The Politics of US series: Trade
Finding the patterns
Third in a 10-part weekly series. The Politics of US looks at polarizing topics to help deepen understanding of the issues – and respect for those with differing views. This installment explores how much is left out of the national conversation about trade.
Subscribe to the whole series via our free weekly Politics newsletter and follow us on Twitter @CSM_politics. Review the previous two installments, from guns to the shrinking middle class, here.
In this week's edition:
- Cover story: The truth about US manufacturing
- By the numbers: America's top imports and exports – in one chart
- Civics 101: The United States' zig-zag course on trade
- The candidates: Where they stand on trade issues
- Interview: Robert Scott, the trade expert Trump cited 20 times
- Engage: Join in on a civil conversation, start discussions in your classroom, and see perspectives from different sides.
- Our picks: "Five myths about trade" – and more
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The truth about US manufacturing
By Patrik Jonsson and Simon Montlake, Staff writers
Tom Fitch remembers attending a community meeting one night in 1997 at the North Lake Country Club here in Shelby, N.C., a small city of red-brick storefronts and wide boulevards.
He listened as members of the local business establishment claimed that the North American Free Trade Agreement would give local businesses and textile plants millions of new customers and boost job growth.
Mr. Fitch didn’t buy it. The owner of a boutique sign business, he already stood out amid the suit-and-tie crowd in his jeans and beaked cap. His concern was that the implementation of NAFTA would flood the United States with cheap imports and shutter local mills.
He turned out to be prescient.
Shelby lost 40 percent of its factory jobs between 1999 and 2014 and saw the poverty rate rise to double the national average.
Yet today a small renaissance is under way in the area. Schletter Inc., the US subsidiary of a German solar-panel manufacturer, has hired 305 people.
Shelby’s failures and fortunes represent a microcosm of the US in the era of more open global commerce. Free trade is often portrayed in stark, one-dimensional terms: as a menace that has cost the US millions of jobs while enriching China and Mexico.
But the truth is more complicated, and the big emerging question is: How much should the US pull back from free trade – if at all?
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BY THE NUMBERS
Also check out: The pros and cons of trade in five charts, by The Monitor's Laurent Belsie and Jacob Turcotte.
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CIVICS 101: The United States' zig-zag course on trade
By Laurent Belsie, Staff writer
One driver of the American Revolution – for the very idea of America as an independent nation – was foreign trade. Many colonists chafed under England’s attempts to control and limit their ability to trade everything from sugar from the West Indies to fur with Native Americans. The Boston Tea Party came about not because Parliament raised the duties on tea (it actually lowered them), but because it gave the British East India Company duty-free access to the colonies, undercutting the local merchants and smugglers.
But if the United States was born with the ideals of freer trade, it has since sailed a zig-zag course between liberalization and protectionism.
It started innocently enough when Treasury Secretary Alexander Hamilton, looking to fund the new federal government under the Constitution, imposed mild tariffs on imported goods. Tariffs soon shot upward as subsequent administrations looked to pay for wars and other operations. Under President Jefferson, Congress blocked virtually all international commerce for 16 months, an embargo with harsh economic consequences. By 1830, duties on imports stood at a whopping 60 percent, higher than even the disastrous Smoot-Hawley tariffs imposed a century later.
But South Carolina’s threat to nullify the tariff (and possibly secede) changed all that. From the Compromise Tariff of 1833 to 1860, average tariffs fell to less than 20 percent. Midwestern farmers could export their grain.
After the Civil War, tariffs began rising again with Republicans arguing they protected domestic industries. The era continued through 1930, when Congress passed the so-called Smoot-Hawley Tariff. By 1932, US imports and exports had fallen by two-thirds.
The Great Depression was so traumatic that Congress changed course again with the 1934 Reciprocal Trade Agreements Act. From then on the US has moved increasingly toward freer trade with average tariffs falling from 18.4 percent in 1934 to 1.3 percent by 2007. And postwar agreements have created an international infrastructure for negotiating multilateral trade deals and resolving disputes.
The current presidential election, where Democratic nominee Hillary Clinton and the GOP’s Donald Trump have qualified their support for trade liberalization, represents a potential break from the bipartisan consensus that has lasted 70 years.
But the Trans-Pacific Partnership, which has earned the ire of the far right and far left, represents only incremental liberalization (like the North American Free Trade Agreement, which spurred a similar backlash in the 1990s). If it doesn’t pass, the $5 trillion worth of US exports and imports will continue to flow, points out Douglas Irwin, a trade historian at Dartmouth College, in an e-mail. “Few are suggesting that we roll back the opening of trade.”
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THE CANDIDATES: Where they stand on trade issues
We encourage you to contact the Monitor on Twitter @csm_politics or by email email@example.com if you can improve our chart!
