How is this possible?
During his trip, the president traveled to Saudi Arabia, Israel, Rome and Brussels, and is now attending the Group of Seven summit in Sicily. That’s a meeting of leaders of most of the world’s industrial powers for discussions on economics and security.
In Saudi Arabia, the president announced a $110 billion arms deal and the Saudis said that business leaders had signed deals “potentially” worth more than $200 billion over the next 10 years. In a speech, Trump claimed that “we signed historic agreements with the Kingdom that will invest almost $400 billion in our two countries and create many thousands of jobs in America and Saudi Arabia.”
But it’s one thing to announce such deals and another thing to actually follow through with them. At the time of the signing, such deal numbers are especially inflated, which is why the word “potentially” slips into the talking points. At least some of the Saudi investments predated Trump’s election, but apparently have now been repackaged as a deliverable on the president’s trip.
As for the number of jobs, thousands appears to have morphed into millions. But an analysis published by The Washington Post reported that the U.S. companies involved would not confirm any specific number of jobs saved or supported, suggesting that Trump’s original estimate of “thousands” was more guesswork than reality. Our colleague Steven Mufson reported that the deals would create jobs — in Saudi Arabia. “Most of the deals unveiled Saturday were memorandums of understanding rather than solid contracts, and thus still require further negotiation,” he added.
A White House official said Trump was not talking just about the Saudi deals but “benefits to trade from the entire trip from Saudi Arabia to the G7.” He noted that “any improvement on trade would save many jobs. Stopping even one bad trade deal can save millions. Changing the infrastructure of global trade to tilt it back toward the U.S. would save and create millions.”
Hmmm. There was no specific change in bilateral or multilateral trade arrangements announced on the trip. So Trump appears to be claiming jobs have been saved from agreements still to be negotiated.
Predicting the impact on jobs from trade agreements often is a fool’s errand. Most mainstream economists do not believe that the number of jobs is significantly affected by trade policy. The composition of the workforce may change — which is why some communities may be adversely affected by trade deals while others gain — but in general the gains or losses, measured against the overall size of the U.S. economy, is minimal.
There is, of course, a long history of presidential administrations touting imaginary job gains from trade deals. “I believe that NAFTA will create 200,000 American jobs in the first two years of its effect,” President Bill Clinton said in 1993, when he signed supplemental agreements to the North American Free Trade Agreement. “I believe that NAFTA will create a million jobs in the first 5 years of its impact.”
Clinton was relying in part on analyses generated by the well-respected Peterson Institute for International Economics. Two years later, after a financial meltdown in Mexico and collapse of the peso evaporated any job gains from NAFTA, the economist who generated the forecasts famously said he would stay away from job forecasting in the future.
Trump has habitually claimed that NAFTA was a massive job killer. But that’s also false.
“NAFTA did not cause the huge job losses feared by the critics or the large economic gains predicted by supporters,” concluded the nonpartisan Congressional Research Service. “The net overall effect of NAFTA on the U.S. economy appears to have been relatively modest, primarily because trade with Canada and Mexico accounts for a small percentage of U.S. GDP [gross domestic product]. However, there were worker and firm adjustment costs as the three countries adjusted to more open trade and investment.”
The Pinocchio Test
In claiming job savings from trade deals not yet concluded, Trump is counting his chickens before they hatch. Even if he succeeds in reorienting U.S. trade policy, jobs gains are still likely to be illusionary. That’s all the more reason to be cautious about such pronouncements. Ultimately any gain in jobs under Trump’s presidency will be recorded by the Bureau of Labor Statistics, and the reality may not live up to the hype.
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