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CRECELIUS: Presidential candidates’ trade rhetoric flawed

April 30, 2016

CreceliusExpect to hear more about trade as the presidential candidates push through the primaries, nominations and into the general election. The trade deficit is increasing, the United States’ overall share of global exports is down, and it looks as though the Trans-Pacific Partnership—a free-trade agreement among 12 Pacific Rim nations—faces a diminishing chance of passing Congress this year.

While deficits are not always bad in the overall flow of trade, trade has become an easy subject to attack on the campaign trail. Unfortunately, while the candidates often make valid points, they more frequently leave out information, misleading the public on the effects of their proposals.

Donald Trump has blamed foreign governments for our trade deficit, claiming currency manipulation has enabled their dominance in trade—a development he wants to halt with retaliatory duties. Yes, some foreign governments have questionable monetary policy, but gains in trade are often returned in foreign direct investment, creating new or expanded opportunities in the United States. This is part of trade balance. Trump has offered no plan to help offset possible reductions in FDI or other retaliation from foreign governments that his higher duties would spawn. One problem might be solved, but another is created in its place.

Bernie Sanders has consistently opposed most trade agreements, recently criticizing the lack of labor and human rights in developing countries as reasons not to move forward on TPP. Yet trade agreements actually can help transition poorer nations to higher standards of living, while also opening coveted new markets for American goods and services.

Ted Cruz has joined in, too, combining his general support for free trade with vague support for something he calls “fair trade.” This new fair trade would levy value-added taxes that would further burden imports. Unfortunately, Cruz does not seem to take into account that these taxes would raise costs for American companies, which use nearly 60 percent of our nation’s imported goods.

Hillary Clinton has gone back and forth, shifting from general support for trade agreements when she was secretary of state to now broadly opposing them in tune with her competitors, almost overnight. She has been advocating for the Export-Import Bank of the United States—a credit agency that facilitates the export of American goods and services that lost and regained authorization last year. Ninety percent of its deals benefit U.S. small businesses in some way, according to Bloomberg. But it also has been awash in corruption and favoritism, hindering its effectiveness and costing taxpayers.

As each of these examples demonstrates, it is narrow-sighted to focus on limited aspects of a trade policy and then use those aspects to indict or endorse the entire policy. For every issue, there will be an individual, company or government that stands to gain and lose something. That is what trade is all about: trade-offs.

What the candidates are missing as they argue for specific policies is a recognition of the losses inherent in those same policies. This failure to acknowledge what is sacrificed in order to gain is a denial of the consequences of proposed decisions, which makes their arguments incomplete at best, misleading and wrong at worst.

International trade is incredibly complex. It is up to us to go beyond the pandering and support policies that acknowledge real gains and real losses. Remember that when the primaries come rolling in on May 3.•

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Andrew Crecelius is a student in Butler University’s MBA program and operations manager for the Greater Indianapolis Foreign Trade Zone Inc.

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