Ag Policy Blog

Countering Presidential Candidates on Trade

By Chris Clayton , DTN Ag Policy Editor

From today's Washington Insider column:

The Washington Post recently posted a counter argument for Sen. Bernie Sanders, I-Vt., and his standard criticism of Secretary Clinton for her earlier support of trade agreements. The Post notes that as the campaign moves to the Rust Belt, the socialist contender is doubling down on protectionism.

The Post weighs in heavily and asserts that Sanders’ stance is built on bogus numbers that defy the overwhelming consensus among economists, and his solutions would do much more harm than good. “But politically, it appears to be working,” the Post says.…

The Post points to press reports of exit polls that indicated that Sanders’ anti-trade agenda helped him. Fifty-seven percent of those who voted agreed that trade “takes away U.S. jobs,” and 56% of them picked Mr. Sanders. Those figures augur poorly for Hillary Clinton’s prospects in the Midwest — and for the political durability of the country’s commitment to free trade.

“That’s unfortunate,” says the Post since Sanders’s populist rhetoric doesn’t stand up to scrutiny. His insistence, for example, that the North American Free Trade Agreement led to 800,000 job losses ignores analyses from unbiased sources such as the Congressional Research Service. “In reality, NAFTA did not cause the huge job losses feared by the critics,” a 2015 CRS analysis found.

Blaming freer trade for the loss of manufacturing jobs fails to tell the much bigger story of economic transformation that has swept the world over the past several decades. Technological change, automation, productivity improvements and other factors have eliminated old-school manufacturing jobs all over the world. Mr. Sanders cannot bring back the US economy of the 1960s, and it would be harmful to try.

Mr. Sanders’s story also neglects to mention the broad benefits that free trade brings. It pulls foreign trading partners out of poverty. It helps US exporters, who account for an increasingly large share of American output. It enriches US consumers, who get cheaper goods and greater selection. Economists resoundingly agree that these sorts of diffuse benefits outweigh the costs over time.

And, there are non-economic benefits as well, the Post asserts. NAFTA helped turn Mexico from an antagonist into a regional partner. The much-maligned Trans-Pacific Partnership (TPP) would knit the United States into the Asia-Pacific region for decades to come.

There is a downside to trade, the Post concedes, and that is that it promotes competition that may be costly for marginal sectors and so those affected can be politically mobilized. This may be politically difficult in sectors that are already in transition from new technologies—making the developments observed difficult to sort, to the advantage of anti-trade advocates.

The solution, though, is not to provoke international enmity and trade conflict by adopting a hostile attitude toward would-be trading partners, the Post says. The smart policy is embracing openness and pocketing the overall gains in wealth and prosperity, while maintaining a safety net to help those who lose out—good advice, although the winners from trade at least sometimes are not eager to share that increased costs of the necessary safety nets.

These nuanced arguments are difficult and sometimes messy to make, and Hillary Clinton has chosen not to try, perhaps in an effort to appease constituent groups. Instead, she has surrendered the issue by failing to stand up for the TPP. “Mr. Sanders already has the protectionists’ vote, the Post says. “Ms. Clinton would be wise to offer a positive alternative.”

Overall, the Democratic opposition to trade is bad news for the basic U.S. commitment to competitiveness, and probably indicative of future pressure for greater government intervention. The United States has already foregone its former leadership of support for greater global access in agriculture, as well as other areas by support of protectionist policies in recent years, a trend that seems likely to continue, Washington Insider believes.

In some related columns, Fortune and Forbes both took Republican candidate Donald Trump to task for his statements on trade as well in a couple of columns this week.……

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Martin seeds 3/30/2016 | 7:45 AM CDT
Seems to me that we've been using Walmart to fund the military build up & expansion of other countries, which in turn requires us to counter fund our military. Perhaps we should keep "free Trade", but if so, we really need to do a better, tougher job of negotiating the deals. If you think that is an endorsement of any particular Pres. be it.
Bonnie Dukowitz 3/30/2016 | 7:01 AM CDT
Cheaper goods is correct! Truckloads of the throw away junk going to landfills everyday. Made so cheap it cannot be repaired.