Guest Editorial: Trump, Sanders wrong on trade

Chicago Tribune
March 25
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If you’re more anxious than usual about America’s prospects, it may come from listening too closely to presidential candidates freak out over the loss of jobs to foreign factories. Trade policies have “resulted in the shrinking of the American middle class,” warns Bernie Sanders. “We’ve lost our jobs; we’ve lost everything,” moans Donald Trump.

Fear of the global economy: Great for sound bites, and made right here in the U.S.A. Except that the pols’ anti-trade rhetoric is utterly misguided. America is a wealthier country with a higher standard of living because we’re plugged into the global economy.

The world constitutes an enormous, eager market for the best American products and services — from Boeing airplanes and Illinois soybeans to the skyscraper designs of Chicago architects. In return ... we buy stuff. All of which is less expensive than it otherwise would be (toys from China, clothes from Bangladesh) or highly specialized (BMWs from Germany, bananas from Ecuador). Each country focuses on what it does best. The result is that everyone gains.

Trade does affect employment, which is what the candidates are obsessed with, but their lamentations are misplaced. Trade agreements don’t create a lot of jobs, nor do they destroy them: On a net basis, the impacts of these pacts more or less balance out. Lose some jobs when a plant shuts down, pick some up when an exporter or distributor hires.

It is true that employment in the manufacturing sector is shrinking. But the big job killer on the factory floor isn’t competition from China or Mexico, it’s technology. U.S. industrial production has skyrocketed. But factories need many fewer workers due to automation and other new manufacturing techniques.

U.S. employment in manufacturing peaked in 1979, long before the rise of China or the passage of agreements such as NAFTA, the North American Free Trade Agreement. The trend continues: Today there are 12.3 million factory jobs in America, down from 17.6 million in 1998. According to research by Michael Hicks and Srikant Devaraj of Ball State University, 88 percent of factory job losses in the past decade are due to America’s productivity growth. About 12 percent of the losses are attributable to trade-related factors. Even that’s likely an exaggeration, Hicks tells us, because it’s tricky to measure globalization’s benefits.

Any loss of jobs to foreign countries damages communities. When food conglomerate Mondelez said it was cutting half of the 1,200 jobs in its Southwest Side bakery to move the production of Oreo cookies and other snacks to Mexico, workers’ lives were upended. Some will land on their feet; others may struggle to find comparable jobs. A lot depends on how well-educated and trained they are. That’s a problem, potentially alleviated through retraining. It’s no reason to slash trade.

We should keep trading precisely because export jobs pay more than comparable work: on average exports add an additional 18 percent to worker earnings because their employers — in the machinery and electrical industries, for example — invest more in technology and are more productive. American companies are world-beaters, held back only when other countries don’t play fair. Trade deals push open the doors. Caterpillar, the Peoria-based heavy equipment builder, said its exports to Chile tripled because of a free-trade deal with that nation. Last year, Cat generated more than half of its $47 billion in revenue overseas. Many of the machines it makes for export are built in Illinois.

The next deal on the table is the Trans-Pacific Partnership, a pact among the U.S. and 11 other nations (not including China) on both sides of the Pacific. In this campaign cycle, TPP is a chew toy for Trump and Sanders. Hillary Clinton, who pushed for TPP as secretary of state, has turned against it to blunt Sanders, though she has tried to focus on trade violations.

The TPP, which needs congressional approval, does what a smart trade deal should: It knocks down tariffs and quotas to open selling opportunities for U.S. firms, and holds foreign countries responsible for competing fairly. If you want this nation to stay competitive and expand its global clout, you’ll support TPP. The Peterson Institute for International Economics says TPP alone would increase exports by 9 percent and grow real incomes by an amount equal to 0.5 percent of our gross domestic product, by 2030. Those numbers translate into lots of U.S. jobs, and lots of dollars in U.S. wallets.