Donald Trump

Donald Trump's Prescription for Impoverishing America

Free trade makes everyone better off.

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Among the endless injuries Donald Trump has inflicted upon the country, few might do more lasting damage than leading so many Republicans to abandon their commitment to free trade. Millions of people could end up poorer because of it.

"We are in the NAFTA (worst trade deal ever made) renegotiation process with Mexico & Canada," the president tweeted while Houston was drowning. "Both being very difficult, may have to terminate?"

The awfulness of NAFTA is a refrain for the administration; not long ago the U.S. trade representative, Robert E. Lighthizer, claimed "at least 700,000 Americans have lost their jobs due to changing trade flows resulting from NAFTA. Many people believe that the number is much, much bigger than that."

Many people do indeed. Many people also believe the moon landing was fake, George W. Bush knew about 9/11 before it happened, and Barack Obama is really Muslim. Many people are often full of it, as is Lighthizer.

The statistic comes from Department of Labor figures for job displacement as the result of trade. But as The Washington Post's fact-checker Glen Kessler recently explained, some of those job losses had nothing to do with trade. For instance: "A sawmill in Port Gamble, Wash., closed because its timber supply dwindled from efforts to save the spotted owl, so company officials were 'dumbfounded' when the Labor Department certified every laid-off worker as a victim of NAFTA. 'If anyone can find some legitimate connection to NAFTA in this, I'd sure like to see it,' a former manager said."

What's more, the jobs-lost figure looks at only one side of the ledger. It ignores any jobs that NAFTA created: at least 1.8 million, for a net gain of more than 1 million jobs.

That should come as no surprise. Yet far too many people think erecting trade barriers is good for the economy.

The flaw in such reasoning should be intuitively obvious. If Americans prosper more when trade with Mexico and China is cut off, then Virginians should likewise prosper if they trade less with people in North Carolina and California. For that matter, Richmonders could improve their standard of living by ceasing trade with people in Chesterfield and Fairfax. And you, gentle reader, should grow fantastically rich if you stop buying and selling things altogether.

For those who doubt intuition, the Cato Institute's Scott Lincicome has done the homework. His new paper, "Doomed to Repeat It," reviews the academic literature concerning major trade policies of the past seven decades. The findings, he says, are "unequivocal: U.S. protectionism not only produced far higher total economic costs than benefits but also, more often than not, failed even to achieve its intended objective."

Out of all the various industries that won some type of trade protection, there has been "only one instance—the bicycle industry—in which protectionist measures apparently resuscitated the industry in question." On the other hand, protectionism has inflicted huge costs. A 1985 study by the New York Federal Reserve, for instance, concluded that "the effective price increases on clothing, sugar, and automobiles caused by… import restraints were conservatively calculated as generating the equivalent of a 23 percent 'income tax surcharge' for the lowest-income… American families."

Protections for the glassware industry have cost consumers $468,000 per job saved. For orange juice, $561,000 per job; and for bolts and screws, $1.3 million per job.

A couple of months ago The Washington Post published an astonishing chart depicting the income gains and losses for every income group across the globe between 1988 and 2008. It showed that every group—every single one—had higher income, in real terms, than it did two decades before. This is not what the popular press often leads people to conclude, to put it mildly.

And no wonder: The accompanying article, on trade globalization, treats the progress as a contest between "winners" and "losers." In its telling, the losers consisted of the richest 75th to 90th percentiles, whose real-income gains are smaller, in percentage terms, than the gains of those less fortunate. Because middle-class Westerners saw only a small percentage gain in their standard of living, they supposedly lost out to people in the Third World whose lives improved more rapidly.

But as Chelsea Follett of Human Progress points out, it's far easier to go from abject poverty to mere subsistence than it is to go from well-off to immensely rich. So we should not be dismayed that Chinese incomes are rising faster than ours, when America's GDP per capita is $52,704 and China's is just $8,104.

