trade liberalization Archives

Do As I Say?

Trade rarely ranks high for voters in the election booth – so why do we seem to see an uptick in anti-trade sentiment around election time? And does protectionist rhetoric during the campaign season influence politicians’ actual voting behavior on trade?

Evidence, both anecdotal and academic, suggests yes – term length and the electoral calendar play a key role in determining the outcome of votes on trade policy. Members of Congress tend to believe that supporting more protectionist trade policy will increase their chances of re-election. Conversely, without that fear of repercussions at the ballot box, politicians vote in favor of more liberal trade policy.

In the words of economist Dani Rodrik, “no other area of economics displays such a gap between what policymakers practice and what economists preach as does international trade.” There are many examples of normally pro-trade politicians shifting their views around election time.

For example, in the run-up to the 2008 presidential election, Barack Obama attacked NAFTA despite going on to go all-in on free-trade in his presidency. Similarly, in the 2016 Toomey vs. McGinty Pennsylvania Senate race, both formerly free-trade politicians changed their tune to try to appeal to more voters. Beyond the anecdotes, a group of economists has sought to study the pattern over years of trade votes in the United States.

A Study into Economic Policy and Elections

In their 2011 paper “Policymakers’ Horizon and Trade Reforms,” Paola Conconi, Giovanni Facchini, and Maurizio Zanardi attempted to empirically answer the question: Do imminent elections impact the decision-making and voting behavior of elected officials on issues related to trade?

Conconi, Facchini, and Zanardi compared the voting behavior of candidates facing an upcoming re-election contest with those who had a long term ahead of them. Senators are up for election every six years (meaning that every two years, one-third of all seats are up) whereas U.S. House members face election every two years. This vote log provides many data points that show changes in behavior of individuals over time, at different points in the election cycle.

The authors analyzed the individual roll call votes on the final passage of every trade liberalization bill introduced in the U.S. Congress between 1973 and 2005. They considered 29 votes in total, covering 15 trade reform bills. All but one of the bills was approved but with varying margins.

Closer to Re-Election, Free Trade Voting Tendency Drops 10 Percent Points

First, the authors compared House and Senate members. Other studies have shown that House members are generally less likely to support trade liberalization than senators, and the authors’ results align with this. However, the authors found that there is no significant difference in the voting behavior between House members and senators during their last two years before re-election. This suggests that the intercameral difference between the two groups could be explained by their term length, rather than other factors such as constituency size.

Next, they compared different generations of senators, finding that they become more protectionist the closer they get to a re-election campaign. Senators in the last two years of their term are around 10 percentage points less likely to vote in favor of trade liberalization policies than those in their first four years, a significant difference. Interestingly, Banri Ito, in his 2015 paper, used data from the Japanese House of Representatives election in 2012 to find similar results, indicating this is not purely an American phenomenon.

Safe Seat, Retirement or Election Defeat Associated with Free Trade Vote

Their results hold when studying the behavior of the same senator over time or comparing a whole host of controls including campaign contributions, age, gender, and party affiliation. Even those representing constituencies where a majority of their voters should benefit significantly from trade liberalization, such as heavy exporting constituencies, exhibit the same late-term protectionist tendencies.

In contrast, senators who are retiring or who hold very safe seats do not change their behavior as an election nears. Interestingly, two of the votes they tracked occurred in a “lame duck” session (after November elections but before the new senators had taken their seats). In those votes, no defeated senators voted against trade liberalization.

Overall, the Conconi, Facchini, and Zanardi study showed:

-Members of the U.S. House are more anti-trade liberalization than U.S. Senators, but that difference disappears during the last two years of a senator’s term.

-Election proximity reduces representatives’ support for trade.

-The protectionist effect applies both to senators who generally oppose liberalization (Democrats and import-competing constituencies) but also to senators who are generally more pro-trade (Republicans and export-competing constituencies).

-The inter-generational differences disappear for representatives holding safe seats or who are retiring (meaning a return to votes in favor of trade liberalization).

Anecdotal Evidence – Trade and Elections Today

Although far from sufficient to draw any concrete conclusions, anecdotal evidence does appear to corroborate findings from the Conconi, Facchini, and Zanardi study. We can find numerous examples of U.S. politicians changing their views on trade when the re-election stakes are high.

