The Great Debate: Trade vs. Protectionism
In less than two weeks Americans will go to the polls and vote for their next president. The choice is between a Republican candidate vowing to eviscerate unfair U.S. trade pacts, and a Democratic candidate who used to support global trade deals like the Trans-Pacific Partnership, but has altered her position after discovering how unpopular they are with the electorate.
Whatever happens in the election, the U.S perspective on trade may have fundamentally changed over the course of the past two years. A newfound inclination to consider more closely the domestic impact of any trade deal on manufacturing and jobs will place any future negotiations under additional scrutiny.
This trend toward nationalism is not limited to the United States, as demonstrated by Britain’s decision to leave the European Union. And nationalism, at least as articulated by Donald Trump and the UK’s Nigel Farage, is inextricably linked to some degree of protectionism.
“Americanism, not globalism, will be our credo,” said Donald J. Trump, on the campaign stump.
Those opposed to such sentiments suggest that they are expressed not from economic concern but something more primal: an us-versus-them mentality that is often portrayed as prejudice. Racism accusations have dogged Trump almost from the moment he announced his candidacy. In Britain, the Brexit vote that shocked so many observers was attributed in part to anti-foreign sentiment.
Studies conducted by economists and political scientists have affirmed a link between nationalist sentiment and opposition to global markets—and sometimes the people who live in those global markets—especially when they move next door.
But such a characterization is too simplistic, and ignores other reasons for questioning the way some trade agreements are negotiated. President Obama discovered this back in April when he visited Germany in support of the Transatlantic Trade and Investment Partnership (TTIP). Thousands of demonstrators gathered to oppose the U.S.-European trade deal, fearing it would lower standards for products and consumer protection.
That message also resonates in places like Pennsylvania and Ohio, where steel mills that provided lifetime employment to thousands for decades are now shuttered, a victim of a world market now dominated by cheaper Chinese steel.
In 1999, conservative journalist and one-time presidential candidate Pat Buchanan described a $57 billion trade deficit as “a malignant tumor in the intestines of the U.S. economy.” Less than 20 years later that trade deficit has ballooned to more than $500 billion, with China alone accounting for $300 billion.
With American manufacturing already in critical condition, it’s easier to depict deals like the Trans-Pacific Partnership as the last nail in the coffin, especially when the playing field is already tilted against the home team. China’s reputation for unfair trade practices and currency manipulation would make even a mutually beneficial deal suspect.
Democrats point to the hypocrisy of such outrage from a billionaire businessman who has several Trump-branded products manufactured in China. But he’s just following the crowd, while campaigning for better laws and better deals.
In the meantime, companies like Carrier and Caterpillar are also headed overseas, and China’s middle class income growth has topped 70 percent in the past 20 years, while America’s has struggled to hit four percent.
Proponents of free trade insist that in the long run a global perspective is healthier, and that U.S. manufacturing may have to change to keep up with the competition, but it will never disappear. But now they face a broader coalition of opposition—from conservatives complaining about getting taken by bad deals, and liberals worried about the impact of globalization on third-world communities, where slave wages keep the economic engine running.
Whoever wins on November 8, there will be no victory to celebrate for globalism.
What Every Business Should Know About Selling in China