Not only didn’t presidential candidate Donald Trump step back from his protectionist trade stance, he doubled down in a speech in Pennsylvania.
“Globalization has wiped out our middle class,” he told an audience and promised big changes to U.S. trade policy.
Speaking in front of a pile of recycled materials, Trump called NAFTA, “the worst trade deal in history,” blasted the U.S. free trade agreement with South Korea as being “a job-killing deal,” declared the Trans-Pacific Partnership (TPP) to be a “death blow for American manufacturing,” and vowed to pull out of the agreement.
Here are three points where Trump is flat out wrong.
First, the middle class hasn’t been “wiped out.” The Washington Post’s Robert Samuelson summarizes recent Brookings Institution research. Between 1979 and 2014:
There was a gradual and broad-based shift of Americans from poorer to richer status. Productivity gains have translated into higher living standards more than is generally believed.
Second on NAFTA, trade with Mexico and Canada supports 14 million jobs. Five million of these come from NAFTA. U.S. manufacturing output and exports have continued to increase. That’s a good deal that Trump should appreciate.
Third, TPP, the pacific trade deal Trump derides would add $100 billion in new economic output every year. That’s “more than the GDPs of Paraguay, Jordan, Afghanistan and Honduras, combined.” Again, another good deal.
What Trump Wrote in 2013
The Donald Trump of 2016 spouting protectionism is a far cry from the Donald Trump who penned a 2013 CNN op-ed, calling for more economic unity. That Trump should’ve given his speech today.
Where the 2016 version of Trump threatens to slap tariffs on Chinese and Mexican imports—i.e. raise taxes on American families--the Trump of 2013 sensibly emphasized economic cooperation:
We are now closer to having an economic community in the best sense of the term -- we work with each other for the benefit of all.
I think we've all become aware of the fact that our cultures and economics are intertwined. It's a complex mosaic that cannot be approached with a simple formula for the correct pattern to emerge. In many ways, we are in unchartered waters.
The good news, in one respect, is that what is done affects us all. There won't be any winners or losers as this is not a competition. It's a time for working together for the best of all involved. Never before has the phrase "we're all in this together" had more resonance or relevance.
Now, these are the words of a businessperson who gets the importance of international trade, global supply chains, and foreign direct investment. Closer economic ties among nations allow businesses to sell to new customers, give customers a wider variety of goods and services, and create jobs.
Trump 2013 was correct when he wrote, “The future of Europe, as well as the United States, depends on a cohesive global economy. All of us must work toward together toward that very significant common goal.”
Exactly. Thus Congress should approve TPP and the administration needs to keep negotiating the Trans-Atlantic Trade and Investment Partnership with the European Union. The United States has had much economic success with previous free trade agreements; we’ll likely see more with these agreements.
But if Trump has his way and imposes steep tariffs we could be headed to a recession with millions out of work:
An economic model of Trump's proposals, prepared by Moody's Analytics at the request of The Washington Post, suggests Trump is half-right about his plans. They would, in fact, sock it to China and Mexico. Both would fall into recession, the model suggests, if Trump levied his proposed tariffs and those countries retaliated with tariffs of their own.
Unfortunately, the United States would fall into recession, too. Up to 4 million American workers would lose their jobs. Another 3 million jobs would not be created that otherwise would have been, had the country not fallen into a trade-induced downturn.
Trade Agreements are Good for Small Businesses
And despite what Trump says, don’t believe trade only benefits a few. Trade agreements are good for businesses of all sizes, particularly small businesses. Yannick Greiner, director of international sales at Owosso, Michigan-based Rugged Liner, told Above the Fold, “Once a trade agreement is in place, we witness less red tape, less bureaucracy and an overall simplicity in doing business.”
Countries that have free trade agreements with the U.S. are “top export destinations” for small and medium-sized businesses. As the U.S. Chamber’s Stefanie Holland explained, TPP will cut taxes for small business exports and make it easier for them to get through the bureaucratic and regulatory hurdles:
In fact, trade agreements such as the TPP are even more important to smaller companies than to multinational corporations. Tariffs, testing costs, licensing fees and other burdens that may be minor irritants to a large firm can be show-stoppers for smaller companies.
The reality television star isn't the only candidate wrong about trade. Yesterday, Secretary Hillary Clinton told supporters in Cincinnati, “We will defend American jobs and American workers by saying ‘no’ to bad trade deals, like the Trans-Pacific Partnership.”
If only we had the 2012 version of Clinton where she called the TPP the “gold standard” for trade agreements, and said the agreement would “lower barriers, raise standards, and drive long-term growth across the region” as well as create “better jobs with higher wages and safer working conditions.” Instead, 2016 came around—a presidential year—and she has become a TPP critic and scrubbed all mentions of TPP from the paperback version of her memoir, Hard Choices. Presidential politics topped straight talk.
Back to Trump. New, good-paying jobs and sustained economic growth relies on an outward-facing U.S. economy, not inward isolation. With 95% of the world’s customer living outside the U.S. it only makes good business sense.
Both versions of Donald Trump should be able to appreciate that.