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Free Minds & Free Markets

Trump Is 'Raping' the GOP's Free Trade Agenda

The party should say "no" to Trump's anti-NAFTA tirades.

Donald Trump last week offered a "plan" to return jobs and riches to America through "economic independence" by scrapping free trade deals that he maintained wereTrump HandsPhilip N Cohen via Foter tantamount to "rape." His ostensive target was Hillary Clinton, of course. But the entity he's really shot in the foot was his own party given that it has been championing free trade for at least quarter of a century, in words if not always in deed.

Trump alleged that America has lost nearly one-third of its manufacturing jobs since 1997 and at the "center of the catastrophe are two trade deals pushed by Bill and Hillary Clinton," namely NAFTA and China's entry into the World Trade Organization. But to paraphrase the epic putdown of writer Lillian Hellman: Every word in that statement is a lie, including "and" and "the."

For starters, Hillary was only the first lady when the deals passed, and had very little to do with them except to make an occasional obligatory speech in support of her husband. She gave NAFTA a tepid endorsement when she ran for Senate in 2000, but stomped all over it when she mounted her 2008 presidential bid and had to face off against Barack Obama, who talked smack about the treaty too.

What really pushed NAFTA over the Sierra Nevada-sized opposition it encountered from labor union-backed Democrats, who controlled both chambers of Congress in 1993, and Ross Perot, the billionaire who warned of a "giant sucking sound" as jobs moved south if NAFTA were implemented, was Republican support.

In the House, 132 Republicans voted for the treaty and a mere 43 against it while 102 Democrats voted for it and 156 against it. Likewise, in the 61-38 Senate vote, 34 Republicans pulled the lever for NAFTA while only 27 Democrats did. Indeed, Newt Gingrich, who is now among Trump's loudest cheerleaders, rallied House Republicans to vote for NAFTA even though it was the brainchild of a Democratic president by declaring: "This is a vote for history, larger than politics, larger than re-election, larger than personal ego."

But conservatives didn't just supply the votes for NAFTA. They also made the intellectual case for free trade, breaking a two-century protectionist streak, whose high (low?) point was Herbert Hoover's notorious 1930 Smoot Hawley trade tariff that triggered a global trade war and exacerbated the Great Depression. Indeed, with the exception of the inveterate conservative protectionist Pat Buchanan, virtually every right-of-center organization and pundit—Cato Institute, the American Enterprise Institute, Heritage Foundation, Wall Street Journal, National Review, The Weekly Standard, and Reason magazine (where I work)—supported NAFTA, although with some qualms that the treaty contained too many boondoggles for favored industries and did not go far enough.

Meanwhile, Trump hilariously cited the union-backed Economic Policy Institute to make his case against NAFTA—which he berated as the "worst trade deal in history."

At the heart of his argument is the belief that selling to countries is good and buying from them is bad, the crude mercantilist fallacy that Adam Smith's Wealth of Nations debunked in the same year that America embraced the Declaration of Independence. Smith, the brilliant British political economist, argued that unless people start eating gold bullion, the point of wealth is to buy not sell; to consume not produce. If China starts shipping free plasma TVs to America, a few American companies may be thrown out of business, but American consumers will be better off. What's more, they'll be able to spend their savings on goods from other companies. The only folks that protectionist policies benefit are crony capitalists who face less competition — the very thing that Trump says he's fighting.

But even from the mercantilist standpoint of selling stuff abroad, NAFTA has been a huge boon. When it was passed, America's tariffs on Mexico averaged 3 percent and Mexico's on America 10 percent. Because NAFTA equalized tariffs, U.S. manufacturing output post-NAFTA reached record highs.

Cato Institute's Dan Ikenson notes that by all relevant metrics—output, value added, revenues, exports, imports, investment, R&D expenditures—U.S. manufacturing remains a global powerhouse. It attracts $1 trillion in foreign direct investments, the highest in the world, and more than double what China's manufacturing sector attracts. The auto industry alone (which Trump keeps threatening with punishing fines if it moves any operations to Mexico) has seen vehicle production more than double from 5.7 million in 2009 to 12 million by 2015. The U.S. exported over 2.1 million cars in 2014, becoming the third largest auto exporter after Germany and Japan, with Mexico as a distant seventh.

And the U.S. economy has added close to 31 million payroll jobs since NAFTA, despite relentless automation—the real "job killer."

Manufacturing's relative share of the American economy is smaller today than it was when NAFTA was passed. But that's mainly because the service sector has grown — in no small part thanks to the barriers to American banking, financial companies, and other similar industries that this treaty and other trade deals have knocked down.

Trump used to understand at least some of this. He praised "outsourcing" for creating IT jobs and raising wages even though he said it was an "unpopular stance." But he has the squishy ethics of a used car salesman. You cannot trust that what he says today will be true tomorrow.

Of course, other Republicans have done anti-trade things, too. Ronald Reagan imposed quotas on Japanese auto makers. George Bush imposed steel tariffs. And Mitt Romney, like Trump, threatened to label China a currency manipulator. These were all no doubt politically craven acts meant to court key constituencies, but they were sold as departures from standing conservative policy, not as conservative policy. Trump has given up even on the pretense of free trade.

