They are both wrong on trade - November 2016

 11/8/2016 8:30 PM

In what has been the ugliest and downright meanest presidential contest in well over a hundred years, there is one thing that Mrs. Clinton and Mr. Trump agree on – that trade is bad. Some of their biggest applause.....

In what has been the ugliest and downright meanest presidential contest in well over a hundred years, there is one thing that Mrs. Clinton and Mr. Trump agree on – that trade is bad. Some of their biggest applause lines come when they denounce the Trans-Pacific Partnership Agreement (TPP).

A large part of the electorate has become very hostile toward trade. It is an easy bugaboo. All you have to do is tell all those out-of-work factory workers and their families their jobs have been moved overseas because of cheap labor and they understandably get mad.

For others, all you have to say is that America isn’t great anymore because we don’t make anything and they understandably get angry. 

Most people in this country who have never worked in a factory have an idealized vision of manufacturing jobs in the 1960s and they can’t understand why we can't still be like that. No one remembers the bone-tiring work, the incessant noise and the foul smells that accompanied low-end manufacturing.

Where the campaigns have gone wrong is to blame the current economic malaise on a couple trade agreements. NAFTA and TPP are not the cause of changes in manufacturing. Rather they are attempts, and pretty successful attempts, to take advantage of shifts in the world economy. Opening markets to goods and services is a good thing. The United States already is the most open market in the world and has the most successful economy, and where we can negotiate reciprocal market access, U.S. businesses and workers benefit.

Jobs are always in a state of movement. Textile manufacturing started in England. It moved to New England then to the South because there was cheaper labor there. Then it moved to Japan before going to Taiwan and Korea. At the moment it's centered in China. None of the moves were the result of trade agreements. They were the results of wage and technology changes.

This is not to say there is no problem. We have gone through eight years of anemic growth averaging around 2 percent per year. With population growth of 1 percent per year, there is not a lot to be shared. And in the last eight years that little bit has been going more and more to the top earners who have valuable skills. It’s no wonder people are frustrated.

Of the two, Mr. Trump’s proposals are far more draconian than Mrs. Clinton’s. The imposition of tariffs to protect jobs has been tried for centuries and it always results in making things worse, especially for those it is supposed to help. 

It is estimated that without trade the highest income earners will lose 28 percent of their purchasing power. The poorest 10 percent will lose 63 percent of their purchasing power because as you move down the economic ladder, people tend to purchase more imported goods. Trade may cost some people their jobs but it benefits the lives of many other people.

So what’s the solution? First, the more markets that are opened to U.S. products and services through trade agreements the better. TPP may not be perfect but it will make it easier for us to do business in a lot of countries. We should also pursue negotiations with Europe for a trans-Atlantic agreement, as well.

But the real solution is to fix the economy. The lack of vigor in the economy can be directly laid at the steps of the Obama administration and its huge number of regulations that have shut down business expansion. The incoming administration needs to dump Dodd-Frank and the Affordable Care Act, as well as hundreds of other anti-business regulations, and get the economy growing again.

We also need to be mindful that trade or no trade, we need to invest in continuous training of our workforce. We now invest 0.1 percent of GDP in reemployment investments. The average investment by Organisation for Economic Co-operation and Development countries is six times ours. We all benefit from trade. Some lose more than they benefit, however, and the rest of us need to be there to help.