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Trump and Sanders in Agreement? The Strange Politics of Free Trade (Forbes.com) April 1, 2016

Posted by daviddavenport in Newspaper Columns/Essays, Op/Eds.

They say politics makes strange bedfellows and what could be stranger than Donald Trump and Bernie Sanders in alignment?  Yet that appears to be the case on international trade, and more specifically trade agreements.  This harmonizing between far left Sanders and extreme right Trump is one more odd feature of campaign 2016, but it also reflects a lot of misunderstanding and misleading rhetoric about trade policy itself.

The new Trans-Pacific Partnership (TPP), signed by 12 Pacific Rim countries including the United States in February of this year, awaits Congressional approval.  It would be the first major trade agreement since NAFTA (North American Free Trade Agreement) in 1994, and would bring together several important Asian economies with the U.S. on trade, countering some of the economic power of China.  As we learned with NAFTA, such trade agreements are not only economic, but political, developing closer relations and partnerships among the member countries.

Both President Obama and Hillary Clinton have a history of waffling on such agreements, attempting to have it both ways.  President Obama was against it (or at least said important parts of it should be renegotiated) before he was for it, and Clinton was for it as Secretary of State before she developed reservations in the campaign.  Since labor and unions, key party constituencies, fear a loss of jobs, Democrats have trouble supporting free trade in a campaign, yet they end up favoring and implementing such agreements in office.  Ted Cruz has also straddled this fence, speaking earlier of the benefits of free trade agreements, but then coming out later on the campaign trail against.

If waffling is the mainstream political view, Trump and Sanders at the extremes are openly opposed to free trade agreements, albeit for somewhat different reasons.  Author of The Art of the Deal, to Trump this is one more example of America being pushed around and getting a bad bargain, calling it a “horrible deal” and “insanity.”  He doubles down on his negative stance by calling for tariffs on products from countries like Mexico and China, claiming the latter is “eating our lunch.”  For Sanders, it fits into his rhetoric of bashing big banks and Wall Street, calling the TPP “a disastrous trade agreement to protect the interests of the largest multinational corporations at the expense of workers, consumers, the environment and the foundations of American democracy.”

In fact free trade agreements bring significant advantages and most of the low-wage job loss is more part of ongoing modernization and globalization than a consequence of the trade agreements themselves.  For example, now that NAFTA is a relatively mature 22 years old, it appears that it has been a net positive, but neither as great as its proponents once argued nor as bad as its opponents warned.  Trade among the three members (Canada, Mexico and the U.S.) is up 300% and they are now each other’s largest trading partners.  Economies have been modernized and integrated, more direct investment in the poorest country, Mexico, has been facilitated, and real wages are up.  Ross Perot’s “giant sucking sound” of jobs moving to Mexico was never heard—though manufacturing jobs are down, manufacturing is up and productivity, not NAFTA, is the difference.  Jobs move because of cheaper labor, not lower import costs.  And many higher-skilled jobs have been added.

Economists are quick to point out that trade deficits, which seem to concern Mr. Trump, are not a bad thing and are not necessarily because of trade itself, or trade agreements.  Most economists, both left and right, agree that the benefits of free trade heavily outweigh the problems.  Like many policy matters, it’s just a little complicated to make those arguments in the sound bite style of a political campaign.  Let’s hope Congress, however, presumably following the election, is able to study the TPP more carefully and reach a more rational outcome than is proposed by the rhetoric of Trump, Sanders and our presidential field.

To view the column at Forbes.com:





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