strategy of constructing a new balance of power in Asia. The agreement with 11 Pacific Rim nations would create a vast liberal trading zone encompassing 40 percent of the world’s GDP — formidable counterweight to China’s growing economic might. If Washington lets TPP die, U.S. credibility and influence in the region will plunge and Beijing will set the rules of trade in Asia.
In addition to its geopolitical significance, TPP would lower tariffs and administrative barriers on U.S. products, raise environmental and labor standards in emerging markets such as Malaysia and Vietnam, and make it easier for small U.S. firms and entrepreneurs to sell into global markets. That’s critical as the locus of global demand shifts from U.S. consumers to Asia, which is expected to add two billion new middle class consumers over the next 15 years. This means growing demand for the products and services that American companies excel at producing, including digital technology, advanced materials and high-end manufacturing (such as 3-D printers), wholesome foods, modern financial services, and innovative medical devices and treatments.
All this makes TPP, in particular, and trade, in general, central to what will surely be the next president’s top priority: sustaining an economic recovery that is finally starting to reach average working families. Last year, median household income rose by more than 5 percent, the fastest growth on record. While incomes rose across the board, middle- and lower-income families saw the largest gains. The economy lifted 3.5 million people out of poverty, including about one million children.
Such broad gains belie populist claims that the U.S. economy is a “disaster” (Trump) or a game rigged by the “billionaire class” against the working class (Sanders). They remind us that more robust economic growth is necessary, if not entirely sufficient, to return America to shared prosperity.
As President Obama understands — and as all U.S. presidents going back to FDR understood — open trade is a powerful stimulant for economic innovation and job growth here and abroad. That’s why he signed three bilateral free-trade treaties initiated by his Republican predecessor, and why he’s pushing for ambitious multilateral agreements in Asia and Europe, as well as pacts for lowering barriers to trade in services and information technology. The disinformation war populists are waging against trade in this election cycle will make it harder for his successor to move such far-sighted initiatives across the finish line.
In fact, left-wing populists already are trying to turn Democrats into a party that sounds more like Trump than Obama on trade. Having failed to insert an anti-TPP plank in the party’s platform, they are now pressuring elected Democrats to block any attempt to bring TPP for a vote after the election. Evidently, they want to make dogmatic opposition to trade a Democratic version of the GOP’s notorious “no tax” pledge, which has paralyzed fiscal reform in Washington.
This would drive a wedge into a Democratic coalition that is fairly evenly balanced between moderates and liberals. Populists insist that trashing trade agreements will “energize the base.” But the question is, whose base? The voters most moved by such rhetoric are mostly Trump voters: white, non-college educated men and women who have been voting Republican in national elections since the 1980s. The Democratic base is more diverse, younger, more urban — and more favorably inclined toward trade.
In a survey by pollster Peter Broadnitz for the Progressive Policy Institute, Democratic voters backed new, high-standard trade deals by a margin of 66–25. And the swing voters who ultimately decide elections also support trade, by 55–32 percent. These results jibe with findings from recent Pew polls. When asked whether trade agreements have been good for America, Democrats and Democratic-leaning voters agreed by 56–34 percent. Interestingly, millennials — the backbone of Sanders’ support — were even more supportive (67 percent).
These findings refute the biggest populist myth of all: that the “people” are rising in righteous wrath against elites who have foisted trade agreements on them to advance their sinister globalization project. Actually, it’s anti-trade activists, not pro-growth Democrats, who are out of touch with the party’s grassroots.
In fact, college-educated whites and young voters, not factory workers, are the key targets of opportunity for Democrats in 2016 and beyond. A majority of whites with college degrees say Trump is not qualified to be president, while 65 percent say Clinton is. Instead of echoing Trump’s bellicose rhetoric on trade, Democrats should be aiming a hopeful, pro-growth message at aspirational voters across the political spectrum, including independents, college-educated suburban moderates, and a substantial slice of Republicans who can’t abide Trump.
There’s no disagreement among progressives that working families have borne the brunt of the nation’s disappointing economic performance since 2000. Some have lost jobs to trade (though more manufacturing jobs are supported by exports). Many more have been automated out of their jobs. Job prospects for people with no more than high school education have gotten dimmer. And the nation’s leaders have done a poor job of helping them adjust to new economic conditions.
But embracing protectionism and making fanciful promises to “bring back” yesterday’s jobs is the wrong way to show solidarity with working families. Democrats are never going to “out demagogue” Trump on trade. The right way to help working families is to revive U.S. economic dynamism and productivity growth and ensure that everyone has access to affordable education, housing, health care, and more focused and effective job training.
Just how to do that is a debate worth having, but it will only happen if voters decisively reject anti-trade populism in November.
Will Marshall is President of the Progressive Policy Institute.
Authors' Recommended Reading:
Ed Gerwin, “A Big Deal for Small Business: Seven Stories of How the Trans-Pacific Partnership Would Boost America’s Small Exporters,” Progressive Policy Institute (September 2016).
Michael J. Hicks and Srikant Devaraj, “The Myth and the Reality of Manufacturing in America,” Center for Business and Economic Research, Ball State University (June 2015).
Will Marshall, “Unleashing Innovation and Growth: A Progressive Alternative to Populism,” Progressive Policy Institute (March 15, 2016).
Chris Rasmussen, “Jobs Supported by Exports 2014: Product and Industry,” Office of Trade and Economic Analysis, International Trade Administration, Department of Commerce (July 13, 2016).
(Read the response by Wilbur Ross and Peter Navarro.)