Posted on 01/25/2017 8:52:08 PM PST by TBP
In he Oval Office on Monday, President Trump signed an executive order formally ending the United States’ participation in the Trans-Pacific Partnership. The move was mostly symbolic, TPP was dead in Congress anyway. But signing this EO on his first full weekday in office signals that Trump is serious about two issues that are, sadly, tied to together: pulling out of trade agreements and replacing them with new barriers to international trade.
Trump described withdrawing from the trade pact a “great thing for the American worker.” That’s likely as true as his press secretary’s inauguration attendance numbers. International trade has increased the number of American jobs on net.
To be sure, the TPP is laden with regrettable regulatory strictures, including some truly terrible rules concerning intellectual property and harmonization. But these have nothing to do with the reasons Trump cited for the abandonment of the trade deal.
Trade and Jobs Go Together
International economists Peter A. Petri of the Brandeis International Business School and Michael G. Plummer of Johns Hopkins University studied the potential impact of the TPP. They found that TPP would likely reduce growth in manufacturing employment by about one-fifth.
However, it would grow employment in service jobs and high-export so-called “primary goods” industries such as agriculture and forestry. Export-intensive jobs pay about 18 percent more than other jobs on average. Already over the past two decades, international trade has increased the average US worker’s wages $1,300 annually. Altogether the economists say having passed TPP would have increased US real incomes by $131 billion annually.
In fields including finance, engineering, software, education, legal, and information technology, US service workers have a competitive advantage over foreign workers. While tariffs don’t hinder services employment, many developing countries protect local workers from American competition through nationality requirements and restrictions on investing. TPP would have hindered countries’ abilities to use these tactics, likely leading to a net increase in US service industry employment.
As I’ve pointed out here before, when you examine the combined revenue of the 500 largest US companies, half of it comes from international trade. Even if Trump could bully American companies into closing their factories in Mexico and reopening them in the US (unlikely), these firms will need to raise their prices and lay off workers to make up for the hit to their profits.
“Delaying the launch of the T.P.P. by even one year would represent a $77 billion permanent loss, or opportunity cost, to the U.S. economy as well as create other risks,” Petri and Plummer wrote in their report.
The Coalition Against Trade
We can’t lay all the blame at President Trump’s feet, however. Trump may have put the last nail in TPP’s coffin, but Congress killed it. And the hit was on behalf of unions, environmentalists, and consumer groups, according to CNN’s Jonathan Tasini.
Trump claimed that the TPP "put the interests of insiders and the Washington elite over the hard-working men and women of this country." But what’s more Washington elite than AFL-CIO President Richard Trumka promoting Trump’s pick to head the new National Trade Council by sponsoring screenings of his film? Trumka lauded the killing of the TPP and asked Trump to kill more trade deals, saying “They are just the first in a series of necessary policy changes required to build a fair and just global economy.”
In 2014, less than 2% of Americans worked in Agriculture, less than 10% worked in manufacturing, and more than 80% worked in service-providing roles.
By killing TPP, Trump is sacrificing a deal that would have likely created new jobs for 80% of American workers in order to delay the inevitable for the 10%.
That’s what’s known as a “bad deal.”
It’s almost like that 10% are more politically connected or something. Business groups such as the U.S. Chamber of Commerce had lobbied extensively for passage of TPP, touting the deal as an engine of job growth. But the groups representing the 80% of Americans who work in the service industry don’t seem to have the same sway with the National Trade Council.
Limiting Trade: Bad Idea
Not content to offer “alternative facts” on trade’s impact on domestic jobs, Trump claimed while signing the EO, “Protection will lead to great prosperity and strength.” Well, that would be a first.
In the real world, limiting international trade has been terrible for the average consumer everywhere it’s been tried. As Emory Economics Professor Paul Rubin put it, “Mr. Trump’s anti-immigration and anti-trade positions make him essentially a disciple of mercantilism—a protectionist economic theory refuted by Adam Smith in 1776.”
Border taxes are highly regressive. International trade has raised the average American household’s purchasing power 29%. Poorer families will be hardest hit by the extra we’ll all be paying for the goods we import from China.
“TPP withdrawal will slow US [economic] growth, cost American jobs, & weaken US standing in Asia/world,” said Richard Haas, president of the Council on Foreign Relations, said in a tweet early Monday. “China could well be principal beneficiary.”
“The decision to withdraw the American signature at the start of Mr. Trump’s administration is a signal that he plans to follow through on promises to take a more aggressive stance against foreign competitors,” New York Times reporter Peter Baker wrote.
A Zero-Sum World
This phrase “aggressive stance against foreign competitors” reveals an important truth about Donald Trump’s worldview. “In Donald J. Trump’s private conversations and public commentary, one guiding principle shines through: The world is a zero-sum place, and nations, like real estate developers, are either on the winning side of a deal or the losing side,” three New York Times reporters recently wrote.
Rubin: “Messrs. Trump and Sanders have been led astray by zero-sum thinking, or the assumption that economic magnitudes are fixed when they are in fact variable.”
TPP would have joined the United States with 11 other nations, representing 40 percent of the world’s economy, to facilitate trade by lowering tariffs, streamlining regulations, and setting rules for resolving trade disputes.