When votes on significant trade deals are on the table, trade has featured in congressional races, but in presidential races, trade is often a footnote or subsumed by debates over the state of the economy broadly. However, Donald Trump’s presidential campaign signified a marked change as he made trade a central part of his platform. In 2016, both Donald Trump and Hilary Clinton took a negative stance on the Trans-Pacific Partnership (TPP), and Trump against NAFTA. Notably, as Secretary of State, Clinton had defended TPP as the “gold standard” of trade agreements, but expressed a different view during election season.

In the 2016 Pennsylvania Senate Race, support of the TPP became an extremely important issue between two politicians with records of trade-liberalization support. Republican Senator Pat Toomey and Democrat rival Katie McGinty both came out against the TPP, despite the former’s career-spanning support of free-trade deals, and the latter’s support of the then newly-signed NAFTA while she served in Bill Clinton’s administration.

Similarly, Republican Ohio Senator Robert Portman, who voted in support of NAFTA in 1993, a series of subsequent trade deals, and served as George W. Bush’s chief trade negotiator, came out against the TPP. Democratic rivals called the announcement an election-year conversion.

Some politicians even admit to changing their views due to the political climate. Rep. Luke Messer (R-IN) who went from supporting various free trade deals with China to opposing them, called his own reversal on the issue a reaction to changing political pressure.

As for the 2020 election, Biden and Trump both cite trade as a critical issue, saying that U.S. trade policy has not been benefiting Americans as it should. Biden seems to have moved away from his past pro-free trade stance, and both candidates are advocating for Buy American policies.

DNC & RNC Platforms

Both the Republican and Democratic parties have taken on a protectionist bent ahead of the 2020 election, and in fact the platforms seem remarkably similar. Both the Democratic and Republican platforms emphasize the need to protect American workers from a competitive international system, with free trade and trade agreements taking a back seat. The Republican party is doubling down on its 2016 goals to punish China and bring outsourced jobs back to the United States, while the Democratic party touts the same goals, but proposes a new solution.

Democratic Party

In the 2020 Democratic Party Platform, any talk of free trade is notably absent, apart from a brief mention of support for the African Continental Free Trade Agreement and promoting free trade in that region. Instead, when trade is mentioned the focus is on China’s unfair trade practices and on the need to protect American workers from the global trading system.

The platform states that “Democrats will pursue a trade policy that puts workers first,” negotiating for labor, human rights, and environmental standards in trade agreements. They cite the COVID-19 pandemic as evidence that the United States has over-relied on global supply chains, but criticize the Trump Administration’s U.S.-China trade war as un-winnable. On the issue of China, the Democratic party plans to take aggressive action against them, and any other country that takes unfair trade action such as dumping, currency manipulation, and unfair subsidizing, as well as theft of U.S. intellectual property. The platform states that tax and trade policies that have encouraged corporations to move manufacturing jobs overseas and avoid taxes will be eliminated. They will “claw back” any public investments or benefits received by a company that shuts down U.S. operations to move abroad.

The DNC’s discussion of “Global Economy and Trade” and “Advancing American Interests” focuses yet again on putting American workers first. They claim that no new trade agreement will be negotiated before first investing in American competitiveness, and existing trade laws and agreements will be aggressively enforced. They plan to work with allies to stand up to China, and negotiate from the strongest possible position. An outline is also given of their stance to fight foreign corruption, and to reign in “misused and overused” sanctions.

Republican Party

The Republican party decided to forgo a traditional platform this year, instead opting to “to enthusiastically support the president’s America-first agenda”. However, the party also agreed to adopt the same platform as in 2016. President Trump has released a list of core priorities for his second-term agenda, two of which – “Jobs” and “End Our Reliance on China” – contain goals directly applicable to issues of trade. Echoing the growing protectionist rhetoric, Trump’s priorities appear to double down and expand on the 2016 platform.

Under the core priority of “Jobs,” Trump vowed to “Enact Fair Trade Deals that Protect American Jobs” and implement “’Made in America’ Tax Credits”, sentiments that match up with Trump’s various executive orders focused on Buy American policies. The 2016 Republican platform recognized the importance of free trade deals: “We envision a worldwide multilateral agreement among nations committed to the principles of open markets, what has been called a ‘Reagan Economic Zone,’ in which free trade will truly be fair trade for all concerned.” The 2020 priorities seem to expand on this policy, stating that free trade is good, but with much more focus on the American worker and American power in the equation.

