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Why Trade Is An Important Issue In the Presidential Campaign

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Why Trade Is An Important Issue In the Presidential Campaign

Politics

Why Trade Is An Important Issue In the Presidential Campaign

Why Trade Is An Important Issue In the Presidential Campaign

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Steve Inskeep talks to Dartmouth Economist Douglas Irwin about the perceptions and realities of trade policy in the current political primary season.

RENEE MONTAGNE, HOST:

Of the states voting for presidential candidates today, Michigan is the biggest prize. It's a state sensitive to debates over trade.

STEVE INSKEEP, HOST:

A poll shows 60 percent of Michigan Republicans want more trade restrictions on China, just to give one example that may help to explain why the candidates talk so much about trade.

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BERNIE SANDERS: Secretary Clinton supported virtually every one of these disastrous trade agreements written by corporate America.

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HILLARY CLINTON: I want to make sure that I can look into the eyes of any middle-class American and say, this will help raise your wages. And I concluded I could not.

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DONALD TRUMP: Does Mexico come here and build a plant in the United States? We lose a fortune with every deal we have.

MONTAGNE: Hillary Clinton, Bernie Sanders and Donald Trump are among those critiquing trade deals from NAFTA, 20 years ago, to the Trans-Pacific Partnership now.

INSKEEP: And Douglas Irwin has been following all this and more. He's a Dartmouth College economist who specializes in trade policy. Welcome to the program.

DOUGLAS IRWIN: Thank you for having me.

INSKEEP: What really is making trade such a potent issue in both parties?

IRWIN: Well, historically that's really been the case. We think back to 1992 when Pat Buchanan and Ross Perot ran on an anti-NAFTA platform. In 2008, Barack Obama ran against NAFTA - 2012, Mitt Romney raised issues with China. So trade has always been a sensitive issue in American politics because jobs are at stake.

INSKEEP: And you say jobs are at stake. In what way is that really true? You mentioned NAFTA. It's more than 20 years old now. Is there enough evidence to say whether free trade deals cost American jobs or add American jobs or something else?

IRWIN: Well, trade does destroy jobs in import-competing sectors, such as apparel and furniture. But so does technological change. And it also has to be pointed out that trade creates jobs in export-oriented sectors, such as aircraft and high-tech. So trade doesn't affect the number of jobs in the United States so much as it affects the composition of jobs. And unfortunately, some of those jobs are located in Ohio and Michigan, where heavy industry has traditionally been.

INSKEEP: Which makes sense. Does it affect how much people can get paid? Are there higher-paying jobs being destroyed for lower-paying jobs?

IRWIN: Actually, it's sort of the opposite. A lot of the jobs that are being destroyed in apparel and furniture were low-paying jobs. And a lot of the jobs that are being created are in aircraft and high-tech - are high-paying jobs. But still that said, wages have been flat even though total compensation is up because health care costs are taking that wedge, that bite out of people's paycheck. So people don't think they've been getting a pay increase at all.

INSKEEP: Well, tell me about something else that I think is in peoples' heads and that is part of the argument here. There's a sense that jobs may well be created. But jobs are also destroyed. People are thrown out of work. And the people who are really profiting are investors or stockholders. It may be good for the broader economy to do a trade deal. But it's really people at the top who are benefiting. Is that statistically true?

IRWIN: Well, people at the top have been benefiting. But it's not so much because of trade. If you look at the people in top 1 percent in law and entertainment, financial services, it's not because of international trade so much. And we sometimes forget that consumers and, particularly, downstream industries really benefit from imports. A lot of the imports that we bring into the country are needed by our manufacturing industries as inputs into production.

INSKEEP: For example, if we're talking about the auto manufacturing industry, which is centered in Michigan. They may get auto parts out of a Mexican factory, just to give one example.

IRWIN: Absolutely. And even our candy and confectionery industry depends on cheap sugar. And we have a sugar policy that keeps out cheap sugar. Marco Rubio from Florida defends that. But we've lost thousands of manufacturing jobs in our candy and confectionery industry.

INSKEEP: So we have a wide range of trade positions. Donald Trump has very loudly denounced NAFTA and other trade deals, has said the United States has done a terrible job of negotiating them. Bernie Sanders has a position on this. He's very skeptical of trade deals. Hillary Clinton favored the idea of the Trans-Pacific Partnership. But does not like the reality. We could go on for some time. What is the basic difference here as you follow the different campaigns? What are the sides?

IRWIN: Well, it's very interesting. Both parties have this division within them. Interestingly, public opinion polls suggest that Democrats support trade more than Republicans. But the Democratic candidates are speaking more to their union base in the party and opposing these trade agreements. Meanwhile, the Republicans traditionally have been, in recent decades, much more in favor of free trade. But the Republican base does not support trade as much. And now you see some candidates moving in that direction as well.

INSKEEP: Wow. Are you saying that on both sides the interest groups within the party are in a different place than the mass of voters within the party?

IRWIN: Well, it's a matter of degree. But it is surprising that in public opinion polls, Democrats tend to support trade more than Republicans, despite what you'd expect from the party leadership, which would be exactly the opposite.

INSKEEP: Professor Irwin, thanks very much.

IRWIN: You're welcome.

INSKEEP: Douglas Irwin of Dartmouth College, we reached him by Skype.

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