Commentary: Trade and tradeoffs

Candidates keep economic debate overly simple

Certain certainties have long characterized American international economic and security policies. Pillars of those policies have been the North Atlantic Treaty Organization and, at least rhetorically, the principle of free trade.

However, those bastions of the U.S. international role have been called into question in the current presidential campaign.

Donald Trump has questioned the value of NATO and Bernie Sanders argues that other members of the alliance should pay more of the costs. Sanders said in last week's Brooklyn debate that the U.S. pays about 75 percent of the NATO costs, which is somewhat exaggerated, and, in any case, doesn't take into account all the indirect contributions made by European members. There is no doubt, however, that the U.S. pays a major share of NATO costs, and burden-sharing with the wealthier European countries has long been on the U.S. agenda.

NATO has been a central factor in U.S. policy since 1949 and was a bulwark during the Cold War. In more recent years NATO has greatly expanded membership from its original 12 countries to 28, including a number of former Soviet bloc nations in Europe. Trump says NATO is "very obsolete." And some maintain the organization is a Cold War relic. Defenders insist, however, NATO still has a critical role, including serving as a check on Russian ambitions.

Hillary Clinton, with experience as secretary of state, agrees that other nations should pay a larger share, but strongly defends NATO. "I will stay in NATO," Clinton affirms. She says that not only does NATO have a vital role in blocking an aggressive Russia, but adds, "Remember, NATO was with us in Afghanistan. They came to our defense after 9/11."

Issues related to trade and international economic policy have generated considerable attention in the ongoing campaign. The fallout from the financial crisis, the loss of American jobs and the stagnation in working and middle-class incomes have helped create an audience receptive to vows from Trump and Sanders that they will bring back millions of jobs from other countries, however unlikely that may be.

The essence of free trade is that goods move in international commerce without restrictions or barriers. Beginning with the international economic structure established at the end of the World War II, the U.S. has proclaimed itself as the leader of liberalized world trade. Although there have been protectionist moments, the U.S. has generally steered away from a protectionist course, and free trade has been sacrosanct.

Trump, however, would tear up existing and proposed free-trade agreements. He pledges to slap high tariffs on products from China, which might draw applause in campaign speeches, but would almost certainly set off a round of retaliations that would reverberate through the global economy.

American consumers would pay the price for protectionist policies. Those low prices at Walmart wouldn't be so low anymore.

Significantly, a large majority of Americans prefer paying lower prices, even if the less-costly items are made abroad. According to a recent survey, nearly three in four say they would like to buy "made in the USA" goods, but those items are often too costly or difficult to find.

Placing blame on China or Mexico or others for our economic problems and misguided claims about "currency manipulation" may provide some political satisfaction but won't resolve problems that have as much or more to do with technological advances that have eliminated or reduced relatively well-paying jobs. And although the unemployment rate is at the lowest since 2008, that point is receiving little attention because economic dissatisfaction remains strong.

Sanders says he will renegotiate all trade agreements and Trump proclaims himself as the master negotiator who will set everything straight from the American perspective. That boastfulness assumes unlikely pliability on the part of other nations.

And what these candidates fail to explain is that, as in many areas of policy, there are tradeoffs in trade policy.

Sanders and Trump strongly oppose the Trans-Pacific Partnership trade deal, negotiated by the Obama administration and 11 other countries, which is yet to be considered by Congress. Hillary Clinton supported the pact while she was secretary of state, but now opposes it. Ted Cruz also became an opponent. John Kasich is the only supporter among remaining major-party presidential hopefuls, seeing the TPP as strategic economic alliance against the Chinese.

Indeed, Secretary of State John Kerry said that without the TPP countries such as China will rush to fill the void and lower trade and labor standards even further.

Claims and counter-claims in the current campaign climate are over-simplifying multi-dimensional issues. There are some important steps that could be taken to uphold American interests without undermining key elements of international relations. More burden-sharing in Europe is certainly in order. Pushing China away from its mercantilist tendencies is important and finding broader consensus on trade agreements is essential. But abandoning NATO or abandoning free trade, however appealing that might sound on the campaign trail, would not be in American interests.

Commentary on 04/20/2016

Upcoming Events