Donald Trump’s upset of Hillary Clinton was fueled in no small part by the votes of working-class Americans, mostly whites, for whom his populist economic message deeply resonated. At the heart of that message are what the president-elect called the “disastrous trade deals” signed by Democrats like President Bill Clinton (NAFTA) and supported by President Obama (TPP).
Of course, Trump was challenging Republican orthodoxy as much as that of Democrats, which also explains the depth of his support on the issue. For decades, elites from both parties ignored those who see themselves, often with good reason, as being hurt by trade with low-wage countries. For those of us who’ve long been documenting these downsides of trade (while, in my own case, not at all dismissing the upsides), the question was less whether an anti-establishment candidate would gain traction from this issue and more what took an opportunistic politician so long to discover its potency.
Now Trump voters should be asking precisely how their new president intends to “negotiate fair trade deals that create American jobs, increase American wages, and reduce America’s trade deficit.” In fact, this is an early chance for the president-elect to show whether he truly intends to try to help working people or whether that was merely campaign rhetoric.
His plan on trade is to withdraw from the TPP, appoint “tough and smart trade negotiators,” instruct agencies to use “every tool” they have to stop “abuses,” renegotiate NAFTA and label China a currency manipulator. Though there are some worthy ideas in there, I doubt any of them will much improve the economic conditions of some of the people who helped elect Trump.
The TPP — the Trans-Pacific Partnership — appears to be over, as the White House sees no way forward for the deal. But since the deal had yet to be enacted, canceling it doesn’t change the status quo. Moreover, trade deals have much less to do with jobs than people think: Don’t conflate trade deals and trade. These deals have less to do with the extent of trade and more with the rules of the road that determine who wins and who loses from trade. With a few notable exceptions, I don’t see much in Trump’s trade agenda that deals with the rules of the road in a way that could make a difference to working people.
What matters to Trump voters, i.e., the ones motivated by trade, is the trade deficit, or exports net of imports, and that depends on the competitiveness of our manufacturers — the source of our trade deficits — and their ability to export into global markets (we have a trade surplus in services, but the much larger goods deficit drives our negative balance). That, in turn, is partly a function of international prices being fairly set such that our exports are not artificially expensive and our imports are not artificially cheap. It’s also a matter of who’s at the table when the trade deals are cast.
Trump says he’ll name China a currency manipulator, but I don’t see how this helps at all. First, while Chinese currency manipulation was extremely damaging to American manufacturing in the 1990s and 2000s, the yuan is judged to be fairly priced today. Moreover, labeling them or any other country a manipulator amounts to international name calling. The real problem here is that none of our trade deals, including NAFTA or the TPP, have enforceable rules against currency manipulation, and, even if they did, we have no such trade deal with China.
During the election, Trump talked about imposing sky-high tariffs on China and Mexico. According to analysis by Goldman Sachs researchers, were Congress to support him on this, the average tariff would rise almost tenfold, from about 1.5 percent to about 13 percent, “a level not seen since WWII.” It’s possible that such high tariffs could initially engender some substitution of domestic purchases in place of imports, but they would also raise prices, offsetting any real wage gains and disproportionately hurting households that depend on cheap imports to sustain their consumption. Moreover, any retaliation by trading partners would dampen exports, and, eventually, such high tariffs would lead to higher inflation, weaker investment and slower growth, undermining any gains to the working class.
Finally, there’s the withdrawal from or renegotiation of existing trade agreements. Presidents have more power here than is commonly realized. In many cases, they can pull out the United States from existing agreements, they can impose broad tariffs for short periods, and even in cases where no trade agreement is in place, they can instruct federal agencies to pursue fees or tariffs on specific imports, like when a country engages in “dumping” (selling below cost to garner market share). Our trade officials have a track record of pursuing dumping cases against China, and a Trump administration would probably continue that tradition.
But such actions are already in play, and they affect few workers. If Trump really wants to follow through on his trade promises to the working class, here’s an outside-the-box idea that he should consider: announce a first-100-day plan to get his new trade team to begin a bottom-up rewrite of the TPP and any other trade deal to be considered under his administration. Show his supporters what a non-disastrous trade deal looks like. Show his counterparts among our trading partners that the United States is still open for global business but that it has got to put workers’ interests, not corporate interests, at the heart of its trade deals.
That means enforceable rules against currency manipulation, no more extended patents and other investor privileges, strong labor and environmental rights, and a transparent negotiation process. It means that instead of 85 percent of the outside advisers on trade deals coming from industry and trade lobbies, workers and consumers’ groups get the main seats at the bargaining table.
Don’t worry. I haven’t lost my marbles, and I know his transition team isn’t listening to the likes of me. But what I’m describing is clearly a people’s agenda, which is what makes this such a revealing moment for a president-elect who argued with great fervor about his intention to renegotiate our trade deals. Here’s his first chance to show us on whose behalf he’s negotiating.