What the Presidential Candidates Get Wrong About Free Trade



Alan Wolff

This article originally appeared on Fortune.com  on April 14, 2016.

It’s not a time to embark upon a new era of turning inward.

Every presidential candidate now recognizes a new political reality: Income inequality and depressed wages are making voters feel that the future will not be as good as the past. Yet politicians are reluctant to talk about the real causes of income inequality, and negatively talk about trade agreements instead. In fact, free trade has become a major theme in this year’s presidential race, and is bound to come up in tonight’s Democratic debate. But it’s time to stop blaming trade agreements and ignoring other causes of job loss if we’re ever to figure out what to do about the real problems that exist.

What the candidates ignore is that America’s market is already very open, and that really isn’t going to change unless the country wants to trigger a global economic downturn more serious than the one caused by the financial crisis in 2008. Trade agreements are mainly about leveling the playing field for American exports by opening up foreign markets, so they are the right policy for America.

Take Rochester, New York, for example. For over a century, Rochester was best known as the home of Eastman Kodak. At its peak, Kodak employed 61,000, but that number dropped to 7,000 before the company went bankrupt in 2012. It was a city with a lot of chemists and chemical plants dedicated to making photographic film. But as cameras became digital and stopped using film, Kodak tried—and ultimately failed—to pivot into the digital age. Even the digital cameras that it marketed were submerged in yet another technological revolution: smart phone cameras.

Neither trade agreements nor trade caused Rochester’s huge job losses. It was advances in technology, something no one can stop. But technology is the answer as well as the challenge. Investing in both education and research and development is the best hope to save the cities like Rochester, and it has made a lot of progress—creating a new economy around 22 colleges and universities that can and is bringing jobs back.

It is true that globalization is a major factor causing job loss. Containerization of freight has caused shipping costs to drop by 790%, and total U.S. trade has expanded by 585% over a 20-year period. The savings from cheaper shipping costs, due to technological change, dwarfs any effect of trade agreements liberalizing import barriers over the same period. The average U.S. tariff on imports of manufactured goods was 5.57% two decades ago, declining to 2.7% in 2013. Other factors that contribute to income inequality: Not spending what the country needs to on infrastructure cuts into construction jobs, not spending on education means fewer teaching jobs, and having a tax system that is not competitive for making products in the United States means fewer manufacturing jobs.

Why do politicians like Donald Trump, Ted Cruz, Bernie Sanders, and Hillary Clinton target trade agreements then? Because they can’t go to Baltimore’s container port and say, “Tear down those cranes that offload super container ships,” nor can they say to their supporters, “Throw away those smart phones, unplug your computers, and stop ordering anything over the Internet.” That would not sell. They should be talking more about investing in America—in infrastructure, in education, in training—by adopting policies that restore voters’ confidence that America’s future will be better than the past.

We used to call our presidents, and those who aspired to be our president, “leaders.” Every American president from Franklin Roosevelt to Barack Obama has been for opening markets—not only because they were world leaders, but because they concluded with advice from senior officials and support from Congress that opening foreign markets was good for the United States—and not just for business, but for workers. Most of the world’s consumers are outside of the United States. The trade agreement signed a few months ago with 11 Pacific-Rim countries is a good beginning. Six other countries in the region are interested in joining. What we have in common with them is that we know that growth in trade will bring economic growth at home.

There may be more heat than light in a presidential campaign, but there should be enough light to read a trade agreement. The Trans-Pacific Partnership Agreement is mostly about getting rules in place—rules against state-owned enterprises causing harm to private competitors, better protection of labor rights, and rules to keep the digital economy growing. There are a host of domestic programs that would start to provide the right answers for the crowds that now cheer the end of trade agreements—more job training, more education, better highways, and better airports. This is not a time to embark upon a new era of turning inward, but to champion good policies for the world economy for which the United States is still seen as the essential leader, and at home to advocate and implement progressive domestic policies that provide people with far better prospects for the future.

Alan Wm. Wolff is chairman of the National Foreign Trade Council and practices law with Dentons LLP in Washington D.C. He served in Republican and Democratic administrations as a senior U.S. trade negotiator.