Armchair economists miss complexity of trade agreements

Not since Ross Perot’s “giant sucking sound” have the issues of free trade and free trade agreements featured so prominently in a presidential election.

Both Democrat Bernie Sanders from the left and Republican Donald Trump from, well, wherever it is he’s coming from have attacked international trade and free trade agreements, including the proposed Trans-Pacific Partnership.

The two candidates argue that economic globalization has hurt American workers, sending jobs overseas and leading to growing inequality at home. That idea resonates with many middle-class Americans who have seen their standard of living stagnate over the past few decades.

Even Hillary Clinton, whose husband famously pushed the North American Free Trade Agreement, has come out in opposition to the TPP, reversing her support from when she was secretary of state.

These arguments resonate because they reflect the experience of too many Americans — furniture and textile workers in North Carolina who watched their jobs melt away and once-productive factories close, machinists in Missouri, steelworkers in Ohio, autoworkers in Detroit.

It’s simple and easy to blame international trade agreements and globalization — but not completely accurate.

Trade and its effects on the domestic economy are enormously complicated. Many economists have studied this issue, and their findings conflict. How they tabulate costs and benefits affects their conclusions.

Certainly, trade has resulted in cheaper goods, which help middle-class Americans deal with stagnant wages. Still, ask most Americans if they’d rather have cheaper goods or good-paying jobs, and the answer probably wouldn’t surprise you.

Nor is trade the only culprit. Technological advances have contributed to the decline of manufacturing jobs. The United States actually exports more manufactured goods than it imports.

The public seems to realize this, at least the public writ large. According to Gallup, overall sentiment concerning international trade has improved. More people see it as an opportunity than a threat, though Republicans have become increasingly pessimistic.

Another complication in the opposition to trade agreements like the TPP is that they often involve more concessions on the part of trading partners than the United States. As former U.S. Treasury official Jeffrey Schott said recently, U.S. trade barriers are already relatively low while regulatory protections for safety and the environment are relatively high. Trade deals mostly work to lower other nations’ barriers and upgrade their regulatory standards.

Also worth noting is this: Even without trade agreements, trade is not going away. Jared Bernstein, senior fellow at the Center on Budget and Policy Priorities, notes that trade volume as a share of Gross Domestic Product has increased steadily, tripling in the last 50 years, regardless of whether new agreements were being signed.

“We won’t trade less because we’re not signing the next (free trade agreement),” he wrote.

In addition, the extreme protectionist policies offered by Trump would likely hurt middle America by provoking an economically devastating trade war.

Income inequality is real. The loss of manufacturing jobs is real. The anxiety and insecurity of the American middle class are both real and justified.

There’s a place on the campaign trail for robust debate about trade deals. But simple solutions offered by politicians trying to turn anxiety and insecurity into votes don’t help.

This story was originally published March 25, 2016 at 3:32 PM with the headline "Armchair economists miss complexity of trade agreements."