Chapter 11. Making the Case for Trade

11.1 Section Title

The Trans-Pacific Partnership (TPP) was opposed by all four candidates for the U.S. presidential nomination in 2015–16. This article argues for the benefits of free trade, and contrasts the candidates’ opposing views to the statements in support of free trade by past U.S. presidents.

Divided though the four leading presidential candidates are on so many topics, united they stand on one: the assertion that trade hurts America. All four oppose the U.S. ratifying the Trans-Pacific Partnership. All four demonize trade the same way. Donald Trump blasts that “foreigners are killing us on trade,” while Bernie Sanders inveighs against “disastrous trade agreements written by corporate America.” Ted Cruz laments that “we’re getting killed in international trade right now,” and after flipping her position on the TPP and other trade agreements, Hillary Clinton now promises that America will never again “be at the mercy of what any country is going to do to take advantage of our markets.”

Where is the leader with the courage to tell the truth? . . . First, trade has generated substantial gains—not losses—for America overall. Companies and their workers benefit when the company sells more exports and can pay higher wages. Individual consumers and families benefit when they enjoy a wider variety of products at lower prices. America’s exporters and importers are among the country’s most dynamic companies, paying their workers about 15%–20% more than workers earn elsewhere in the economy.

The overall gains are large. Trade and related activities—spurred by accords such as the North American Free Trade Agreement, or Nafta, have boosted annual U.S. income today by about 10 percentage points of GDP relative to what it would have been otherwise. This translates into an aggregate gain of about $1.8 trillion in 2015—thousands of dollars per U.S. household every year.

Future trade agreements will bring more gains. A 2016 analysis by Peter A. Petri and Michael G. Plummer estimates that the TPP—which will eliminate more than 18,000 tariffs that other countries today impose on U.S. exports—will boost U.S. national income by about $130 billion annually. Part of this gain will be due to the higher average wages Americans earn as a result of more trade. . . .

The way to support those affected by trade is not with tariffs that will destroy the jobs of other Americans that depend on trade. The solution is to drop trade barriers to maximize trade’s gains—and then design well-targeted supports for workers and communities that need help. Whatever field they work in, many American voters feel anxious about their jobs and their paychecks. Policies designed in a bygone age— when there was less economic volatility—aren’t enough to help them cope with ever-shifting labor-market pressures. We need to build a broader, more-responsive safety net to assist workers in transition regardless of the reason. For instance, unemployment insurance and trade-adjustment assistance should become part of an integrated program that offers a menu of options to all displaced workers.

For generations, American presidents of both parties have spoken about the benefits of trade. “Economic isolation and political leadership are wholly incompatible,” warned John Kennedy. “A creative, competitive America is the answer to a changing world,” said Ronald Reagan. “We should always remember: protectionism is destructionism.”