Another of Trump’s core priorities is to “End Our Reliance on China,” including goals such as “Bring Back 1 Million Manufacturing Jobs from China,” “Tax Credits for Companies that Bring Back Jobs from China,” and “No Federal Contracts for Companies who Outsource to China”. China was mentioned in the 2016 platform too, with the party vowing to take a firm stance that involved retaliation when necessary in order to punish Chinese “currency manipulation, exclusion of U.S. products from government purchases, and subsidization of Chinese companies to thwart American imports.” Perhaps unsurprisingly given global politics, this again appears to be an area of increased focus for the Trump administration looking ahead to a second term.

Protectionist Rhetoric on the Rise

Past studies have found evidence to support the assertion that when faced with an election, politicians are more likely to take a protectionist stance. That trend has continued, or perhaps escalated, over the last 15 years – and if the rhetoric we’re seeing on the 2020 campaign trail is any indication, it seems unlikely to slow down anytime soon.

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Alice Calder received her MA in Applied Economics at GMU. Originally from the UK, where she received her BA in Philosophy and Political Economy from the University of Exeter, living and working internationally sparked her interest in trade issues as well as the intersection of economics and culture.

Haiti is still rebuilding following the devastation of the 7.0 earthquake that struck a decade ago. Among an array of social burdens keeping this small Caribbean country in a perpetual cycle of vulnerability, food insecurity has been a persistent threat to its citizens since well before the earthquake. The earthquake exacerbated Haiti’s food crisis, and consequently, about half of the Haitian population remains undernourished.

In the aftermath of the 2010 earthquake, the country of 10 million people faced a dire food shortage. Approximately 25,000 tons of food aid of U.S. origin was distributed in response to the earthquake. Over 80 percent of the total dollar value of funds and metric tons of U.S. food aid allocated for emergency activities throughout Latin America and the Caribbean during the 2010 fiscal year was apportioned to Haiti. During the same year, Haiti imported about US$160 million worth of rice from the United States. Haiti needed to rely on foreign food aid, including rice imports.

Fast forward to 2020, Haiti continues to face severe food insecurity that has been exacerbated by the COVID-19 pandemic. Haiti imported more staple food, for which the prices had decreased, by April 2020 than the previous year. However, the global slowdown on imports and exports, in addition to low domestic production and high production costs, have resulted in elevated prices on locally produced staple food such as rice. Haiti’s dependency on rice imports is puzzling considering that it once produced enough rice for local consumption.

The Result of Disproportionate Liberal Trade Policies in a Time of Crisis

As a supporter of trade liberalization myself, it is important to fully understand this contradiction by going back to the liberalization policies of the 1980s and 1990s, when many Latin American and Caribbean countries implemented open-market trade policies to grow their economies. In 1986, Haiti placed a 50 percent ad valorem tariff on rice imports. By 1995, with the support of U.S. President Bill Clinton, the International Monetary Fund and the World Bank pushed structural adjustment programs in Haiti, which involved Haiti drastically reducing its tariffs on rice imports to three percent.

Rather than leading to economic growth, these policies resulted in an influx of cheaper, subsidized rice imports. Haitian rice imports increased dramatically from 7,000 metric tons in 1985 to 207,000 metric tons a decade later, according to the U.S. Department of Agriculture (USDA) figures. The majority of these imports came from the United States.

On the other hand, rice productivity in Haiti dropped significantly. From 1980 to 1990, Haiti averaged 124,000 tons of rice produced, which dropped down to an average of 114,400 tons by 2005-06.

Most of the U.S. rice imports come from Clinton’s home state of Arkansas. The rice grower in Arkansas has received billions of dollars of subsidies since 1995. Following the earthquake, Clinton stated during a Senate Foreign Relations Committee hearing, “It may have been good for some of my farmers in Arkansas, but it has not worked. I have to live every day with the consequences of the lost capacity to produce a rice crop in Haiti to feed those people, because of what I did.”

The liberalization of Haiti’s rice market has created a cycle of dependency for the country, which becomes more evident during a crisis, such as the 2010 earthquake and today’s global health pandemic. Many Haitian rice growers have found it difficult to sell within their own market because of the inability to compete against the lower cost, subsidized imports from the United States. As a result, and prior to the pandemic, 80 percent of rice consumed in Haiti had been imported.

With the current global health pandemic, the United Nations World Food Programme estimates that the number of people in Haiti alone that face food insecurity will jump from 700,000 to 1.6 million.

