May 23, 2016 - 10:30am

Point and Counterpoint on Trade: Responding to Trump, Sanders, Clinton

Senior Vice President for International Policy

On the campaign trail, it’s not unusual for the rhetoric to escalate and exaggerate as candidates vie for attention in a crowded media landscape.

But there’s no excuse for what we’ve heard this year, as candidate after candidate has thrown caution — and facts — to the wind when it comes to trade.

To correct the record, we’ve taken a closer look at some of the wilder and woolier proposals we’ve heard from candidates Donald Trump, Bernie Sanders, and Hillary Clinton:

Trump says he wants to force companies “to build their damn computers and things in this country instead of in other countries.”

As a matter of fact, they already do. U.S. real manufacturing output has risen by more than 75% over the past 25 years and is at a record high today. U.S. manufacturers’ production, earnings, and exports have never been higher.

Let that sink in: Never before have so many goods been “made in America.”

At the same time, employment in the sector has declined as automation, robotics, information technologies, and highly sophisticated capital goods have allowed factories to produce more with fewer workers.

This productivity-driven decline in U.S. manufacturing jobs has been underway for decades. The absolute number of factory workers began to decline in 1979, but manufacturing jobs as a share of U.S. private sector jobs have declined in a straight line since 1945, according to data from the Federal Reserve Bank of St. Louis. This was long before NAFTA or the emergence of China as a major trading power.

U.S. firms also invest abroad, but they do so to serve those markets — not as a substitute for domestic production. Often this involves production of goods (such as potato chips or detergent) that can’t be transported long distances economically; some services also require a local investment. More than 90% of the production of foreign affiliates of U.S. multinationals is sold abroad, reports the Commerce Department.

Trump’s remedy? He has proposed to slap tariffs of 35% and higher on imports from China and Mexico. Analysts with several non-partisan research organizations have warned this would cost American consumers $250 billion per year, cause the loss of up to 4 million American jobs, and impose a regressive consumption tax on the typical American family of more than $2,000 annually.

Even "Ferris Bueller’s Day Off" can provide a useful reminder of the devastating results the last time tariffs on this scale were imposed (the Smoot-Hawley tariff).

Sanders says trade agreements are “part of a global race to the bottom” and mostly serve to enrich “the 1%.”

Actually, U.S. trade barriers hit the poor hardest, and trade liberalization is particularly beneficial to low-income Americans. As a paper from Progressive Economy explains:

“Because U.S. tariffs are concentrated in taxation of cheap clothes, shoes, and other home goods rarely made in the United States, they are mostly ineffective as import limits and regressive as taxation. The main effect of reducing these tariffs through trade agreements would be to raise living standards for lower-income households and thus ease inequality.”

Academic researchers recently found that “trade typically favors the poor, who concentrate spending in more traded sectors.” They find “a pro-poor bias of trade in every country … while high-income individuals consume relatively more services, which are among the least traded sectors.”

Further, the Commerce Department estimates that foreign tariffs reduce the earnings of American factory workers by as much as 12%. Non-tariff barriers add to the damage, which hits other sectors as well. Trade deals that lift those trade barriers help U.S. manufacturers and their workers.

Clinton writes that she will only support new trade pacts “if they will create good jobs, raise wages and advance our national security. I opposed the Trans-Pacific Partnership when it failed to meet those tests.”

In fact, a host of studies show the TPP will indeed achieve those goals.

The World Bank estimates the TPP would boost U.S. national income by more than $100 billion. That sum is larger than the annual economic output of approximately 130 countries. It’s more than the annual economic output of 14 states.

Researchers with the Peterson Institute for International Economics estimate that the TPP will increase annual real incomes in the United States by $131 billion. They also expect around 650,000 more people to work in export-related jobs (and fewer in lower-wage jobs) because of the TPP.

Such a shift in the mix of jobs will help raise wages: Manufacturing workers whose jobs depend on exports earn 18% more on average than those that don’t, and trade-oriented service industries pay a similar premium.

And now the U.S. International Trade Commission has weighed in, estimating that the TPP will boost U.S. annual real income by $57.3 billion by 2032. (The ITC’s estimates have proven conservative, underestimating the boost to U.S. exports from new trade agreements by factors ranging from four to ten.)

And national security? Just ask the eight former Secretaries of Defense who recently wrote a letter strongly backing the TPP. They wrote: “The TPP represents a choice for the United States. It is a choice between leading the world toward a future that supports U.S. values and interests, or standing back and allowing others — most likely China — to write the rules of the road for Asia in the 21st century.”

In fact, Defense Secretary Ash Carter has compared the TPP to having an extra aircraft carrier in the Asia-Pacific region.

In sum, there’s a gulf between what the candidates are saying about trade and the facts. The Chamber is committed to making sure the facts aren’t left behind.

About the Author

About the Author

Senior Vice President for International Policy

Murphy directs the U.S. Chamber’s advocacy relating to international trade and investment policy.