Besides: Without trade, nobody's income would be rising at all. Donald Trump might pretend otherwise for public consumption. But as a private businessman who sold products made in 12 foreign countries, from China and Mexico to Bangladesh and Vietnam, he knows better on some level. Even if he won't admit it.

This column originally appeared at the Richmond Times-Dispatch.

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  1. Obviously, NAFTA benefits Canada and Mexico – why else would they have agreed to the deal? Just as obviously, if Canada and Mexico are benefiting then we must be getting screwed on the deal. There’s only two sides to a deal, somebody wins and somebody loses. That’s just common sense, how could it be otherwise? It’s absurd to think both sides could win or both sides could lose, that don’t even make sense. What would you even call such a thing? A win/win situation, a deal where both sides come away thinking they got the better end of the bargain? What nonsense. And I should know, I’m a graduate of the Wharton School of Business and if they ever taught any such nonsense there it’s news to me.

    1. NAFTA was a win-win overall years ago when it was first implemented.
      However national economies have changed enormously since NAFTA implementation and many of the trade controls are seriously outdated and abused.

      Most non-partisans agree that NAFTA needs a re-write. The only question is the scope.

      I personally think Trump is using a ‘bad-cop’ tactic and a middle ground will be negotiated that benefits all the NA countries. The sky-is-falling nonsense is a bit overwrought.

      1. ” The sky-is-falling nonsense is a bit overwrought.”
        This is always the case.

      2. But… endless injuries!

  2. >Donald Trump’s Prescription for Impoverishing America

    Looking on the bright side, at least nationalism and trade protectionism are a slightly different prescription than most of his immediate predecessors, right? /sarc

  3. you lost me at “Glen Kessler”. Does anyone still believe he is a “fact-checker” in any legitimate sense of the phrase?

  4. Free trade makes everyone better off

    Free trade,

    Not ‘free’ trade deals

    Not ‘managed’ trade.

    FREE trade.

    Skepticism about managed trade deals is EXACTLY what we want.

    And you can’t fact check with anyone from the WaPo.

  5. NAFTA is not free trade. Its managed trade or fair trade.

    1. Re: loveconstitution1789,

      NAFTA is not free trade.

      Anti-trade ideologues think it is free trade and so attack free trade per se.

      1. Anti-trade ideologues think it is free trade and so attack free trade per se.

        Gosh, perhaps those “anti-trade ideologues” are just taking the “FT” in “NAFTA” at its word.

        And if you think NAFTA isn’t actually “free trade”, maybe you would care to define what “free trade” would actually mean and then make a compelling argument that that form of “free trade” is necessarily better for everyone.

        1. It’s not free trade it it takes 80000 pages of regulations.
          Try being a small business that moves shit across the border.
          It’s ain’t fucking free trade.

  6. Free trade deals like NAFTA are beneficial for everyone

    This is clearly a silly take.

    No deal is beneficial to everybody. Some people are harmed by anything.

    To ignore that some might NOT benefit from free trade belies the usefulness of the argument.

  7. So no mention anywhere that NAFTA is managed trade, and that Trump has stated that he wants a ‘better deal’ rather than, say for instance, cut off ALL TRADE with Mexico and Canada.

    In other words, the whole thing is predicated on a falsehood. Nice job, Hinkle, not that I necessarily disagree with your claims merely the assumed foundation they are built upon.

    1. Re: BYODB,

      So no mention anywhere that NAFTA is managed trade, and that Trump has stated that he wants a ‘better deal’ rather than, say for instance, cut off ALL TRADE with Mexico and Canada.

      The rhetoric coming from that man’s mouth and his cadre of anti-trade ideologues that support or advice him suggests you’re being incredibly naive.

      1. You mean the part where they continually say they want to renegotiate NAFTA, rather than a true desire to pull out of those agreements?

        I would agree if they were saying ‘Fuck NAFTA, we’re out, screw you guys’ but what they’re actually saying is ‘renegotiate these managed trade deals, or we’ll pull out of them’.