In April 2020, the World Bank, which supported trade liberalization in Haiti, provided US$9.5 million to Haiti’s agricultural sector to address the deepened food insecurity resulting from the COVID-19 outbreak, as well its impact on global trade. Ironically, such support may help the local agricultural sector to become self-sufficient again. Time will tell.

Awareness to Action

Haiti’s story is a familiar one in other regions as well, such as Sub-Saharan Africa. However, many remain unaware of the link between trade policies and food insecurity. For instance, in response to my TEDx talk on the subject, people have commented, “I had no idea about how these policies impacted so many lives.”

Similar to Haiti, the East African country of Tanzania is a net importer of rice, a least-developed-country, and implemented liberal trade policies by the 1990s. Local measures have been taken to reduce the effects of trade liberalization on Tanzania’s local farmers and food production thus, offering insight into three approaches to mitigate the negative impact of structural adjustment policies–acknowledge disproportionate trade policies, implement policies that support local producers, and build the capacity for local producers to compete internationally.

Consider the trade policies that restrict market access to local producers and create an unfair competitive advantage for foreign producers. Being aware of the role of disproportionate trade policies in the loss of food in developing countries and creating a reliance on imported food aid is the first step to developing effective policies and practices to promote higher levels of food security.

Tanzania allows for duty-free agricultural imports from other East African Community (EAC) members—Burundi, Kenya, Rwanda, South Sudan, and Uganda. However, it places a 75 percent tariff or $345 per ton, whichever is higher, on rice imports from non-EAC countries. This high tariff rate limits the influx of foreign rice imports. In 2018, Tanzania imported a total of 236 tons of rice from international suppliers. The majority of rice—180 tons–came from Pakistan. The United States only accounted for 16 tons.

Tanzania has since placed a ban on rice imports for the 2020/21 marketing year in an effort to boost local production. The US Department of Agricultural estimates a nine percent decrease in rice imports into Tanzania during this period.

The second solution is to develop policies that complement local production, rather than displace it. It becomes a win-win outcome when exported goods are not already abundantly available in a market for which there may be a growing demand. However, the export of staple crops already being produced in a lower-income country should add to the supply and be sold at market value to allow for fair competition.

At the same time, Tanzania has experienced increased imports as rising demand exceeds local production. For instance, in the late 1990s, food imports jumped almost three-fold only because of a decline in domestic production, rather than trade liberalization. Rice imported from the United States are mainly for food aid programs. The rice imports supplement, rather than compete directly with, local production.

Finally, trade facilitation and capacity building (TFCB) programs present a third solution. Such programs emphasize enhancing the skills of local farmers to compete in today’s global economy. TFCB programs can produce success stories, given that they are implemented under truly reciprocal trade policies and practices.

The EAC countries, including Tanzania, have implemented TFCB programs with technical assistance from organizations such as the United Nation Conference on Trade and Development (UNCTAD). EAC countries have adopted an electronic cargo tracking system and invested in transport infrastructure (ports, roads, railways, airports) to improve their trade competitiveness. In Tanzania alone, the transportation and storage industries have grown 16.6 percent by 2017. Improving infrastructure becomes important as Tanzania’s rice production is expected to increase slightly by 2020, per USDA estimates. Furthermore, Tanzania has expanded its market access by exporting rice to its neighboring East African countries, making it a major supplier of rice throughout the region. Tanzania’s rice producers can provide for domestic and international markets. Tanzania’s response to trade liberalization has resulted in it being the fastest growing East African economy at 7.1 percent in 2017.

In sum, trade liberalization policies create structural incentives that shift supply and demand in favor of foreign producers to the detriment of local subsistence farmers. As the COVID-19 pandemic is showing, the cycle of food insecurity only worsens when imports are restricted, local production remains low, and food prices go up. However, designing trade liberalization policies and capacity-building programs that support local producers over the long-term may help address food insecurity in developing countries.

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Sarita D. Jackson, Ph.D. is the President and CEO of the Global Research Institute of International Trade, a Californian think-tank and consulting firm. Dr. Jackson has previously worked on overseas projects funded by the U.S. Agency for International Development (USAID) and the Fulbright Scholar/Lecture Award. She is also a published author, TEDx speaker, and business school instructor. She conducts her work in English and Spanish. Dr. Jackson earned a Bachelor’s degree in journalism and Spanish at the University of Southern California and a Master’s and Doctorate in political science at Brown University.

THE ANTI-FREE TRADE EFFECT OF ELECTIONS