Opposing so-called free trade deals has been an important part of the rhetoric of presidential candidates in both parties, especially polar opposites Donald Trump and Bernie Sanders. They blame free trade for the loss of American jobs, the decline in workers’ real wages, increased income inequality, and a shrinking middle class.
From their opposing ends of the political spectrum, Sanders and Trump have ignited an important debate about just who benefits from free trade. Sanders criticizes free trade as a proxy for corporate greed, while Trump says such deals serve politicians who put the interests of corporate contributors over those of ordinary Americans. Both candidates roll out the full Monty of free trade criticisms and argue that the U.S. needs to be smarter about sustaining a global trading order that supports America’s workers and economic interests rather than playing the victim for trading partners who steal jobs and play by rules that don’t reflect American social and environmental values.
They are fed up with being out-traded and out-negotiated in deals that are the serial killers of American jobs. They believe other countries engage in managed trade, not free trade, and play the game in a way that produces trade surpluses for them and fewer lost jobs for the U.S .
Opposition to free trade is a major vote getter; a way to leverage voter anger and bond with ordinary Americans. In some parts of the country, it has served as an organizing principle in a deeply divided electorate.
The typical American family saw its wealth decline significantly in the wake of the Great Recession and many voters have begun to question the fairness and adequacy of past trade policies. Deals such as the 1994 North America Free Trade Agreement (NAFTA) have been blamed for massive job losses.
Barack Obama repeatedly criticized NAFTA during the 2008 Democratic primary battle, noting that “we can’t keep passing unfair trade deals like NAFTA that put special interests over workers’ interests.” Trump and Sanders, hoping to win support from working class voters who are not fans of globalization, fervently oppose the ambitious 12-member Trans-Pacific Partnership pact the president supports.
Manufacturing’s contribution to U.S. employment has fallen steadily for more than half a century. Over the last 20 years, tens of thousands of factories have closed and many have moved to lower wage countries like Mexico, China and Vietnam. The sword of additional plant closings hangs over the heads of workers as companies pursue the classic go-to move of chasing cheaper labor.
Both Trump and Sanders cite the Carrier Corp.’s recent announcement that it will close its Indianapolis manufacturing plant and move all 1,400 jobs to Mexico. The move comes after the company was awarded $5.1 million in taxpayer money in 2013 under the Clean Energy Tax Credit Program. The funds were supposed to be used to “expand production at its Indianapolis facility to meet increasing demand for its eco-friendly condensing gas furnace product line.” Carrier says it has not received the money and will not claim it despite having been awarded the funds.
Carrier is another example of how low-wage countries can raise their living standards and impoverish American workers by importing American jobs and industries. You could argue that Carrier and other firms are really engaging in the exploitation of cheap labor, a form of economic arbitrage rather than trade, but this would not accrue to the political advantage politicians pursue.
While Carrier’s move will in theory reduce the cost of its products in the U.S., who will compensate the 1,400 workers losing their jobs or the community’s tax base? Is it any wonder that large numbers of voters prefer protecting domestic jobs from low-wage countries over lower prices for consumer goods?
To hold the line, Trump and Sanders contend it is time to rethink free trade and advocate for quotas and tariffs that protect and defend American interests and values rather than those of special interests such as multi-national corporations. On that issue they may have a point.
Originally Published: April 2, 2016