        Is the implication there something other than ‘NAFTA is perfect as conceived and can not be improved upon’? I’ve found that so far during the Trump administration I need to ask myself what the opposite argument is, and I’ve found that many times the opposite argument from what Trump says is usually not what people say it is.

        Hinkle goes to great lengths to show that NAFTA has been beneficial, but with the underpinning assumption that we’re going to leave NAFTA. I don’t disagree that NAFTA is better than no NAFTA generally speaking, but to pretend it’s perfect of better than a theoretical ‘better deal’ for us is a strange claim to make. It assumes that Canada and Mexico will cut off their nose to spite their face.

  8. black-clad anti fascist provocateurs

    Fixed.

  9. RE: Donald Trump’s Prescription for Impoverishing America

    The best way to impoverish a country is to tax it until businesses go bankrupt, allow the ruling elites to profit from their mischief (along with their toadies) and force those who know how to raise capital out.
    If it worked for Cuba, it can work here.
    One can only hope Trump and the usual band of merry morons who enslave us will realize this and turn this capitalist hell hole into a bright and shining example of socialist oppression and failure.

  10. it’s far easier to go from abject poverty to mere subsistence than it is to go from well-off to immensely rich.

    When I point out this to the anti-trade knuckle-dragging Trumpistas, who have this strange predilection for quoting the meaningless statistic that “average wages have not risen!” as if everybody did the exact same thing from cradle to grave, they accuse me of being an illegal immigrant who wants to deliver the world to rich oligarchs. It’s like arguing with Marxists without being able to discern who is worse.

    1. My pinko-commie neighbor supported Obama and argued against free trade when I first met him. A year latter, Trump started saying the same stuff, and I had fun pointing out the similarity.

  11. Am I supposed to envy the Chinese who go from $8k to $10k? WTF?

  12. *Without trade, nobody’s income would be rising at all. Donald Trump might pretend otherwise for public consumption*

    Wow Trump is trying to impoverish Americans, you mean he wants to spend more and raise taxes on everyone??? I didn’t know that. It is so funny that I didn’t hear that Donald Trump doesn’t believe in trade, I hear that he just wants to make sure we get the best deal possible. It’s like someone went full retard in making assumptions or somehow reading the secret thoughts of the President.

    1. Uhh, individuals make the best choice possible not the President.

      1. Uhh, individuals make the best choice possible not the President.

        You’re using free market reasoning in a highly non-free market environment of both domestic and international trade. In such an environment, individuals still try to make the best choices for themselves, but the “invisible hand” doesn’t translate those individual choices into maximizing benefits for society.

        1. And Trump knows how to “maximiz[e] benefits for society”? I very much doubt that, anymore than any central planners do.

          1. Of course, I should have said that individuals know how to make the best choices for themselves. There is no such thing as “the best choice for society”.

            1. I think it’s time to stop pretending that the self-promoting king of eminent domain, selective bankruptcy and an ability to borrow money faster than it has to be paid back is an outstanding example of a free market capitalist.

              When Trump first came on the public scene in the 1970s he promoted himself as a new kind of “capitalist” who supported “liberal” (ie left wing democrat)* causes.

              God only knows what kind of damage he will do to American life. It is only my unalloyed joy that Hillary clinton did not become President together with my firm belief in Trump’s deep seated incompetence and that it will finally catch up with him that that keeps me from deep despair for the future.

              After all, America survived LBJ, Nixon and Harry Truman, it can surely survive a nonentity like Donald Trump.

              *I sometimes wonder if there are not midnight phone calls where Donald and Hillary don’t laugh together about the joke they put over on America.

              1. king of eminent domain for private purposes

                Not to mention the uuuge takings of private property that The Wall will require. It will be the Mother of all Takings. Good thing it won’t happen.

                1. Yes he liked eminent domain and listened to some fool who told him expanding into Afghanistan was a wise choice. I think it personally is a waste of time and life. He also gets two extra scoops of ice cream supposedly and has a monster ego.

