In the Republican primaries, Donald Trump’s forthright protectionism helped him defeat the few rivals who stuck by the traditional Republican free trade line.
Those who retreated to the intentionally ill-defined middle ground of “free but fair” did no better. On the Democratic side, Bernie Sanders’ attacks on Nafta and the pending Trans-Pacific Partnership raised his popularity with rank-and-file voters, helped to propel him from fringe candidate to a real contender for the nomination and effectively killed the TPP’s prospects for ratification in the current Congress.
Trade promises to be even more central in the general election campaign. Taking a leaf from protectionists who preached economic isolation during the Great Depression, Trump is doubling down on his promises to reverse globalization. Speaking in June in western Pennsylvania, he said:
Our politicians have aggressively pursued a policy of globalization – moving our jobs, our wealth and our factories to Mexico and overseas. … Globalization has made the financial elite who donate to politicians very wealthy. But it has left millions of our workers with nothing but poverty and heartache. … It doesn’t have to be this way. We can turn it all around – and we can turn it around fast.
Under pressure from right and left, Hillary Clinton has rapidly backed away from support for trade agreements that she formerly praised as first lady and secretary of state. Interestingly, the “issues” section of her official campaign website, which covers nearly every other topic, does not include a specific heading on globalization or trade. The “manufacturing” section, however, provides the following goal statement, which is hardly a ringing endorsement of free trade:
Level the global playing field for American workers and manufacturers by aggressively combating trade violations. Establish and empower a new chief trade prosecutor reporting directly to the president, triple the number of trade enforcement officers, stand up to Chinese abuses and crack down on currency manipulation that hurts American workers.
Mainstream economists have supported free trade since David Ricardo outlined the theory of comparative advantage in the early 19th century. However, dissent has increasingly begun to appear. Robert Reich, a professor at the University of California, Berkeley, who was secretary of labor in the Bill Clinton administration, wrote last year:
I used to believe in trade agreements. That was before the wages of most Americans stagnated and a relative few at the top captured just about all the economic gains.
Paul Krugman, the Nobel Prize-winning economist, who, as a New York Times columnist, is arguably the most influential left-center economist in the country, acknowledges the many benefits of trade. But he notes:
[N]ot all free-trade advocates are paragons of intellectual honesty. In fact, the elite case for ever-freer trade, the one that the public hears, is largely a scam. … What you hear, all too often, are claims that trade is an engine of job creation, that trade agreements will have big payoffs in terms of economic growth and that they are good for everyone. … Yet what the models of international trade used by real experts say is that, in general, agreements that lead to more trade neither create nor destroy jobs; that they usually make countries more efficient and richer, but that the numbers aren’t huge; and that they can easily produce losers as well as winners.
So who’s right here, the protectionists or the free traders? Free traders are mostly right to say that trade promotes economic growth and efficiency, but wrong to think that efficiency is everything. Anti-traders are right to say that economists should pay more attention to the reality that trade produces losers as well as winners, but wrong to think that protectionism is the cure for what ails. Both sides need to be open to ideas for managing trade policy to minimize the social costs.