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Columns, Opinions

Shanmugam ’23: Free trade is under attack

By
Staff Columnist
Tuesday, October 20, 2020

Twenty years on, the 2000 Republican Party platform is surprisingly similar to its 2020 counterpart ― from its commitment to “rebuilding the American military,” to lamenting that the federal tax code “penalizes hard work.” Yet one section of the document stands out like a big, red elephant in the room. A whopping five paragraphs exalt one pillar of the GOP’s economic plan as “The Force of Economic Freedom”: free trade. The party demands reductions in tariffs and expedited procedures to approve free trade legislation, while arguing rightfully that the benefits of trade are enormous for “producers and consumers alike.”

Fast forward 20 years, and Donald Trump’s words on free trade are a little less eloquent and a lot less optimistic. From the start, President Trump lambasted multilateral trade agreements such as the Trans-Pacific Partnership (TPP) and the North American Free Trade Agreement (NAFTA), while demonizing China for its predatory economic practices. He cited three key justifications: shielding workers at home from foreign competition, leveraging the renegotiation of trade deals and protecting national security. Besides the rare, quiet complaint ― e.g. GOP Senator Joni Ernst says that she “really … hate(s) the tariffs” ― the president faces no real, legislative opposition on his anti-trade, interventionist warpath. 

President Trump has turned the party of free trade into the party of protectionism. And across the aisle, establishment Democrats have faced internal opposition to their support for deals like the TPP, as political progressives such as Bernie Sanders and Elizabeth Warren railed against the agreement in the Democratic presidential debates. 

Free trade is nearing political homelessness, with destructive consequences for consumers, producers and American economic growth. 

The noisy rhetoric of anti-trade figures like President Trump obscures the fact that about 80 percent of Americans actually view foreign trade as an opportunity for economic growth, and with good reason: Consumers in this country are better off because of it. The underlying rationale for free trade is that different countries are better at producing different goods efficiently. For example, low labor costs make China and Vietnam perfect places for manufacturing processes that require relatively little skill, while fertile soil and an established, innovative agricultural sector make the United States one of the world’s top exporters of soybeans. When economies trade, their respective consumers can purchase goods at lower costs. The impacts are substantial: One estimate claims that every American saves $260 each year as a result of trade with China.

And President Trump’s claim that trade kneecaps manufacturers lacks nuance. For decades, manufacturing employment has decreased ― but not necessarily because American manufacturing is worse off. Indeed, manufacturing output in the U.S. has actually increased. As economies became more interconnected throughout the late 20th century, corporate leadership realized that the supply chain could be unbundled: design, construction and assembly could each occur in different locations thanks to then-state-of-the-art shipping processes. The result was cheaper, more efficiently produced goods and services that required fewer American workers. In this light, President Trump’s protectionist crusade against declines in manufacturing employment overlooks the value that free trade creates for most Americans.

But perhaps the best argument in favor of free trade is what happened when it went away. President Trump’s trade war attacked the underpinnings of the U.S.-China economic relationship, placing tariffs on $350 billion worth of Chinese goods. It is debatable whether the tariffs actually motivated changes in the behavior of Chinese firms and their government; it is empirically obvious that consumers have borne most of their cost. The price of washing machines, for example, had increased by 12 percent as of April 2019.

Tariffs on some resources could even wind up hurting the domestic manufacturers that President Trump hopes to protect. For instance, plenty of these companies rely on Chinese steel and aluminum to build their products, meaning that tariffs ― which drive up the cost of cheap, imported steel and aluminum ― are squeezing their bottom lines, risking the very jobs at the center of the president’s political rhetoric. Some research suggests that each steel or aluminum industry job created by the tariffs causes 13 others to be lost in industries that require these metals as inputs.

The president is blind to the realities of his protectionism: It distorts American markets, leads to inefficient economic tradeoffs and upcharges consumers for goods of unchanged quality. It is today unclear where free trade lies on the political spectrum, and without anyone to preserve it as a political ideal, Americans can no longer count on the benefits it provides. 

The modern Republican establishment finds it natural to cling to many of the ideas it had 20 years ago. Free trade, not so much.

Arjun Shanmugam ’23 can be reached at arjun_shanmugam@brown.edu. Please send responses to this opinion to letters@browndailyherald.com and op-eds to opinions@browndailyherald.com.

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