                  There is no real free trade with our governments. There are to many interests giving out goodies to politicians for them not to extend some protection. I am simply saying if we are going to have a deal, let him create a better one that gives us advantages. Hinkle made real idiotic assumptions and baseless claims as I quoted above. Some of you just attacked Trumps past, that didn’t answer critique of the article.

                  Think of the government as the Mob, oh you like Free Trade, f-you pay me!!!

                2. Speaking of land rights and free trade, Jordanian law prohibits Americans from buying land there. The World Trade Organization, which Jordan belongs to, is in the process of renegotiating regulations, because restrictions on land purchases make it difficult for foreigners to be in the distribution services sector of the economy.

  13. “Free trade makes everybody better off” is only true under certain assumptions. For an extreme example, we would probably not have been “better off” if we had sold nuclear weapons to Nazi Germany in exchange for land in Nazi Germany.

    Many of our trading partners have tightly regulated markets and large subsidies; none of them have our best interests at heart. Many of them want to acquire US currency to buy political power in the US, through lobbying, investments, and property ownership. No, free trade with such partners is not obviously or automatically in the economic or political interest of Americans.

  14. Free trade makes everyone better off.

    How about (1) you define what you actually mean by “free trade”, because it actually means different things to different people, and (2) then actually provide evidence and logical arguments that it “makes everyone better off”.

    Note that the obvious answers (“trade without tariffs” and “comparative advantage”) fail.

    1. They don’t even know, they just want to criticize with little or no true solution. Your argument made too much sense and life is often more complex than we want it to be, the extends to writers at Reason.

      1. They also ignore that raw stats don’t tell a story. If my state loses one million jobs and another states gains 2 million jobs, my state isn’t better off for having lost those jobs. The country OVERALL is better, but my state got raped in the process.

  15. “Donald Trump’s Prescription for Impoverishing America”

    Must have been a tough headline to write on a day when Q2 GDP growth was revised upward from 2.6% to 3%.

  16. Yes, it is horrible that Trump adopted Obama’s anti-trade campaign position.

    Obama 2012 campaign Video 1 and Video 2.

  17. I cannot vouch for the source, but this summary of the real estate situation in Jordan is worth considering. It says that the influx of refugees lead to a housing shortage and that government regulations prevent developers from keeping up with demand. Rents are rising as a result.

    I support a generous immigration policy, but we also need to fight for the right to build homes while we are at it. Plenty of reporters spend many column inches advocating for more immigration without addressing the barriers to home construction in America. It is as if they want our neighborhoods full of homeless people.

  18. The minority president didn’t lead Republicans to abandon their commitment to free trade. They abandoned the idea when they decided to appeal to under-educated working class white people with a series of lies blaming everyone else for the lack of jobs available to the unskilled.

  19. The minority president didn’t lead Republicans to abandon their commitment to free trade. They abandoned the idea when they decided to appeal to under-educated working class white people with a series of lies blaming everyone else for the lack of jobs available to the unskilled.

  20. There are no losers to this policy!
    Sparkly unicorn ponies for everybody!

  21. “The flaw in such reasoning should be intuitively obvious. If Americans prosper more when trade with Mexico and China is cut off, then Virginians should likewise prosper if they trade less with people in North Carolina and California. For that matter, Richmonders could improve their standard of living by ceasing trade with people in Chesterfield and Fairfax. And you, gentle reader, should grow fantastically rich if you stop buying and selling things altogether.”

    Holy shit is this guy stupid. There’s no free trade until everyone is operating under the same rules. Put US style rules, regulations, and taxes on the rest of the world and we can start to talk about free trade. There’s a million reasons why US companies struggle to compete.
    .Environmental regs
    .taxes
    .minimum wage laws
    .property ownership
    . welfare
    . contract and tort law
    . subsidies
    . energy prices

    There’s a million ways for governments to give their preferred industry an advantage.

    When we have interstate trade, both states are operating largely under the same set of rules.

    When we trade with Mexico, it is an entirely different situation.

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