How Trump Gives Protection A Bad Name

Trump's trade policy is a menace, but not for the reasons many people think.
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Trump’s brand of protectionism is a menace, but not for the reasons many people think.

His fulminations about NAFTA, subsidized Chinese steel, protected Canadian dairy products, and failed Obama-era trade deals, have produced a spate of articles warning about the damage Trump’s trade policy could do to the global economic order. The most instructive of these was a recent New York Times piece by their senior economic writer Eduardo Porter.

Porter began: “It seems President Trump is ready to start rolling back globalization. Let’s hope he doesn’t blow up the postwar economic order.”

According to Porter, Trump might turn his back on the World Trade Organization, as “he retreats from prior American commitments to global trade.” Porter asks, rhetorically, “Will he eschew the multilateral framework in pursuit of a set of bilateral deals, turning his back on a long history of trade diplomacy?”

But of course, this is exactly what “free trade” presidents have done for more than 30 years, with dozens of bilateral deals intended to protect U.S. special corporate interests, in NAFTA and most recently in the stalled Trans-Atlantic Trade and Investment Partnership (TTIP). Ever since the failed round of trade talks in 1999, American presidents have given up on more general deals under the auspices of the WTO.

“Trump will make NAFTA’s existing anti-regulatory protections for big business even worse.”

Porter warns that “protectionism will not add to American jobs or raise wages, on the whole. At best, it will shuffle jobs around.” But the reality is that when other nations, such as China, protect domestic markets and subsidize exports, they do steal American jobs. Defenders of an idealized notion of free trade contend that it’s “protectionism” to challenge the overt protectionism of other countries.

The supposed benefits of more trade deals such as NAFTA and the TPP are grossly exaggerated by their proponents. The Harvard economist Dani Rodrik, one of the most careful and quantitative of trade scholars, in a paper for the National Bureau of Economic Research with then-grad student Francisco Rodriguez, reviewed several influential studies claiming large benefits for trade agreements, and found their assumptions misleading and their conclusions exaggerated.

Trump really is a menace, but not for the reasons cited by Porter.

First, Trump’s trade policy diverts attention from an entirely legitimate and overdue critique of the current trading order. The “postwar order” that Porter cites Trump as threatening was actually toppled in the 1970s.

In the original postwar order – the one that led to 30 years of growth that produced broadly shared prosperity – labor rights were protected, there was tight regulation of financial speculation, and nations had the right to have national industrial policies and public investments without being hauled before some trade tribunal as protectionists.

The global order that followed bashed labor, liberated capital, and restored the brand of laissez faire that brought us the Great Depression and the financial collapse of 2008. We need a very different sort of trade regime that puts social rights back on the same level with financial rights.

This is the sort of protection that can be defended as both sound economic policy and sound social policy. If we had kept more of it, workers would not have taken it on the chin and we would not have gotten President Trump.

So the trouble with Trump is not that he challenges the current trading system. The problem — as with all of his policies — is that he is an opportunist and a hypocrite. And that raises the second concern. His actual trade policies are an incoherent mash-up.

For instance, his revisions of NAFTA are likely to restore many of the same pro-corporate provisions in Obama’s failed TPP. Trump objects to them, not because they help corporate cronies but because Obama’s name was on the TPP deal. Credible reports suggest that Trump will make NAFTA’s existing anti-regulatory protections for big business even worse.

Trump made an ad hoc bargain with China under which China will accept more American exports of beef, and in return the U.S. will import Chinese cooked chicken products ― with no country-of-origin labeling — so that consumers cannot know what they are buying. China is notorious for having lax or nonexistent food inspection standards. Yuck! This is exactly the kind of free trade we don’t need.

Occasionally, he gets something right. Trump has threatened to punish China for producing steel at well below the cost of production and dumping it on world markets. Those actions do violate trade norms, hurt U.S. industry, and should indeed be subject to sanctions.

But we’ll see what Trump actually delivers. In his communications with Chinese leader Xi Jinping, Trump promised to ease up on trade threats if China would take a harder line with North Korea.

Meanwhile, China’s planned and subsidized economy and its predatory trade policies are undermining America’s ability to compete in the entire range of green industries, from solar panels to wind turbines to rail cars.

U.S. solar manufacturers have filed a trade complaint — as they should. It remains to be seen what Trump will do, given his other geo-political goals vis-a-vis China. Diplomatic finesse, much less ideological consistency, is not the man’s strong suit.

Some day, we may get a progressive leader who criticizes the current trading system for the right reasons. That surely isn’t Trump. But neither is it his chorus of orthodox critics.

Robert Kuttner is co-editor of The American Prospect and professor at Brandeis University’s Heller School. His latest book is Debtors’ Prison: The Politics of Austerity Versus Possibility.

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