Donald Trump’s conservative defenders, betraying varying degrees of embarrassment, often try to explain away their support or at least acceptance of the GOP presidential nominee by arguing that, while his character and his temperament would normally be disqualifying, at least he is raising important issues that other Republicans have neglected for years. Specifically, they say Trump has finally brought to the top of the national agenda the economic prospects of working-class Americans (as if this had never occurred to anyone else before) by calling for, among other things, a more protectionist trade policy.
Trump has claimed repeatedly that his plan to issue threats and ultimatums to U.S. trading partners is the quickest way to “bring jobs back” to the U.S.
What utter nonsense.
Trump’s tirades on trade, and also on immigration, are more reasons to oppose his candidacy for president, not support it, especially for conservatives who claim to support free markets. Unfortunately, too many GOP officials have already begun to accommodate Trump’s views through changes in their rhetoric and by mimicking his absurd claims. This is a big mistake.
Contrary to Trump’s assertions, the global trading system has not been a colossal failure. Rather, it has been one of the great successes of the post-war era. Scores of studies have shown that international commerce has enriched the United States and its citizens, even as it has also integrated many newly developing countries into the global marketplace and thereby helped reduce the number of people living in abject poverty by hundreds of millions over the past half century. This is the opposite of a catastrophe.
America’s workers benefit immensely from access to goods and services made in other countries. On average, access to these goods provides a 29 percent increase in the purchasing power of the average American household. The 500 largest U.S. companies earn about half of their combined revenue from their international operations. The average U.S. worker earned $1,300 more annually over the past two decades owing to U.S. access to international markets.
Trump seems to think he can start a trade war and leaders in other countries will unilaterally disarm. The reality is that if the U.S. retreats from its leadership position on global trade, other countries will follow suit and give in to protectionist impulses too. We have seen this before in history, and the results have been tragic. There would be job losses in the U.S. and elsewhere, not job gains, and U.S. consumers would be forced to pay much more for the products they buy. Protectionism hits the poorest households the hardest because they are least able to handle the price increases that follow for food, clothing, and other essential goods.
A turn toward protectionism would be especially tragic because the U.S. has provided crucial global leadership on international trade for seven decades. Starting with the General Agreement on Tariffs and Trade (GATT) in 1948, U.S. trade policy under administrations of both parties has been a steady, long-term effort to lower barriers and provide a fair and level playing field for international commerce. There were 23 members of GATT in 1948, 128 as of 1994, and now 164 countries participate under the trading rules governed by the World Trade Organization (WTO). The U.S. also has separate free-trade agreements with another 20 countries.
U.S. trade policy also has been a crucial tool in pushing the world to embrace the virtues of a free global market. Protectionism would invite a return to statist policies across the board.
When trade is free, capital in a country naturally moves toward industries in which that country has an advantage relative to other countries and other industries.
For two centuries, there has been no real dispute among economists about the advantages of free trade, which are based on the theory of comparative advantage. When trade is free, capital in a country naturally moves toward industries in which that country has an advantage relative to other countries and other industries. When capital is allowed to move in this way, global production rises, firms become more efficient, and trade among nations allows everyone to be better off. The theory of comparative advantage is observable in the gains seen in economic well-being all over the world from more liberalized trade.
Of course, free trade does not benefit every industry in every country. Industries that do not enjoy a comparative advantage in the global marketplace contract, and employment in those industries declines. But the solution to that problem is not to impose higher costs on all consumers, which is what would happen with a return to protectionism. The federal government should provide extended income-support benefits, job retraining, educational opportunities, and relocation assistance to workers dislocated by international trade.
Not all job losses are due to global trade, either. The reduction in manufacturing jobs in the U.S. is tied mainly to technological advances, not trade. No matter how high tariffs are raised, jobs lost to automation will not be resurrected. Trump is raising false hopes among millions of people who somehow think the clock on technology can be turned back to the 1960s.
The steady promotion of free trade has not always been easy. Politicians of both major political parties have tried to play the populist card by railing against the trade agenda pushed by “Washington elites.” The result has been a series of very close votes in Congress for virtually every major trade deal going back three decades. These votes were won for free trade only because there has been determined presidential leadership making the case that lower tariffs abroad serve the U.S.’s long-term economic interests. That argument has, for the most part, carried the day.
That would all change with Donald Trump. If elected, he would be the first fully protectionist president since just before the Great Depression.
The American electorate has become more susceptible to populist rhetoric in part because the U.S. economy has been going through a very long period of tepid growth. Workers are seeing lower income growth and fewer opportunities for advancement. What the U.S. desperately needs is a plan to restore dynamism to the U.S. economy.
Unfortunately, what Trump is offering is an anti-growth plan. Attempts to wall off U.S. industries from international competition would backfire; U.S. firms would export fewer goods and services, and U.S. consumers would pay more for their basic needs. The tragic and ironic result would be even more populist resentment toward Washington.
— James C. Capretta is a resident fellow at the American Enterprise Institute.