The puzzling movement against free trade
Neil Joseph | Tuesday, October 4, 2016
One of the biggest topics in this presidential election has been a movement by both candidates against free trade. Specifically, both Donald Trump and Hillary Clinton have expressed disdain for the Trans-Pacific Partnership (TPP). Quite simply, TPP would make trade from the U.S. easier to other Pacific countries, in both Asia and South America. Their (surprising) agreement in opposing TPP indicates an incredibly new shift in the general sentiment of presidential candidates. Presidents from Bill Clinton to Ronald Reagan have supported free trade and implemented free-trade friendly policies during their respective presidencies. In fact, free trade seems to be one of the issues that the two parties may have some common ground on. So what does this shift mean and what does it mean for America?
The most comparable policy to the Trans-Pacific Partnership is the North American Free Trade Agreement (NAFTA). Passed by Bill Clinton, the policy lowered tariffs and greatly expanded trade amongst Canada, Mexico and the United States. It was passed as an effort to stimulate the economies of all the North American countries and increase trade between them. Clearly, it has done this. Additionally, however, many posit this increase in trade is an extreme negative for the United States as a whole. Both Trump and Clinton say that policies such as TPP (which increases trade with other countries) harm America, specifically American workers. They say that this increase in foreign trade invariably leads to a loss in American jobs, hurting American workers and thus America as a whole.
But what does the evidence say? Economically, it is difficult to say. There are many theoretical models that show that free trade has great economic benefits for the United States. It lowers the cost of acquiring many goods, lowers the costs for businesses and makes work much more productive. The impact on citizens, however, is tangible and real. It is undeniably true that free trade agreements such as NAFTA and TPP do cost some workers their jobs. The free trade deals make it much cheaper and much easier for American companies to find very cheap labor outside of the U.S., leaving American workers high and dry. Americans do lose their jobs and these jobs do move overseas.
The larger picture, however, is much more complex than the zero-sum game that we think free trade elicits. It naturally seems bad when Americans lose their jobs, but it’s not that simple. Although some jobs go overseas, others are created and actually added to the United States economy. For example, Donald Trump’s continuous talking point regarding NAFTA is the fact that it has increased our trade deficit with Mexico — which is bad for Americans. But in fact, a rise in trade deficits has actually corresponded with falling unemployment rates — not rising unemployment. Additionally, NAFTA actually supports U.S. jobs, as almost 2 million United States jobs are dependent upon Mexico because of free trade.
In reality, free trade deals have and continue to be a net positive for the United States. And yes, there are negatives to free trade. We do lose jobs, and Americans are put in incredibly tough spot because of that. That makes programs such as Trade Adjustment Assistance (TAA) so important, as they retrain and reeducate workers in order to compensate them for the jobs that they have lost to free trade. But the truth is that in an increasingly globalized world, free trade is absolutely necessary for the United States to compete as a country. Not only does it directly help American consumers by making goods cheaper for them, but it also lowers costs for businesses and spurs economic investment and activity. Policies are complex, and every policy has its negatives. But free trade is a net positive and actions such as TPP should continue to be pursued in order to further our economic growth and help our country.
The views expressed in this column are those of the author and not necessarily those of The Observer.