Sources: the Jill Stein campaign, The Washington Post, The New York Times, On the Issues, the Jill Stein campaign website, The Washington Times, CNN, Politico, The Council on Foreign Relations, the Donald Trump campaign website, Our America Initiative, National Review, Politifact
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INTERVIEW: Robert Scott, the trade expert Trump cited 20 times
Robert Scott is a man of the moment. As an expert for the liberal-leaning Economic Policy Institute in Washington, Mr. Scott has long sounded alarms against the effects that global trade is having on the American economy. For many years, arguments like his were largely pushed to the side.
But presidential candidates Bernie Sanders and Donald Trump captured the concerns of many voters. Mr. Trump even cited Scott’s research 20 times in a July speech on manufacturing. In an interview with the Monitor, Scott shares his thoughts on how the debate about free trade is changing.
Scott shared his thoughts with the Monitor's Simon Montlake. His answers have been edited for clarity and brevity.
Q: In the political debate over the benefits of free trade, what aspects are missing or misrepresented?
I would like to rebalance trade. I think that’s a key issue. But there’s a much larger issue at stake and that is that trade redistributes income to a much, much larger number of people. Essentially, it redistributes income from everyone who doesn’t have a college degree to those that do, and the population that doesn’t have a college degree makes up a little bit less two-thirds of the labor force. It’s 100 million people.
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ENGAGE: Living Room Conversations and AllSides.com
We don't fully understand a topic unless we can argue the other side, and we can't effectively move forward together if we don't really listen to each other and have a respectful conversation. Here are some tools to help us better understand the topic and each other.
- Review the latest news and policy proposals on trade from left, center and right biased news sources and think tanks. This will bring you up-to-date and broaden your understanding of the issue.
- Have a Living Room Conversation about the Trans-Pacific Partnership (TPP) with half a dozen friends who have diverse opinions. Enjoy this simple, respectful, structured program that begins with human relationships.
- Discuss trade in the classroom using a specialized lesson plan that teaches respectful dialog, fostering mutual respect and understanding. This program can be easily integrated into current curriculum, and includes various guides and online tools for making the class activity more engaging and revealing.
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OUR PICKS: Recommended reading and viewing
1. "What is TPP? The massive trade deal, explained," by CNN
The Trans Pacific Partnership is a trade deal that encompasses 40 percent of the world's economy. There are 12 of them total participating in the deal, but just as important as those 12, is the one that's not: China.... The deal is all about setting the rules on labor, the environment, economics, around that Asia-Pacific region in a way that lets the United States have a lot to do with it and sort of prevents China from setting lower standards.
2. "Is NAFTA a success story or damaging policy?" by PBS News Hour
The prospect of reaching new cross-border trade deals was very much on the mind of President Obama during his trip to Mexico this week. But a trade agreement that is now two decades old, and still the subject of debate, is casting a long shadow over the president's plans.
3. "Where Jobs are Squeezed by Chinese Trade, Voters Seek Extremes," by The New York Times
Between 2002 and 2010, districts in the top 5th percentile of trade exposure, on average, experienced a 19 percent greater drop in manufacturing employment relative to districts at the other end of the spectrum. Those hard-hit districts became, on average, far more conservative: the ideological equivalent of moving from Marco Rubio to Ted Cruz.
4. "Five myths about trade," by The Washington Post
In a Michael Crichton-esque throwback to the 1980s, Trump loves to toss Japan into his triad of great trade villains, along with China and Mexico – especially in terms of automobiles.... But while it's true that Japan exports cars to the United States, it doesn't do that nearly as much as it used to, even though Toyotas, Hondas and Nissans dot the list of best-selling automobiles. Today, many Japanese brands build vehicles in the United States – more than twice as many autos as those shipped from Japan into U.S. ports.
At first sight German industry does seem strong. Its main components – cars, chemicals, machine tools – have been the same for decades. Although Berlin has become a bit of a European digital hub, and Germany's SAP is the world's third-largest software company, the country has no Apple, Facebook or any other household name of the new economy. Look more closely, though, and German firms dominate some less obvious but crucial arteries of globalisation.
6. "Currency manipulation and manufacturing job loss: Why negotiating 'great trade deals' is not the answer," by the Economic Policy Institute
Rebalancing the dollar could reduce the trade deficit and expand US GDP.... Thus, ending currency manipulation is one of the few policy issues that has a strong, bipartisan appeal in Congress. Making progress on this issue could empower a new president to work with Congress on other, more controversial issues such as expanded infrastructure spending. Thus, rebalancing the dollar and rebuilding US manufacturing are policy issues that could be adopted by any of the candidates running for national office in 2016.
Check out The Monitor's five-part Free Trade in America series:
Part 1: The harsh downside of free trade – and the glimmer of hope
Part 2: The surprising truth about American manufacturing
Part 3: What 'good' free trade looks like
Part 4: Why, this time, free trade has hit American workers so hard
Part 5: What can be done for free trade's 'victims'