Trade Talk : Truthful Tidbits on Trade

By Alex Moore

Unreal alliteration in the title, huh? Anyhow, in this dumpster fire of an election cycle, we have all been collectively subjected to some horrifically low levels of discourse pertaining to a wide variety of different subjects. Thus, it is telling that of the various topics that have received depressingly low levels of intricate attention by the candidates, perhaps none stand out as much as trade. As such, I am taking it upon myself to write an incredibly concise and basic analysis of why trade is, without a doubt, a substantial net gain to the U.S economy. 

(Disclaimer of this by no means being an in-depth analysis due to page constraints)

Donald Trump, of course, has made trade bashing a centerpiece of his populist quest for the Oval. Bernie Sanders, the surprise challenger to Hillary Clinton’s far left, also made free trade one of the main culprits of his raging populist ridicule. Sanders’ attacks against “disastrous” trade agreements even forced Clinton, a moderate pro-trade Democrat, to move left and disavow the TPP (which may in the future be looked upon as one of Obama’s greatest achievements) that she worked tirelessly as Secretary of State to negotiate and promote. While Sanders and Trump sounded fairly identical on a variety of issues, perhaps no other issue unites the two and the populist left and populist right more than anti-trade sentiment. According to Sanders and Trump, free trade agreements such as NAFTA are singlehandedly responsible for decimating middle class manufacturing jobs that provided countless American families with a stable livelihood. Moreover, they argue, enacting massive pending free trade agreements such as the TPP and TTIP will further exacerbate the issue that they claim exists. Is free trade really the boogeyman that Trump, Sanders, and their legions of die-hard supporters claim it to be? I, and countless others who claim to know a little something about IPE and geopolitics hypothesis that, in fact, they could not be more wrong. 

First, why don’t we approach trade from the standpoint of economics. Broadly speaking, trade and the comparative advantage premise that it rests upon are overwhelmingly supported by economists. To synopsize, comparative advantage is the premise that different countries specialize in producing specific goods more efficiently than others. Thus, when they trade into each other’s respective market, both sides win. Trade is an unequivocal net gain to society, providing economic growth, raising standards of living, providing unrestricted access to foreign markets, and substantially lowering the costs of goods for consumers (none of these even get into the geopolitical pros of trade, which I will discuss later). Trade benefits the U.S economy enormously, and backing out of preexisting trade agreements or slapping massive tariffs on foreign goods would be economic suicide. The most obvious yet simultaneously most taken for granted pro of trade is that it substantially lowers the cost of goods, which, of course, disproportionally benefits the poorest segments of our society. 

One particular notion about trade that has been expressed is that the U.S is “losing” in a zero-sum trade game. The Trump circus is most guilty of expressing this ludicrous sentiment. First and foremost, having a negative trade balance has nothing to do with “losing” as Trump insinuates. Countries (especially ones like the US with a reserve currency) can run an indefinite trade deficit without compromising any semblance of economic health. In fact, trade deficits are known to increase when the economy is growing and creating jobs. Need proof that there is no negative correlation between trade deficit and economic benefit? Look no further than the fact that from ’06 to ’09 the U.S trade deficit was cut in half, despite the fact that the economy was spiraling out of control. Need more proof? Japan has run consistent trade surpluses over the last few decades despite the fact that the economy has been notoriously stagnant over that period of time (among other things, the Japanese REALLY need to procreate to fix the economy, but I digress). 

Alright, so trade does some good, but what about the fact that Trump and Sanders claim it kills low-skilled manufacturing jobs? Nah, fam. That boogeyman isn’t trade, its technological innovation. Automating manufacturing technology has increased efficiency tenfold and is the main culprit behind the hemorrhaging of manufacturing jobs. One such study on this phenomenon found that technological efficiency improvement was responsible for 85% of manufacturing job losses from ’00-’10. 

There is far more to say about the economic fruits that come as a result of free trade, but this isn’t a dissertation. As such, let’s discuss the geopolitical ramifications of trade. There is quite literally an entire subfield of international relations (economic interdependence theory) that is dedicated solely to analyzing the positive effects that trade liberalization has on peace. As some French economist whose name I’m forgetting put it a few centuries ago, “When goods don’t cross borders, armies will.” I cannot stress how much of an outlier post-WWII human history has been when situated within context. The last seven decades and change have been BY FAR the most peaceful and prosperous in human history. While there are obviously a variety of factors that have helped contribute to our good fortune, trade undoubtedly plays a role in each of the aforementioned phenomenon of relative global peace and prosperity. Need proof? Look no further than Europe. Europe, plagued by interstate war literally since the creation of nation-states in 1648, decided to integrate its markets following World War II. The economic integration has helped create a stable, peaceful, and prosperous European norm that was previously unthinkable (Brussels stand up!). The premise is self-evident. If both sides stand to undergo serious economic malaise as a result of engaging in conflict then that would theoretically drastically negate the chances of said war taking place. A war between the U.S and China would wreak ridiculous havoc on the global economy, for example, so lets hope that economic interdependence wins out and the South/East China Sea confrontations don’t boil over. 

This brings me to my final point, which is that the TPP is as genius of a geopolitical maneuver as it is an economic one. While the economic fruit is there (40% of the world’s GDP, 2 billion untapped middle class consumers in the next 15 years) the TPP will ensure that the U.S keeps an ascendant China constrained within its own region by creating a liberal trade and security bloc around it with its neighbors in the Asia-Pacific. If the TPP is not ratified, we may soon face a regionally hegemonic China that seeks to confront the U.S in a bipolar world much like the Soviet Union did during the Cold War. Yeah…lets not do that again. Ratify the damn TPP, Congress.

To summarize: trade is a beautiful thing, despite what the raging populism on the far left and far right wants you to think. Call your congresswoman or congressman and let them know that you support the TPP and TTIP and they should too. Seriously, do it. Polling indicates that solid majorities of the U.S populace are heavily pro-trade. Don’t let the vocal minorities on the far left and far right control the debate.


Photo Credit: Lee Chapman