Campaign Demagoguery on Parade

It is an economic fact of life that both businesses and their employees benefit when we sell more products overseas, and consumers enjoy a wider range of products at lower prices.
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To me the most offensive aspect of the political debates thus far - and that is saying something - is the eager abandonment of this nation's century-long and highly successful commitment to free trade. I have waited for someone to step forth and speak truthfully about the positive impact of free trade on our country, but all we get is demagoguery.

The shots at the North American Free Trade Agreement (NAFTA) simply defy reality. We've been living with NAFTA for more than 20 years and the effects have been almost universally beneficial. The result has been more growth and more good jobs. That great "sucking sound" that Ross Perot warned us about simply did not happen.

It is an economic fact of life that both businesses and their employees benefit when we sell more products overseas, and consumers enjoy a wider range of products at lower prices. Our exporters and importers pay workers 15-20 percent more than companies that depend exclusively on the domestic market. NAFTA and other trade agreements have boosted annual U.S. income today by about 10 percentage points of GDP relative to what it would have been otherwise. In real world terms, this meant about $1.8 trillion in 2015, or thousands of dollars per household.

The attacks on the proposed Trans-Pacific Partnership (TPP) are even more bizarre and contrary to reality. The TPP is much bigger and even more promising than NAFTA. It would eliminate more than 18,000 tariffs that other nations today impose on imports from the U.S. A 2016 analysis by Peter A. Petri and Michael G. Plummer estimates the TPP would boost our national income by about $130 billion annually - a big chunk of it in higher wages paid to employees of exporting companies.

Even economists who have in the past been critical of free trade agreements see pluses in the TPP. David Autor, David Dorn and Gordon Hanson have contended with some justification that previous agreements have led to loss of manufacturing jobs. We lost about 5.7 million manufacturing jobs in the first decade of this century, and it was indeed painful for working people. But they see the TPP as a different animal entirely. "We believe blocking the TPP on fears of globalization would be a mistake," they wrote, because the agreement would promote trade in the so-called "knowledge industries" in which the U.S. has a clear advantage.

In any event, abandoning the TPP in response to lost manufacturing jobs would amount to shutting the barn door after the horses have fled. As Autor, Dorn and Hanson argued, "killing the TPP would do little to bring factory work back to America."

Donald Trump is trapped in a time warp, still ranting about Japan which has been struggling for 20 years. He knows little about real business. Senator Bernie Sanders is a socialist who knows even less. But Senator Ted Cruz and Secretary Hillary Clinton certainly know that what they are saying about trade is simply false. We can only hope that Governor John Kasich, who actually knows a thing or two about trade, can offer some clarity to this issue.

Jerry Jasinowski, an economist and author, served as President of the National Association of Manufacturers for 14 years and later The Manufacturing Institute. Jerry is available for speaking engagements. March 2016

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