Loading icon

Trading Economics for Votes

News & Features | October 24, 2016

From the anti-Trans-Pacific Partnership (TPP) signs brandished at the Democratic National Convention, engulfing the crowd in a sea of white and red posters, to Republican nominee Donald Trump lambasting the North American Free Trade Agreement as “the single worst trade deal ever approved in this country,” free trade has emerged at the forefront of the 2016 presidential election. Though a majority of economists agree free trade is net positive for the economy, many voters feel otherwise. With significant factions within both parties opposed to free trade, calls for protectionism—policies that protect the domestic economy from foreign competition—are reverberating across the country, demanding change and driving anti-establishment sentiment.

The impact of this development extends beyond the 2016 election. In “Importing Political Polarization? The Electoral Consequences of Rising Trade Exposure,” a group of economists track how growing trade with China has shaped congressional elections from 2002 to 2010. They found that districts most negatively impacted by trade agreements replaced moderate representatives with more partisan candidates. Moderate Republicans were likely to be replaced by conservative Republicans, particularly Tea Party members, and moderate Democrats were likely to be replaced by liberal Democrats or conservative Republicans. In other words, the harder a district was hit by free trade, the more disposed it was to elect polarized candidates.

At its peak, from the 1950s to the 1980s, manufacturing presented an opportunity for workers without a college degree to live comfortably in the middle class. Now, however, due to a larger number of college graduates and increasing competition from imports, manufacturing in the US has been on a steady decline, dragging unemployment, lifetime incomes, and domestic factory operations down with it. This might explain why many of the key swing states in this election have experienced significant import competition: Ohio, Pennsylvania, and Michigan, to name a few. Take Detroit, for example. As New York University professor Thomas J. Sugrue said, “Detroit rose and fell with the automobile industry.” Once a symbol of flourishing life and industry, Detroit’s appeal began to fizzle as import competition from foreign automobile producers posed a serious threat. Now, protectionism seems alluring to many Michigan voters— as already hinted by the victories of Bernie Sanders and Donald Trump in the state’s primaries—which pressures both presidential candidates to reject the status quo regarding free trade. When winning a swing state might hinge upon a candidate’s stance on trade, it is natural that this topic has been a key policy point in the election.

Many candidates who have a history of supporting free trade are beginning to face backlash and reverse their stances. Most notably, while Hillary Clinton once called the TPP the “gold standard,” she became firmly against it right around the October 2015 primary debate. Beyond that, Senator Rob Portman (R-OH) —a former US trade representative and a longtime member of the Republican establishment who voted in favor of fast-tracking negotiations for the TPP—publicly came out against the agreement in February when facing re-election pressure. Jeff Sessions (R-AL) praised Trump’s divergence from the Republican Party’s traditional pro-trade stance, writing, “This determination to protect American workers from reckless trade and immigration policies will grow the Republican Party and position us to win in November.” In his eyes, Trump’s fierce anti-free trade rhetoric presents the “opportunity” to incite party realignment by attracting disgruntled Democrats.

However, Professor Jeffrey Berry of the Tufts Political Science department doubts that these campaign promises will transform into actual policy. “Both parties have strong elements in them that are pro-trade,” he said. Professor Berry explained that politicians rely on businesses back home for funding and economic growth in their districts, and so they generally understand that protectionism would harm the economy and their personal careers.

This does not mean that protectionist rhetoric has not left a mark, however. “I see it—the Trump candidacy—as showing the potency of that issue, so I wouldn’t expect Congress to pass a lot of very large multilateral deals. In the future, the government will likely shy away from those and work more toward bilateral deals that are not quite as visible.” In a sense, politicians now understand the political “risk,” as Professor Berry described it, of being staunchly pro-trade. Introducing or voting in favor of a controversial trade agreement, such as the TPP, becomes low-hanging fruit for any opponent who might try to capitalize on such aggrieved voters. When predicting the trade stance of the next Republican nominee, Professor Berry said, “I don’t think they’ll be outwardly pro-trade. They’ll probably talk about fair trade, making good deals—I mean, Trump himself just says we need to make ‘better’ deals.”

Professor Berry conveyed hope that the nation is not heading toward an embrace of protectionism; instead, according to his judgment, the conversation will begin to focus on fair free trade agreements.

How can free trade agreements promote economic growth while also caring for those who might fall behind in the new economy? Though there are safety nets in place to support adversely affected workers—most notably, the Trade Adjustment Assistance (TAA), a retraining program—those who use such resources often complain that the resources are inadequate. Professor Berry criticized poor outreach by those retraining programs, saying, “I would venture to say that most people who lose jobs from factories and businesses that close down on their cities don’t end up in those programs.” The evidence supports this claim: even for the small percentage enrolled in the TAA, a 2007 GAO report found that in 2006 only 5 percent or less of such participants received wage insurance. US trade deals tend to advance skill-intensive sectors, and when low-skill workers are unable to access higher education or retraining programs such as the TAA, they often feel left behind. In many ways, without a proper safety net, these workers start to worry they may never be employed again.

To address this, policymakers need to demonstrate that they are committed to trade agreements that promote shared prosperity. Professor Thomas Weber, a professor of History and International Affairs at the University of Aberdeen in Scotland, drew upon a parallel moment in history. “What we’ve been seeing in recent years is something that the world also saw after 1873 —a global crisis of liberal democracy and therefore liberal capitalism, in that people either objectively felt worst off or at least perceived it as so,” he said. Yet, he remained “somewhat optimistic” because of recent events in Germany. After thousands protested outside the European Union’s offices in Brussels, Professor Weber said, “It just seemed that all these ideas of free trade would just go down the drain.” Then, however, the government changed tack, understanding that certain features of the trade agreements—such as the arbitration courts, which have been criticized for promoting corporate interests over the people—were too controversial and needed to be replaced. Professor Weber followed up on America’s own situation, arguing, “If that kind of narrative can change in a country like Germany, there’s no reason why we can’t also see that in the United States.” If the government commits sufficient resources to the TAA, introduces more policies to address the skills gap, and avoids provisions that might seem to only promote corporate interests, then pro-trade politicians can defend that they are promoting economic growth and shared prosperity. In turn, less polarizing figures will be elected to Congress and America will not have to sacrifice its standing in the world.

When giving a lecture to Tufts students on the future of nation states, Professor Weber said, “Ultimately, it was functioning states that made the illusion possible that you don’t really quite need them. It is often only in the breakdown of a system that you realize how important the system is.” Though he was commenting more on the political qualities of the nation state, the same argument can be applied to the age of economic integration. When a state cannot sufficiently control the manner in which it integrates—making itself vulnerable to an unfavorable balance of trade, a rapid loss of industries, or other economic issues that spark political controversy—there is a breakdown in the system. And in an age of rising protectionism, most recently shown by Brexit, states must strengthen their support structures for the victims who are already experiencing that breakdown firsthand. Otherwise, as the authors of the “Importing Political Polarization?” study warn, voters will feel inclined to close off America’s economy and elect more polarizing politicians out of a feeling of intense frustration with the status quo.