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July 5, 2016

Responding To Trump's Spasm of Protectionism

Trump's trade nonsense is easily debunked
IPI expert referenced: Merrill Matthews | In The News | Media Hit
  Washington Post

By Jennifer Rubin

Donald Trump’s anti-free-trade bloviating of late might give the impression the whole party has lost its bearings on this economic issue. Fortunately, like so much else, Trump doesn’t talk for Republicans. Unfortunately, GOP leaders are afraid of the anti-trade mob these days, so you don’t hear much from them on the topic. Nevertheless, there are those speaking out.

Merrill Matthews of the Institute for Policy Innovation, a conservative think tank based in Dallas, wrote:

The driving concept behind Trump’s economic policy is the belief that other countries are beating us on trade, which for him is proven by the existence of a trade deficit. Many, and perhaps most, economists argue that trade deficits have little bearing on a country’s economy, but even so, Trump’s not telling the whole story.

Our actual trade deficit (when services sold overseas and imported oil are taken into account) is much less than commonly cited figures, he explains. Moreover, there is good reason for globalization, which Trump ludicrously claims is a policy driven by politicians:

The fact is, politicians don’t create jobs in other countries; companies do—and often for good reasons. Coca-Cola sells a lot of its products in Mexico. Toyota sells a lot of its cars and trucks in the U.S. So both companies have factories in those nations. I recall Americans being excited when foreign carmakers built U.S. factories and hired U.S. workers, so what’s wrong with U.S. companies building foreign factories?

The biggest lie from Trump is that trade deals are responsible for the loss of manufacturing jobs. That’s just bunk:

The number of manufacturing jobs has indeed declined since the 2001 recession. And Trump wants to blame the North American Free Trade Agreement (NAFTA) for it.

However, there were 16.9 million U.S. manufacturing jobs in January 1994, when NAFTA went into effect, and that number rose over the next four years, peaking at 17.6 million in April 1998. If Trump is right, shouldn’t manufacturing jobs have declined?

That job growth came to an abrupt halt with the 2001 recession. But as the St. Louis Federal Reserve Bank shows, manufacturing jobs always decline during economic downturns. Usually they return once the economy picks up, but that didn’t happen in the 2000s.

Still, manufacturing output has risen every year since 2000, excluding the two recessions, from nearly $1.6 trillion in 2000 to more than $2 trillion in 2013, according to the National Association of Manufacturers. New technology, not trade agreements, played a major role in those job losses because it allowed companies to increase production with fewer workers.

There is no reason Republican pols cannot make the same arguments. Facts may not matter to Trump and his core supporters, but they matter a lot to many voters and to policymakers.

The more globalized the economy becomes, the stupider Trump sounds. As the Consumer Technology Association pointed out in a statement from its chief executive and president, Gary Shapiro:

Mr. Trump may not realize that 95 percent of the world’s consumers live outside the U.S. The factory jobs upon which he is basing his protectionist trade policies are low paying and in most cases jobs are created in R&D and innovation, particularly because of advances in technology, are much higher paying and provide more desirable employment. Mr. Trump would be better focused on highly skilled jobs and training. . . .

Building walls, raising tariffs and implementing domestic manufacturing requirements are destructive isolationist policies, which will eliminate American businesses and triple prices to consumers for many everyday items. This brand of populism relies on convincing Americans that unilaterally breaching agreements and imposing walls and tariffs will somehow make us better when in fact it will lead to retaliation and depression as it did with Smoot-Hawley. Our American way of life and standard of living benefit from and rely on trade.

More and more businesses and trade associations are going to need to carry the burden of explaining trade to the American people. Their own livelihood is at stake, so they better speak up. If they don’t, the anti-trade crowd will own the discussion, making pols who should know better even more timid. The irony is the pro-trade camp has the facts on its side and a convincing case to make, if only its proponents had the nerve to speak up.


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