The Peterson Institute in Washington has published a report on the international trade policies enunciated by the two US presidential candidates during their campaigns. Its conclusion:
Clinton's proposed trade and international economic policies would damage American well-being, primarily but not solely due to her stated opposition to TPP and to further economic integration. The policies proposed by Trump are another matter altogether. His stated approach to the global economy of waging trade war and protecting uncompetitive special interests would be disastrous for American economic well-being and national security…We call them as we see them: While Clinton's stated trade policy would be harmful, Trump's stated trade policy would be horribly destructive.
The Peterson study models a couple of different scenarios, including a 'full-scale trade war' in which Trump imposes the threatened 35% tariff on Mexico and 45% on China, and abrogates NAFTA but doesn't end any other US trade agreements. The simulation assumes Mexico and China respond in kind. The result would be a serious recession for the US, which would take unemployment from under 5% to well over 8%. In time, trade would adjust and employment would return to normal within 7-8 years, but with slightly lower living standards.
Both candidates currently say that they would not agree to the Trans-Pacific Partnership (TPP), although a back-flip by Clinton is more likely than by Trump, despite her adamant language. When she was secretary of state she supported it and there is some family history of trade-agreement reversals.
For Australia, the economic case for participation in the TPP was always marginal. Plurilateral preferential trade agreements don't do as much harm as bilateral agreements, and while this 'platinum' set of rules blatantly favours US interests, some of the worst aspects were softened in the negotiation.
If TPP were to go ahead we would join in order to affirm our close ties with America, hoping to deepen their security commitment to the region. The TPP provides content and profile to America's 'tilt to Asia'. If this falls over, there is not much left other than words and past performance. Hence the response from Singapore, New Zealand and now Australia. Singapore's Prime Minister Lee Hsien Loong told President Obama face-to-face:
Your partners, your friends who have come to the table, who have negotiated, each one of them has overcome some domestic political objection, some sensitivity, some political cost to come to the table and make this deal. And if at the end, waiting at the altar, the bride doesn't arrive, I think there are people are going to be very hurt.'
NZ's John Key sang a similar tune.
'If [the US] abdicates leadership in the region, that role will get filled. It has to. In the end, these economies aren't going to stand still.' And Malcolm Turnbull chimed in: 'It is a statement of America's commitment to the region.'
But it is the economics, rather than security aspects, that is holding the TPP back in the US Congress. Bernie Sanders' view of the TPP is widely shared and (allowing for a bit of hyperbole) it's actually easy to agree with much of it:
The Trans-Pacific Partnership is a disastrous trade agreement designed to protect the interests of the largest multi-national corporations at the expense of workers, consumers, the environment and the foundations of American democracy. It will also negatively impact some of the poorest people in the world. The TPP is a treaty that has been written behind closed doors by the corporate world. Incredibly, while Wall Street, the pharmaceutical industry and major media companies have full knowledge as to what is in this treaty, the American people and members of Congress do not. They have been locked out of the process.
Everyone knows (or thinks they know) that globalisation and international trade has caused the slump in American manufacturing. Well, actually, the dollar value of American manufacturing output is at a historical high. The key problem is that this production is now done so efficiently that fewer workers are needed. In the period which showed the biggest impact of China becoming 'manufacturer to the world' (2000-2010), 88% of the fall in American manufacturing employment was caused by the huge rise in productivity: fewer jobs, done by more skilled people. If year-2000 technology had been maintained, manufacturing employment would have been almost 21 million, instead of just over 12 million. Technology has been far more important than globalisation. But who want to stop it? Who wants to bring back the steam engine and the hand-loom?
Nor can globalisation explain the extraordinary change reported in Nicholas Eberstardt's 'Men without Work', with labour force participation among American 'prime-age males' (25-54 year-olds) dropping sharply. One in eight is not even in the labour force. Combine this with the finding of Deaton and Case showing that mortality among white non-Hispanic males has risen since 1998, contrary to the downward trend in all other age groupings, thanks to drugs and alcohol, suicide, chronic liver disease and cirrhosis. This adverse trend was far strongest among the least educated.
Nor is it the impact of globalisation that Arlie Hochschild reports in 'Strangers in their own Land: Anger and Mourning on the American Right':
You are patiently standing in a long line for something you call the American dream. You are white, Christian, of modest means, and getting along in years. You are male. There are people of color behind you, and in principle you wish them well. But you've waited long, worked hard, and the line is barely moving.
Then 'Look! You see people cutting in line ahead of you!' Who are these interlopers? 'Some are black,' others 'immigrants, refugees.' They get affirmative action, sympathy and welfare — 'checks for the listless and idle.' The government wants you to feel sorry for them.
At a superficial level, a consensus seems to be forming that globalisation is the principal culprit for Brexit, the unnerving popularity of Donald Trump, and most of the world's ills. This is a convenient scapegoat for a whole raft of discontents of greater or lesser justification.
The sort of glib remedy directed at 'hyper-globalisation' by Dani Rodrik clearly misses the point. Many of the problems need political remedies. In economics, a basic measure would be to avoid having the sort of Great Recession that America is only now, eight years later, emerging from.
The TPP is no great loss, in itself: the day may come when the system of international governance can write a far better set of multilateral rules for the World Trade Organization, for international corporate taxation, for intellectual property, for global capital movements and the myriad of other global economic issues, rather than having these formulated within the vested-interest processes in a single dominant country. These multilateral economic rules will not be seen principally as a way of winning indirect security advantage over China; they will be designed to make the international economy work better. In the meantime, let's hope Donald Trump can't do too much harm to the existing system, imperfect though it is.
Photo: Gett Images/Bloomberg