FREE-TRADE FEARS
U.S. presidential candidates vow to get rid of trade pacts, but once in office, they’ll change their mind.
Conventional wisdom has Canadians suffering a mild panic attack at the prospect of a U.S. presidential administration headed by Donald Trump.
Most fearsome is Trump’s demagoguery in vowing to tear up America’s free-trade agreements with Canada and other countries. That is an overwrought fear. The next U.S. president won’t noticeably change America’s trading practices.
There are many reasons why continued mutual benefit will prevail. But that’s obviously not how the outcome appears today.
The latest national U.S. election cycle has pulled back the curtain on three decades of accumulated rage among middle- and working-class families. They have not had a pay raise, adjusted for inflation, in 30 years. And, on average, they own only as much equity in their homes as they did in 1969, Richard Nixon’s first year in the White House.
And so Trump rips into the North American Free Trade Arrangement (NAFTA), part of the bedrock of the Canadian economy, at every rally.
His grandstanding obscures the fact that the last two Democrats standing in the presidential race, Hillary Clinton and Bernie Sanders, are also inveighing against free trade. They each vow to thwart the proposed 12-country Trans-Pacific Partnership, to which the U.S. and Canada are signatories. They would also scrap several years’ worth of effort in achieving a U.S.-European Union trade deal.
The spew on trade from these candidates is dangerous bunkum. Fact is, there is only a tenuous connection between free trade and the widening gap between rich and poor in the United States and Canada.
Long ago, New England’s textiles industry migrated to the low-wage U.S. South. And in the 1960s and 1970s, high-cost Pittsburgh lost its status as world’s biggest steelmaker to South Korea. That was long before the first sweeping trade deals on the continent, the Free Trade Agreement (FTA) between Canada and the U.S. in 1989, and the FTA’s successor, NAFTA, in 1994.
Yes, the “drive to the bottom” in wages is a factor of globalization, but hardly the only or biggest one. It does, however, obscure globalization’s benefits.
Among other virtues, globalization has Whirlpool Corp. of Michigan emerging as the dominant supplier of specially designed small fridges in the developing world; Honda Motor Co. Ltd. investing $800 million to expand its auto-assembly operations in Ontario; and a Fort Worth, Texas, engineer posted to Beijing to customize General Electric Co. engines made in Cincinnati for a Chinese airline.
Truth is, many of the “offshored” U.S. Midwest manufacturing jobs are not being lost to China or Mexico, but to the low-wage, “right-towork” U.S. South — the world’s newest sweatshop.
Both U.S. and non-U.S. firms seeking an American manufacturing location choose the U.S. South, where state rules make unionization impossible and where Americans are paid rock-bottom wages with minimal benefits.
And that also has nothing to do with trade deals.
Neither does the 30-year starvation of the U.S. education system, currently ranked 30th in the world. That tragedy has kept Americans who lose jobs in traditional manufacturing from upgrading their skills to fill the high-skilled, fulfilling jobs the country has in abundance.
Those jobs are to be found in tech, information technology, telecommunications, advanced health-care practices, financial services, environmental technologies and organic agriculture, among other fast-growing sectors.
But tuition costs for the necessary skills upgrading are prohibitive — a consequence of the dominant rightwing political orthodoxy in postReagan America, not trade policy.
Pointing to “trade deals that have been a huge boon to the U.S. economy,” the U.K. Guardian recently talked about Canadian fears of a newly protectionist U.S. with former Saskatchewan finance minister Janice MacKinnon, now a public policy professor at the University of Saskatchewan.
MacKinnon described with admirable clarity what’s happening in the unpleasant U.S. presidential campaign.
“It’s common in the United States, when they get into difficulty and people are struggling and they can’t explain why they’ve lost their jobs and why these manufacturing jobs are leaving, it’s a very common reaction to turn to protectionism,” McKinnon said. “It’s a very protectionist (presidential race), and we should be nervous about it.”
Indeed, Canada, like Germany, Australia and China, is highly reliant on trade. But Canada has no equal among major economies in its reliance on the U.S. market, though China has overtaken Canada as America’s largest trading partner. Exports account for 45 per cent of Canada’s GDP, and 79 per cent of those exports go to the U.S.
But here’s why there will be little meaningful change in U.S. trade policy regardless of who occupies the White House next January:
Without the TPP, many American goods and services would be denied favourable access to the other 11 TPP member countries in the biggest free-trade zone ever created.
By ripping up its existing trade deals and imposing steep tariffs on goods from China and Mexico, the U.S. would be launching a trade war. The last time the U.S. did that, with the infamous 1930 Smoot-Hawley protectionist legislation of the early Dirty Thirties, the U.S. helped worsen the Great Depression as world trade ground to a halt.
Punitive U.S. trade actions would harm some of Washington’s staunchest military, national security and economic allies — Canada, Japan, France, Germany, Australia and the United Kingdom among them. the United States would be ill served by alienating countries that help make possible Pax Americana.
Provocative campaign promises tend to melt in the heat of governing. Playing to blue-collar voters, Clinton and Barack Obama in their 2008 presidential races each vowed to renegotiate NAFTA. But in office, Obama not only left the pact untouched, he pursued the TPP and a trade deal with the European Union as well.
When she was a U.S. senator from New York, Clinton allowed that NAFTA had been a job creator for her state. Still later, as Obama’s secretary of state, Clinton helped negotiate a TPP she now says she opposes.
The undeniable malaise among the 99 per cent in the United States has little to do with trade policy.
It has almost everything to do with three decades of bipartisan public policy that has withheld economic fairness from the majority of the U.S. population.
Throwing a wrench into global trade would not help Americans a bit.
It would raise their cost of living still further, putting essential imported goods out of reach behind the tariff walls that Trump proposes.
A billionaire Donald Trump in touch with everyday Americans would learn why it is that Wal-Mart Stores Inc. is so heavily stocked with goods from China, Bangladesh, Malaysia, Vietnam and other lowcost countries.
These are the only goods that most Americans are able to buy. That fact, not trade policy, is why U.S. shoppers don’t “Buy American.” They can’t afford to. dolive@thestar.ca