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.
I hadn’t noticed that the Federal tax dollars collected in Montana were being shared with Canada, silly me...or that industries in Canada would be available to the USA in a war situation. If you don’t understand the function of a Nation vs a State you have no business muddying the waters here.
Canada & America are fairly close as Nations but they have a different set of laws and socialized medicine as well as a very Liberal mindset. They set up their country to benefit Canadians not to look after Americans and we should have the same ground rules. Our trade situation with Canada is closer to free trade then with many other countries but we still address specific industries and situations as do they.
Where in your scenerio is the possibility of a foreign Gvt or corporation using Canada as a pass through to undercut our workers?
Many of the people who push “free trade” are either naive idealists or cynicists have duplicitous motives even petty ones such as not wanting to look foolish after spouting off for so many years. Like socialists they want to pretend that other Nations(the people of the world) will take the high moral ground and not work the system against any Nation(the rest of the Socialist’s group) that doesn’t maintain a guard against their actions. Or like the Liberal who thinks that if he writes a law everyone will put away their guns ignoring the reality that the effect will be that only criminals will have guns leaving the honest citizen doubly vulnerable.
Its all the same story.
Trump is reminding them that "the customer is always right."
Uh, not you don’t. CD is the discomfort one feels while attempting to simultaneously believe two contradictory things. It is about the personal discomfort of the person doing the believing that is the keystone.
Without the discomfort, it is just “confusion” which is, apparently, what you suffer from.
A very telling point. Use the muscle that you have to get it done!
Nobody should read this article, because it makes too much sense.
Exactly!
First, you;’re assuming that economics (at least employment) is a zero-sum game, that if there is a job created in China or Mexico, that’s automatically one less job for Americans. Not so. To quote the old saying, “A rising tide lifts all boats.”
Second, you’re assuming that economics is about money. it’s not — it’s about commodities and exchange. Money has no intrinsic value. It’s only good if you can use it to get “stuff”, whether goods or services. Trade is about acquiring and distributing commodities for prices that the most people can sustain.
Those who develop products and services make our lives better, to the point that we’re willing to give them our money because we value what they have more than the money, whether it’s food or a computer or medical care. It’s when government tries to make those decisions for us that we get into trouble.
A tariff is nothing but a tax. It’s a tax on imported goods. If you want to restrict imports, that’s the way to do it — but is that good economic policy? Most economists would argue that it isn’t. It may, however, be good foreign policy. (i.e., you want to punish China, not necessarily because they are making low-priced stuff, but because they are making it with slave labor and using the proceeds to build warheads aimed at us and our allies, among other threats.)
It’s not trade that is killing jobs; it’s the ridiculous costs of regulation, 0bamacare, and other government interference, coupled with exorbitantly high taxes. Fix that and jobs will grow, with or without “protection”. (But keeping the market as unfettered as possible will cause them to grow the most.)
Your comment boils down to “lets ignore what has actually happened” and listen to what economists think.
You are absolutely wrong about what has led to the loss of manufacturing base in the US. Regulations certainly helped but its all down to the mighty $. It was cheaper to make things overseas because our Gvt allowed or in some particulars caused it to be that way. The Gov’t failed us by action, inaction & stupidity with a combination of poor trade deals and bureaucratic/regulatory costs while the economists directed the marching music and gave cover.
My comment is based on years of actual evidence, on what has happened. Decades of evidence support my view of this.
So regulation, regulatory costs, union demands, taxes, and other imposed burdens don’t kill jobs? EVERY economist will tell you that they do — at least every rational one. (Krugman may deny it, but he doesn’t know much about what he’s writing about.)
If you don’t believe that these things kill jobs, then you don’t really believe in free markets.
If you read what I wrote I acknowledged they did but NAFTA started the great sucking sound. I don’t believe in completely unregulated markets. I believe in trade deals that protect the interests of both Nations.
Yopu think NAFTA is a free trade agreement? It isn’t. it’s government-managed, preferred trade.
No where in Adam Smith’s writing does he discuss closing a factory and moving the equipment to a third world country and using virtual slave labor to make products that those peasants will never afford and shipping back to be sold at first world prices duty free! All to increase profits and “displace” workers. Had he known how his work was going to be used to justify this form of “free trade” he probably would have never written anything.
Evolutionists, Free traders and global warmists have a lot in common.
Your reasoning is not linear. Perhaps another time we will agree.
That is why I voted for him.
Elites will have to pay more for their toys - but traditional Americans will have jobs and safer happier communities.
Money for elites isn’t everything.
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