[CTC] Economist: Why opposing free-trade agreements is a clever campaign strategy

[Dolan, Mike]

"The potential losses of failure are larger than the benefits of success."

Opinion: Why opposing free-trade agreements is a clever campaign strategy
The Economist
April 4, 2016
http://www.economist.com/blogs/democracyinamerica/2016/04/trade-and-elections

Little has united Democratic and Republican candidates during America's primary season. Their mutual suspicion of trade, however, is a rare exception, as our recent article describes. Donald Trump says China "wants our people to starve" and Mexico is "killing us on jobs". He has proposed eye-watering import tariffs. Bernie Sanders blames the North American Free Trade Agreement for the loss of almost 700,000 jobs. And in October Hillary Clinton decried the Trans-Pacific Partnership trade deal that she once supported. Promising to restore the rustbelt by doubling-down on cheap Chinese imports is, it seems, an easy, patriotic message to sell.

A new paper by J. Bradford Jensen, Dennis Quinn and Stephen Weymouth at the National Bureau of Economic Research suggests that opposing free-trade agreements (FTAs) is indeed a smart campaign strategy. America has a comparative advantage in high-skill activities, such as the creation of computer software, but its low-skill activities are vulnerable to import competition. This vulnerability has increased through the signing of FTAs and the spread of globalisation, which has brought more emerging markets into the warmth of the global economy. According to the researchers, these trends have a demonstrable effect on voting in presidential elections.

At the national level, they found that a one-unit increase in the merchandise trade balance as a percentage of GDP was associated with a 4% increase in the share of the vote for incumbent presidents. And if the trade balance deteriorated by the same amount, an incumbent could expect to see their vote share fall by the same proportion. Digging further down with the aid of county-level data from the Census Bureau, they identified that a one-standard deviation increase in high-wage tradable manufacturing generated a small, 0.5% increase in the incumbent's vote share. However, there was a much larger effect at the other end of a scale, where a similar change in low-wage manufacturing causes a drop in the proportion of the vote of 1.3%.
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When the researchers looked at the crucial swing states, they discovered that the effect on voting among low-wage workers was approximately double. This is explained by the fact that six swing states-Iowa, New Hampshire, North Carolina, Ohio, Pennsylvania and Wisconsin-have a higher than average proportion of manufacturing jobs. The study suggests that presidents (and presidential candidates) have to be brave to endorse trade liberalisation. The potential losses of failure are larger than the benefits of success.

The study helps to explain how interest groups can skew national policy. Among consumers, free trade benefits everyone by lowering the cost of goods and improving their availability. For producers, free trade only makes conditions trickier for domestic-focused manufacturers. According to the National Association of Manufacturers, the sector supports 18.5m jobs in the United States, or around 13% of the private-sector workforce.  Sticking it to the Chinese might sound like economic populism, but to do so would benefit only a fraction of the electorate. And free trade has bought benefits to the vast majority of Americans. After all, thanks to economies of scale and cheaper labour, a made-in-China Donald Trump necktie costs just $60.




Michael F. Dolan, J.D.
Legislative Representative
International Brotherhood of Teamsters
Desk  202.624.6891
Fax    202.624.8973
Cell    202.437.2254

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