Fraser Forum

Free trade under attack in U.S. primaries

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One of the lessons coming out of the U.S. presidential primaries is the electorate's broad rejection of free trade.

On the Democratic side, Senator Bernie Sanders' popularity has in part been driven by his anti-free trade message. This is particularly true in Midwestern states where auto, steel and other industrial manufacturing in the region have come under increased competition by foreign producers. Sanders has criticized Hillary Clinton for supporting free trade, including the North American Free Trade Agreement (NAFTA), arguing: "Many, many Republicans and far too many Democrats who supported these disastrous trade policies... Not only job-loss by the millions, but a race to the bottom so that new jobs in manufacturing in some cases pay 50 per cent less than they did 20 years ago."

For her part, Clinton seems to have effectively disowned the free trade legacy of her husband. During her last run for the nomination, she advocated for a freeze on trade agreements and called to "re-evaluate" the merits of NAFTA. Likewise, this election cycle Clinton has distanced herself from free trade. For example, she is against the Trans Pacific Partnership (TPP), which she once claimed set the "gold standard" in trade agreements. This retreat on free trade has also been manifest in recent debates with Sanders, where Clinton appears to backtrack on NAFTA, deflecting criticism by shifting towards other issues.

On the Republican side, frontrunner Donald Trump has railed against existing free trade agreements. Last month Trump threatened to rip up every trade agreement. He has called NAFTA a "disaster." Trump has repeatedly called out the effect of free trade on wages and outsourcing employment and factories to foreign countries. His solutions? Impose tariffs on China to the tune of 45 per cent (Mexico will get by with just 35 per cent) and do a better job negotiating terms, Trump is also against the TPP.

Canada, heavily dependent on trade with the U.S., likely stands to lose if these concerns, skepticisms or hostilities towards free trade become a reality.

Trump's leading competitor for the GOP nomination, Senator Ted Cruz of Texas, is probably the most hawkish free trader of the bunch. Cruz supports NAFTA and has used foreign competition in manufacturing to justify reductions in U.S. regulation and taxes. Cruz also supports the TPP, though he has criticized subsequent amendments which, he argues, amount to crony capitalism and will also serve to undermine U.S. immigration laws. In line with his free trade mantra, Cruz repudiated ethanol subsidies in Iowa, a state that he actually ended up winning. The problem for free traders is that Cruz is largely disliked, particularly among members of his own party.

How did this anti-trade sentiment arise?

One reason may be that trade is largely amorphous and undirected, achieved by a spontaneous order of private interests acting in unison, not by the orchestration of a government bureau. As a consequence, its costs—jobs outsourced to other countries, and workers who need to change jobs more often or be retrained—are often seen but its benefits—lower prices and a wider variety of goods—are typically unseen. Interestingly, the "costs" of trade are actually its very benefits: exchanging one job for another frees up Americans to focus on what they do best, increasing productivity, leading to greater incomes and leisure. In short, our increased standard of living achieved by trade is easily taken for granted.

Recent polls suggest Americans still favour the idea of free trade—so long as they're the ones selling the stuff. To overcome these anti-trade biases one needs strong institutional support and articulate defenders of market dynamics among the political class. Unfortunately for Canadians, it does not appear the leading U.S. presidential candidates are up to the task, and will instead continue to stoke anti-trade sentiment.

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