The only effect Trump's overwrought accusations will have on Hillary is to pull her even more in a protectionist direction. (The Democratic Party's electoral need for Hispanic voters has forced it to abandon its long-standing hostility to immigration and make that the wedge issue with Republicans. But on trade, Hillary is trying to beat Trump to the protectionist punch.)

This will help her reduce the cognitive dissonance between her and her party's labor base, especially if she sweetens the deal by throwing in a little card check to make it easier to unionize companies. Meanwhile, Trump has dramatically increased the dissonance between him and the GOP. The party must now choose between repudiating its principles or its candidate: If it picks Trump, it'll have to explain to the American public why it kept pushing free trade if it meant "raping" the economy. And if it picks its principles, then it'll have to distance itself from Trump and hope he loses.

The GOP would be better off sticking to its principles. Trump doesn't need or deserve a champion. It should say "no" to his anti-trade tirades.

A version of this column appeared in The Week.

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  • The Late P Brooks||

    GOP has to choose between repudiating Trump or its principles.

    "Principles"

    You slay me.

  • John||

    Whatever your position on trade, a lie is a lie. And this is a flat out lie.

    Manufacturing's relative share of the American economy is smaller today than it was when NAFTA was passed. But that's mainly because the service sector has grown — in no small part thanks to the barriers to American banking, financial companies, and other similar industries that this treaty and other trade deals have knocked down.

    The number of manufacturing jobs has deopped.

    http://cnsnews.com/news/articl.....-1979-peak

    So their declining share is not "mainly because the service sector" has grown. Its share declined because the numbers declined. Manufacturing jobs are down about 33% since NAFTA passed. Now correlation doesn't necessarily equal causation but it doesn't preclude it either.

    Regardless, lying does not help the situation. Tell the truth and make your case. And this wasn't a mistake. Dalmia isn't that bright but she is not that stupid either. She knows the truth and chose not to tell it.

  • sarcasmic||

    Manufacturing is measured by output, not jobs.

    If you think the purpose of manufacturing is to create jobs, then you better outlaw tools and machines and computers and robots and every other labor saving device. Do everything by hand. Full employment!

  • John||

    Fair point. But the problem is that growth in manufacturing output has only occurred in the computer and electronics industry or 10% of manufacturing. Output in the other 90% has stagnated or declined.

    http://www.brookings.edu/~/med.....sworth.pdf

    And it is a good question of what the purpose of an economy is. You think it is to provide the most overall wealth and maximum amount of cheap shit. That is a reasonable answer. It is also a reasonable question to ask at what point is the cheap shit and overall wealth not so great when it comes at the price of long term structural unemployment.

    A society where say 30% of the population has no job, isn't looking for one and lives on the dole, can also be enormously wealthy and have all kinds of cheap shit. If you get rich enough, putting 30% of the population on the dole really isn't that hard. Is that the society we want? No one seems to ask that question. And everyone assumes that the judgement of "the market" whatever that is, is some kind of moral judgement that is beyond question and must be respected as if it were handed down by God.

  • Dallas H.||

    Manufacturing of buggy whips down, too.

    What does it matter if most of the growth is in electronics? I mean, they sure make a lot more of them now than in 1980. Isn't that what should happen - markets respond?

  • Cynical Asshole||

    Surely you're not implying that creative destruction is natural market phenomenon and a good thing are you?! Somebody, quick! Help me to my feinting couch! /sarc

  • Trigger Warning||

    A couch that helps with kinetic misdirection?! Brilliant!

  • Injun, as in from India||

    Make Buggy Whip Manufacturing Great Again!

  • sarcasmic||

    And everyone assumes that the judgement of "the market" whatever that is, is some kind of moral judgement that is beyond question and must be respected as if it were handed down by God.

    The market is nothing more than millions of people voluntarily interacting with each other over the course of their daily lives.

    No one said it is beyond question or anything like that (you do love your strawmen).

    However the alternative is coercion and violence to force people to involuntarily comply with diktats from people like you who feel that you know better how they should live their lives.

    Markets are by no means perfect, but they are infinitely better than the alternative.

  • ||

    It is also a reasonable question to ask at what point is the cheap shit and overall wealth not so great when it comes at the price of long term structural unemployment.

    Gooood. GOOOD. Let the fear of inequality flow through you. Soon your conversion to progressivism with be complete!

  • Cynical Asshole||

    And better get rid of the minimum wage too. If it's cheaper to automate than to hire someone to do some tedious, menial task, then you can bet your ass that menial task will end up being automated.

  • sarcasmic||

    Works for me. Telling certain workers that they may not legally sell their labor below some arbitrary price floor which forces them into perpetual unemployment is just plain cruel (and the original intent of the legislation, despite the emotive bullshit they spout today).

  • MoreFreedom||

    You're correct sarcasmic. From the perspective of manufacturing output, it has grown. http://mercatus.org/publicatio.....-jobs-1975

    The point of production is to produce value, not jobs. That value goes to those who produce, less the government's take (which is taken by force, unlike the income which comes from people who voluntarily buy their products). If you want jobs, the government can simply require that operators connect all phone/cell calls, or dig/fill ditches. The problem of course, is that government doesn't create value, it destroys it.

