YANK-JACOBS: Presidential candidates should not decry free trade

The time has finally arrived when the populist elements of the two political parties agree on an issue: opposition to free trade. Unfortunately, on this particular issue, voters are being misguided by the oversimplification of long-term economic issues.

Vermont Sen. Bernie Sanders’ surprising victory in Michigan last week was largely attributed to his unwavering opposition to free trade agreements, which played well in a state hit hard by the decline of American manufacturing. According to exit polls, Sanders won 56 percent among voters who oppose free trade, The Washington Post reported.

Likewise, Republican frontrunner Donald Trump has made opposition to free trade a centerpiece of his campaign. As a result, he won a plurality of voters opposing free trade in Michigan.

The electoral successes of Sanders and Trump on the issue have caused their competitors to waver. Democratic candidate Hillary Clinton has withdrawn support for the Trans-Pacific Partnership and Texas Sen. Ted Cruz has also opposed the trade deal, though we know little about either one’s present feelings on free trade in general.

The election of an anti-free trade president will have serious consequences. In my Feb. 11 column, I highlighted the limitations of the presidency regarding domestic issues. Trade, it is important to note, is a key area in which presidents can utilize their leeway in foreign affairs to affect the domestic economy in the long term.

The Trade Act of 1974 created what is known as Trade Promotion Authority, or “fast-track,” according to the Congressional Research Service. This allows presidents to negotiate and submit trade deals to Congress for a simple up-or-down vote, without filibuster or amendments. In June 2015, Congress reinstated this authority through 2018 with a possible extension to 2021.

Given the inclination of congressional Republicans to deny victories to President Barack Obama, it seems likely that both the Trans-Pacific Partnership and the Trans-Atlantic Trade and Investment Partnership will be left in the hands of the next president.

For presidential candidates, railing against free trade scores easy points with working-class voters. That said, it also contradicts the near universal consensus among economists that free trade is better for the nation.

The problem is that it is easy to point to short-term job losses in concentrated sectors, while the benefits of trade accrue across society in the form of lower prices and greater choices for consumers. Citing manufacturing job losses, for instance, creates a more visible sense of loss than the few cents or dollars consumers save daily on myriad products — savings that accrue because all countries produce the products that they are able to produce most efficiently.

Consider the case in 2009, when Obama imposed a 35 percent tariff on Chinese tires in response to an unfair influx of imports. A Peterson Institute for International Economics study of the case shows that it saved a maximum of 1,200 jobs yet cost consumers an additional $1.1 billion in sum.

This amounted to approximately $900,000 per job saved, many times the amount it would have cost to pay for unemployment benefits and the retraining of tire employees. And the study claims the reduction of expenditures by consumers in other sectors as a result of increased expenditure on tires cost the United States a net 2,531 jobs.

Claims that protectionist policies will resuscitate dying sectors of the U.S. economy are completely unfounded. Trump’s website, for example, claims he will “reviv[e] American manufacturing.”

But as Paul Krugman of The New York Times noted, a look at the data suggests that between 1970 and 2015, America’s trade in manufactured products fell from roughly balanced to a 3 percent deficit, while employment in manufacturing sectors fell 15 percent. According to Krugman, this means larger forces than free trade are at play. Consider increased automation, for one.

Sanders, on the other hand, frequently claims the loss of almost 700,000 jobs as a result of the North American Free Trade Agreement. But this analysis is misguided.

Trade theory does concede that there will be short term job losses. But these losses are structural, meaning that in the long run, these workers can be retrained and total employment remains unaffected.

Such is, indeed, the case when one reviews long term employment trends. Since 1985 — approximately a decade before NAFTA and 15 years prior to the normalization of trade with China ­­­­— the United States has added almost 50 million jobs, according to the EconoMonitor. This is in line with long-term predictions.

This is not to say that the restructuring free trade necessitates is painless. But this is why free trade agreements are accompanied by trade adjustment assistance or aid offered to workers displaced by free trade. Luckily, Congress renewed this program through 2022 in June last year, The New York Times reported.

While certain terms of the specific trade pacts may indeed be objectionable, the rise of politicians categorically opposed to free trade is concerning. Compelling tales of job loss should be balanced against decades of economic analysis that display the costs of protectionism and show no job loss resultant from trade in the long run.