Trump Denounces Globalization, but Trade Experts Aren’t Buying It
Policy + Politics

Trump Denounces Globalization, but Trade Experts Aren’t Buying It

REUTERS/Louis Ruediger

Presumptive Republican presidential nominee Donald Trump gave a fiery speech Tuesday, lashing out against international trade deals for destroying American jobs and communities and promising dramatic changes if he is elected president.

“Our politicians have aggressively pursued a policy of globalization - moving our jobs, our wealth and our factories to Mexico and overseas,” he said. “Globalization has made the financial elite who donate to politicians very wealthy. But it has left millions of our workers with nothing but poverty and heartache.”

Speaking at an aluminum recycling plant in Monessen, Pennsylvania, he offered a seven-step plan that he said would “turn it around fast” by pulling out of international trade deals, using the “toughest and smartest trade negotiators” to strike new bilateral deals, declaring China a “currency manipulator,” challenging unfair trade practices “anywhere and everywhere they threaten an American job,” and potentially imposing punitive tariffs on countries that don’t cooperate.

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“The era of economic surrender will finally be over,” he said. “A new era of prosperity will finally begin. America will be independent once more. Under a Trump Presidency, the American worker will finally have a president who will protect them and fight for them.”

The biggest problem with Trump’s speech, according to trade policy experts, is that he doesn’t actually appear to know what he’s talking about.

For example, in explaining why he would withdraw the U.S. from the Trans Pacific Partnership free trade deal, Trump warned that by entering the agreement, the country would be handing over authority to an “international commission” that would make trade decisions.

“Completely and utterly wrong,” said Joshua P. Meltzer, a senior fellow in Global Economy and Development at the Brookings Institution and an adjunct professor at the Johns Hopkins School for Advanced International Studies. “There is no such commission that can make any such decision.”

Trump, he said, also “completely misunderstands the importance of open trade and open economies that over the last 60 or 70 years has been a key driver of American prosperity.”

While it is “absolutely true” that the U.S. has lost a lot of manufacturing jobs over the last several decades, Metzler said, the vast majority were eliminated because of technology and productivity gains.

In the 21st century, Metzler said, “The U.S. produces a whole lot more with a whole lot fewer people.”

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Trump, he said, also “completely misreads the situation” in calling China a currency manipulator. While it is widely accepted that China has, in the past, kept the value of its currency artificially low in order to make its exports more competitive. However, that has not been the case for years, and the yuan is now actually appreciating in value.

Trump’s attack on the Trans Pacific Partnership comes in for particular criticism, even from economists who don’t like the deal in the first place. Trump’s description of the TPP and its effects was riddled with errors, according to Derek Scissors, an economist and resident scholar at the American Enterprise Institute, who provided a point-by-point breakdown:

Trump: “The TPP would be the death blow for American manufacturing. It would give up all of our economic leverage to an international commission that would put the interests of foreign countries above our own.”

Scissors: I dislike the TPP but this is false. U.S. law always takes priority over (“trumps”) the provisions of international agreements.

The main thing Mr. Trump misses is that we are already largely open to the world. He may not like that fact but the TPP doesn’t lower American trade barriers – they are already low. A better criticism of the TPP is that it doesn’t do enough to lower foreign trade barriers. 

Trump: “It would further open our markets to aggressive currency cheaters.” 

Scissors: The TPP doesn’t open our markets much at all, because they are already open. You could say that the TPP doesn’t address the problem of currency cheaters. But when China joined the WTO and American manufacturing jobs disappeared, China’s currency policy didn’t change during those years. It’s not currency that China cheats with.

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Trump: “It would make it easier for our trading competitors to ship cheap subsidized goods into U.S. markets - while allowing foreign countries to continue putting barriers in front of our exports.”

Scissors: The TPP does very little to change our trade barriers, because our trade barriers are so low. In my view, it does not do enough to lower foreign trade barriers.

Trump: The TPP would lower tariffs on foreign cars, while leaving in place the foreign practices that keep American cars from being sold overseas.

Scissors: This is arguably true. Our tariffs on foreign cars are fairly low already, though, which gives Americans better choices of what car to buy. Cheap imports are not the problem. There’s a debate over whether the TPP will break down barriers for American auto exports – that’s the real question.

Trump: The TPP even created a backdoor for China to supply car parts for automobiles made in Mexico. 

Scissors: This might become true, though it isn’t now. If China does ship car parts to Mexico, I don’t think cheaper car parts and cheaper cars are a bad thing, as long as they meet safety requirements. 

Trump: The agreement would also force American workers to compete directly against workers from Vietnam, one of the lowest wage countries on Earth. 

Scissors: Vietnam doesn’t make the same things we make and already has pretty good access to the American market. Our gains in selling to Vietnam, on paper, are bigger than their gains in selling here.

Trump, in his remarks drew a parallel between the recent vote by residents of the United Kingdom to secede from the European Union, saying that by withdrawing from international trade deals, the U.S. would be about to “take back” the country’s future.

But many critics of the campaign to encourage the “Brexit” charged its supporters with spreading false information about the impact the move would have on working people.

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Meltzer, of the Brookings Institution, worries that the same thing is happening here, particularly the idea that punitive tariffs and market restrictions will help the economically disadvantaged.

“His proposed solutions would probably make people worse off, not better off,” he said. “At the end of the day you have about 40 million low-wage people in the United States and what he’s saying means that a lot of things they buy are going to go up in price.”