In reality, there’s no reason to set the 80% of American workers in the service sector against the 10% in manufacturing. Both benefit from foreign trade. Economists agree: TPP would have increased incomes, exports, and growth for the United States. Killing it was a mistake. Trump is serious about his willingness to sacrifice the American economy to protect jobs that won’t exist in a decade regardless. The American people lost bigly. It’s up to us to put pressure on Congress to block further trade mistakes before Trump costs us more billions in lost wages and growth.
Has Ian Fletcher figured-out how our national debt is generated, yet? As of early 2016, he was still hopeless.
Thanks. I hadn’t realized it was Wilson. Good point.
Fletcher is more right than wrong on our current trade situation. You are on the wrong side of this issue & your day is over.
I can safely say that I've been hearing the above since Reagan was in office.
>What do you think of their analysis?
I’ve studied a lot theories over the years but with experience I’ve learned to evaluate theories based on the results I can see with my own eyes. The wastelands that used to be the manufacturing heart of American shows the theory of free trade to be bunkum.
Freetraders are about as scientific as global warming alarmists thought not as well funded as the Global warming guys.
Trump’s not Reagan. How’s TTP doing. It’s dead:) NAFTA is next.
The Austrians economists I know advocate for the free, unrestricted flow of goods, services, *and* labor across national borders. That might work out in theory, but not in practice -- as Milton Freidman observed, open borders are incompatible with a welfare state.
Perhaps I should have written that history lesson after all. LOL
The thing is, sadly, most people ignore my factual history lessons here, though most are in great need of them. :-(
> I can safely say that I’ve been hearing the above since Reagan was in office.
Do the lives you and your free traitors have ruined bother you at all? What about the fact that we no longer have an industrial base large enough to fight a real war? No issue with destroying our national security?
We’ll see if Trump kills Reagan’s brainchild, or just modifies it. As far as the TPP goes, I didn’t bother to read it . . . no one else around here did. I just kept hearing about how the text was “secret.”
Do you have a specific national security concern? Let’s discuss it. We shouldn’t go down the road where something is needed “just because.” Think DHS.
Our trade policies need to be revamped for sure. I suspect Trump will not deep-six everything, but I suspect he will do some extensive modifications.
Fair trade is good. The trade between China, Mexico, Indonesia etc. is not good. They pay a fraction of the wages paid in the United States. Their workers are but chattel to their industrial machine. When they are no longer useful they are fired and have no benefits. It is totally impossible to compete against them.
In effect the low price of electronic goods and all goods from China is a function of their expendable work force.
I have absolutely no problem with competitors in developed nations that pay high wages to their workers. If we buy from them it is a function of a superior product and not a low wage scale for their workers.
Name one country other than the US, on this globe that is not 'protectionist' in its function. These so called 'free-traders' are on the hunt for no regulations and slave labor. AND the majority of our elected politicians only care about their reelection and are willing to sell 'we the people' to the highest 'free trader' slave hunter.
These so called 'free-trade' agreements are in theory suppose to counterbalance government setting a minimum wage. IF our elected officials really are about 'free-markets' they would start here in this nation and end the practice of them setting the minimum wage scale. But, no unions are big time contributors to the libs and the so called republicans will not challenge them on their base reelection support.
Generally, the countries around the globe with freer markets do better in most if not all measures than their more protectionist counterparts.
Here is another argument:
Every great manufacturing power rose to its heights with an effective tariff to assure the home market. That includes:
England
France
Germany
Sweden
The Soviet Union (not quite but they were closed to foreign products politically)
The US
Japan
China (do it now)
The UK, Russia, France and American have seen their manufacturing economies collapse when they opened up their markets.
Sweden was kind of free trade, but they have very heavy consumption/value added taxes which effectively functioned the same way as a tariff.
There is not a single example of a “free trade” state building up a impressive manufacturing sector except Singapore and Hong Kong, but these were city states, not nations. One could argue that the that in both cases was due to their location alone that allowed this. Every single major country that became a manufacturing giant did it with a tariff/value added tax system designed to protect their own industries.
I would put the Free Trade guys in with other utopians. They refer to Ricardo and Adam Smith as if their books from the late 18th and early 19th century are handed down from G-d, rather than the works of fallible men looking at similarly constrained small European states.
Their ideas sound great, they should work, but history shows us...they do not.
And that leaves out the idea of free trade implies free movement of capitol and people, which is a similarly a bad idea.
What if the potential international trading partner is, say, a country that uses slave labor to manufacture their products? Or a country that supports terrorism?
Should the United States not be "restricting trade" with such nations?
These are perhaps extreme examples of justification for "restricting trade", but they perfectly illustrate the principle that there can potentially be legitimate moral reasons for adopting restrictive trade policies towards a nation—cases where refusing to restrict such trade might very well result in nurturing Tyranny in the World, and ultimately endangering our own national security.
One might readily posit many situations where the notion of restricting trade with a given nation would make compelling sense.
Thus, dogmatically insisting that "Restricting Trade Is Calamitous Policy" in all cases is simply naive, and to blithely cling to such policy, for the Unites States, "Beacon of the World", is simply not realistic or advisable, IMHO. Similarly, there shouldn't be similar dogma regarding the opposite extreme: always trying to restrict trade.
Was it a Russian Marxist somewhere who once said that "capitalists will sell you the rope that you use to hang them with"?
Name a country... there is NO way this nation has been a 'protectionist' country. .ell we will not even control our borders. I go to War-Mart and it is like I left the US. And I am not just describing the hoards from our southern border.
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