Talking Trade blog
Trump: Change or full scale retreat?
Published 06 July 2016
At the Asian Trade Centre, we’ve been a bit distracted by the continuing fall out of the Brexit vote on the UK economy, rapidly changing trade circumstances in Europe, and ongoing trade negotiations in ASEAN.
But—circumstances on the other side of the Pacific in the United States have forced us to pay attention to the U.S. election again. Start with the following quote:
“It’s either you stick with the establishment or you go for change,” said machinist Dennis Haines, in an interview in the New York Times. “People want change. A guy like Donald Trump, he’s pushing for change.”
There can be no doubt that Trump is advocating change. Last week he put forth his most comprehensive outline yet to describe his vision of trade policy.
Trump claims that he will bring back American jobs quickly, by following 7 steps. It is probably worth reading the agenda in its entirety:
“1: I am going to withdraw the United States from the Trans-Pacific Partnership (TPP), which has not yet been ratified.
2: I’m going to appoint the toughest and smartest trade negotiators to fight on behalf of American workers.
3: I’m going to direct the Secretary of Commerce to identify every violation of trade agreements a foreign country is currently using to harm our workers. Direct all appropriate agencies to use every tool under American and international law to end these abuses.
4. I’m going to tell our NAFTA partners that I intend to immediately renegotiate the terms of that agreement to get a better deal for our workers. And I don’t mean just a little bit better, I mean a lot better. If they do not agree to a renegotiation, then I will submit notice under Article 2205 of the NAFTA agreement that America intends to withdraw from the deal.
5: I am going to instruct my Treasury Secretary to label China a currency manipulator. Any country that devalues their currency in order to take advantage of the United Sates will be met with sharply.
6: I am going to instruction the U.S. Trade Representative to bring trade cases against China, both in this country and at the WTO. China’s unfair subsidy behavior is prohibited by the terms of its entrance to the WTO, and I intend to enforce those rules.
7: If China does not stop its illegal activities, including its theft of American trade secrets, I will use every lawful presidential power to remedy trade disputes, including the application of tariffs consistent with Section 201 and 301 of the Trade Act of 1974 and Section 232 of the Trade Expansion Act of 1962.”
The full implementation of this agenda is supposed to bring back jobs. As with nearly all plans related to Trump, it is difficult to even know where to begin an analysis or assessment of his comments, except to say that it will not work, is deeply misleading or is plain wrong.
But it may be most helpful to return to the quote above by the now unemployed machinist—this election is about the status quo versus change.
It is being skillfully framed as such by Trump. For people who are unsatisfied by their current situation, change in any direction is to be welcomed. A seven step plan that will bring back jobs sounds fantastic.
Still, this election really should not be about the status quo versus change. Certainly not in the trade and economic sphere and probably not anywhere. The world never stands still. Circumstances are constantly in motion. However much any individual might like things to just stop, to be reset, to pause, it does not happen.
Trump gave his economic speech in a former steel town in Pennsylvania. He argued that steel workers in the region had been badly served by previous trade agreements like NAFTA and would be harmed further by future trade deals like the TPP.
At a rally given several hours later in Ohio, Trump increased the rhetoric against the TPP, arguing that it represented the “rape” of the country by special interests. “That’s what it is too,” he said, “It’s a harsh word. It’s the rape of our country.”
Really? This is incredibly demeaning to anyone who has actually been raped. It is flatly unacceptable.
The response to Trump's repeated use of the term "rape" in describing trade deals was remarkably tepid. It is another hallmark, perhaps, of the out-of-bounds nature of the contest in America that such a term could be used in this manner and go so unnoticed by nearly everyone but the Australian Ambassador.
Trump's speech conflated trade deals and globalization and argued that both had conspired against American workers to unfairly ship jobs overseas, leaving behind nothing but poverty and heartache.
Of course, Trump did not point out that America currently produces just as much steel as it did in the 1990s, when NAFTA came into effect. It does so with fewer workers, but this is a result of technology shifts and the rise of mini-mill production. He did not note that just over 70% of all steel used in the United States is domestically produced.
Americans do still make things. The U.S. continues to lead in manufacturing, particularly in high value manufactured products.
The US ITC just issued a new report that examined all existing American trade agreements. The lengthy document looked through 15 deals and found that aggregate trade was expanded as a result by 3 percent, real GDP in the United States was increased by just under one percent, with trade up between partners by 26.3 percent. This new trade was not spread evenly, of course, but the net benefits of existing agreements are clear.
Time does not stand still. Change happens. The composition of the workforce has shifted, including in Pittsburgh, where a large and growing segment of workers are in health care and other services. This is true in most advanced industrialized economies.
Politicians could talk about creating sensible policies to help workers of all types such as improved education, as well as better worker training and retraining across the lifespans. Other policies that improve overall competitiveness could be discussed. These are not on Trump’s seven point agenda.
There is no going back to some mythical point in time when steel jobs set up shop in Pittsburgh. There is no way to make such jobs appear. No set of trade agreements that could force companies to relocate to defunct, uncompetitive mills.
Consumers could somehow try to purchase only “made in Pittsburgh” products.
This has been tried before. In North Korea.
We’ve had variations of “import-substitution” policies over the decades and the evidence is quite clear. It does not work well. Not for workers. Not for companies. Not for the global or regional economies.
Trump suggests the problem is that “we lost our way when we stopped believing in our country.” His solution is to retreat from the world. To pull back and somehow do so with strong beliefs seems like a very bizarre response to a problem.
For a little taste of how well that’s working out, ask a Brit how much they are enjoying the early days of Brexit?
A 7-point plan or a simple referendum for “freedom” sounds like a great idea—“change” seems preferable to the status quo or the establishment. But the world itself is always on the move.
People may want change. They are going to get it no matter who wins. Retreat, however, may be change that literally delivers in the wrong direction.
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