What Liberals Should Learn About Trade From Trump’s Failures

Liberals who have been critical of past trade agreements are clearly not going to support Trump’s isolationist tactics that have led to a trade war. For example here is how Elizabeth Warren explains her position.

My plan is a new approach to trade — one that is different from both the Washington insider consensus that brought us decades of bad trade deals and from Donald Trump’s haphazard and ultimately corporate-friendly approach…And unlike Trump, while I think tariffs are an important tool, they are not by themselves a long-term solution to our failed trade agenda and must be part of a broader strategy that this Administration clearly lacks.

But as we watch Trump’s tactics fail, there are a few things we can learn that should be incorporated into future trade policy. The first is to notice that many of the complaints lodged by liberals about trade agreements focused on the import side of trade. That is because, in search of lower wages and less regulation, corporations exported jobs that resulted in cheaper products being imported from abroad.

As American farmers suffer from Trump’s trade policies, we have been given an updated course on the export side of trade. Like it or not, the agricultural industry in this country depends on selling their products overseas. But they aren’t the only ones. Back when the Transpacific Partnership trade agreement was being negotiated by the Obama administration, I pointed out that it was supported by the U.S. Conference of Mayors. Here is what Ron Brownstein reported about that (emphasis mine).

Houston Mayor Annise Parker, also a Democrat, was even more emphatic in a conference call with reporters. “We live on trade,” Parker said of her city. “It is important to our economy, it keeps people employed, and we absolutely believe it’s our future.”

New data released May 13 by the Brookings Institution’s Metropolitan Policy Program helps explain the mayors’ tilt toward trade…Brookings found that fully 86 percent of U.S. exports now originate from urban areas. Moreover, exports drove more than one-quarter of all metro area economic growth from 2009-2014.

That explains why, according to Pew Research, two thirds (67%) of Democrats say that free trade agreements have been good for the U.S. Urban areas that benefit from trade exports are overwhelmingly Democratic.

Negotiating trade agreements is complex, requiring a balancing act that meets the needs of workers affected by imports, while not damaging the workers whose jobs and wages depend on exports.

The other thing we can learn from Trump’s failures on trade is that, acting alone, the United States doesn’t have the leverage to dictate the terms of trade agreements. Almost immediately after Trump pulled out of TPP, the remaining countries moved ahead on the agreement without us. In addition to that, Japan used the template of that agreement to develop a trade deal with the EU. Meanwhile, Japan is willing to bide its time on developing one with the U.S.

While it is important to go into trade negotiations with high ideals, the United States is not in a position to completely dictate the terms of an agreement. For example, while we can push for higher wages for workers, expecting countries to match U.S. wages is not likely to prevail with many countries, especially those that were originally involved in TPP. They will simply walk away and look elsewhere for trading partners until we are willing to compromise.

Going the next step, what liberals can learn is that unilateral trade agreements tend to give up too much leverage when it comes to negotiations. As Michael Grunwald documented, the Obama administration re-negotiated NAFTA within the TPP agreement.

There was never a formal announcement of “NAFTA Modernization Talks.” There were no presidential tweets mocking the original agreement. But behind the scenes, President Barack Obama’s negotiators spent more than three years haggling and battling to update and upgrade the 1994 deal, and they eventually got a lot of what they wanted.

The key was how they got what they wanted.

When I asked Obama’s trade representative, Michael Froman, what his negotiating team had given up to Mexico and Canada in exchange for their TPP concessions to America, he replied: “Nothing!” Mexico and Canada were willing to play ball because TPP would give them better access to sell their products in Asian markets—and when Trump tries to renegotiate NAFTA, he won’t be able to offer that carrot now that he’s ditched TPP.

Rather than assume that the U.S. has the ability to dictate the terms of an agreement, we need to work in partnership with other countries to have leverage in trade negotiations. Here is how Catherine Rampell described the Obama administration’s approach to Japan during the TPP negotiations.

[A]s part of the TPP talks, the U.S. trade team spent about a year negotiating one-on-one with Japan about agriculture, with the understanding that whatever concessions the United States won would be granted to the other TPP member countries as well…Japan determined that the overall pact would be so valuable that it made the politically contentious choice of agreeing to our requests.

Candidates like Bernie Sanders and Elizabeth Warren, who have been critical of trade agreements in the past, have proposed plans for how they would approach them, including some positive elements. But a review of those plans indicates that they have failed to learn these lessons from Trump’s failures on trade.

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Nancy LeTourneau

Nancy LeTourneau is a contributing writer for the Washington Monthly. Follow her on Twitter @Smartypants60.