  • sarcasmic||

    Sorry, John, but it isn't a lie. In terms of output, American manufacturers produce more now than they ever did.

    They are doing it with fewer workers though. That much is true.

    But only a Luddite measures manufacturing output by the number of people employed in production.

  • ||

    If trade rapes you and you get pregnant, then it wasn't a legitimate rape.

  • Drake||

    What the Republicans will do (whether they mean it or not) is to promise BETTER trade deals. Of course trade deals are way too complicated for the average voter's attention span so it will just be rhetoric.

  • BigT||

    That's Trump's plan.

  • ||

    What the hell is a "better" trade deal?
    One where US consumers right to buy stuff is held hostage until some politically connected corporation gets to sell shit to Japanese consumers?

    Why should General Motors or GE's interests take precedence over my, or your, or anyone else's right to buy anything, from Japan, or anywhere else?

    We should unilaterally drop ALL tarriffs, and we'd be better off for it, irregardless of whether Korea or Japan or whoever else chooses to protect and subsidize their domestic manufacturing.

  • Suicidy||

    That's an easy thing to say. Not quite so easy if you're one of the poor bastards that competes an uneven playing field against a stacked deck. Which is a large part of what Trump is arguing against.

  • ||

    The fact that I don't have to pay tariffs to buy a Japanese car makes the deck stacked unevenly for you how?
    BOTH the Japanese car and the American car are being sold to me without tariffs. That is an even playing field in the US market.

    It's only IN JAPAN that the playing field is unlevel for you. Which is none of the US government's business. You're saying that we must make the playing field unlevel in the US to compensate for it being unlevel in Japan. As a favor to you. As a favor to specific industries and their employees.

    That's not leveling the playing field. That is crony capitalism, by definition.

  • Drake||

    Better trade deal has an evenly weighted control board...zzzzzzzzzzzzzzzzzzz......

  • Broken Window Factory||

    You don't understand, President Trump is going to negotiate awesome trade deals!

    I'll give you an analogy: Right now we poke ourselves in the eye and China pokes themselves in the eye. Under President Trump we will poke ourselves in BOTH eyes! OK, sure... we will probably have to let China poke themselves in both eyes too but that is how negotiations go, Art of the Deal, baby. I bet Trump can even negotiate us stabbing our hands with a fork or something, MAGA!

  • ||

    If you don't stop poking yourself in the eye, I'm going to poke out my other eye! I swear to fucking God! I'll do it!!!!

  • Cynical Asshole||

    Donald Trump last week offered a "plan" to return jobs and riches to America through "economic independence"

    The North Koreans call that "Juche". It's worked out really well for them. /sarc

  • ||

    Yes, let's create jobs by moving the entire manufacturing supply chain back to the US.

    We'll all have great jobs we a use to buy t-shirts that cost $50 each when the textile industry is on-shored.
    Imagine all the money we can spend on small appliances. $100 for a blender. $500 for a microwave. It will be just like the old days, with inflation.

  • Rhywun||

    You're still paying $100 for that blender now. It's just that $50 of it is taken by the government and given to someone on the dole.

  • Pay up, Palin's Buttplug!||

    And reopen all the American rare earth mine that were closed due to China's cheap rare earths!

  • Robert||

    Funny, they don't look (((Juche))).

  • El Oso||

    Shares of Vasoline are up we prepare to be raped by either Clinton or Trump...

  • Mongo||

    Blood is also a lubricant.

  • Suicidy||

    So basically, this is another pro-Hillary article from Reason. How shocking.

  • The Late P Brooks||

    The market is nothing more than millions of people voluntarily interacting with each other over the course of their daily lives

    Anarchy! Now, those Venezuelans know how to "properly" regulate markets and direct resources to their most highly valued uses. We should emulate them.

  • Injun, as in from India||

    Well said.

  • waffles||

    The GOP's free trade agreements are just asking for it.

  • MoreFreedom||

    When increasing government power over commerce creates economic stagnation, lower wages and less opportunity, you get populists blaming free trade and immigration rather than putting the blame on the politicians that deserve it. And the establishment will go along because both the establishment and the populists want the power, rather than returning the power to the people via free markets.

    Trade restrictions are terrible for economic growth, and great for economic decline. Consider the Smoot-Hawley Tariff Act of 1930: rather than economic growth, the economy shrunk by almost half within 3 short years before the act was repealed (see it in the Wikipedia article on Smoot-Hawley). Trump's claims that immigrants and free trade are causing this problem are bunk. He ought to know, since he has his Trump ties manufactured in Mexico.

  • trutherator||

    WHAT kind of GOP "free trade" thing? 30,000 page treaties are NOT free trade. New regional dictatorships are NOT free trade.

  • JagerIV||

    I do think Trump has the right of it though regarding massive universal trade deals: I don't see any reason for us to be trying to negotiate a trade deal with the whole pacific at once. Negotiating country by country seems wiser.

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