How the Democrats Lost Touch on Trade

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[ Thomas Frank | September 12, 2016 | Politico]

One of the most startling developments of this most peculiar campaign season has been the emergence of trade as an electrifying political issue. We’re used to trade being the dry province of diplomats and academic economists—in large part because, for the past 20 years, trade policy has been a largely settled matter for the leadership of the two parties. On both sides, the signing of new trade agreements was long considered an obvious and unmitigated good thing.

Today, however, public fury over those same trade deals has become volcanic. Precious few Americans had even heard of the Trans-Pacific Partnership a year ago. Now, opposition to the deal is driving populists on both the left and right, and has even been adopted by the non-populist Hillary Clinton, a politician who has supported many such deals throughout her career.

We’re discovering that the consensus on trade was always something of a Washington illusion, propped up by the support of business elites plus the appearance of professional unanimity among mainstream economists. Those who doubted were dismissed as throwback isolationists, or as deluded radicals like the protesters who tried to disrupt the World Trade Organization meetings in Seattle in 1999, or as union types who simply “didn’t get it” (to use the favorite expression of the New Economy 1990s), anxious to protect their obsolete Rust Belt jobs.

How did the proud trade consensus crumble so quickly? Part of the answer lies in the destruction of economic authority generally in the aftermath of the 2008 financial crisis. The people who said they could perceive utopia in the trade deals of the past two decades were the same people who believed so unquestioningly in financial deregulation and balanced federal budgets.

But part of the answer lies in something Americans have a hard time talking about: class. Trade is a class issue. The trade agreements we have entered into over the past few decades have consistently harmed some Americans (manufacturing workers) while just as consistently benefiting others (owners and professionals). As a result, and more than almost any other issue, trade brings together the wealthy elements of both parties: the free-market business types in the GOP and the successful professionals among the Democrats.

Trade is an economic issue too, of course, but for members of the political class, where you stand on “free trade” is also a statement about who you are. Supporting trade deals highlights one’s attitude of broad-minded tolerance toward other nations and cultures. It establishes one’s knowledge of academic economics and one’s communion with professional consensus.

In reality, trade deals are complex arrangements produced by lobbyists and negotiators who fight over every comma, but you wouldn’t know it from reading mainstream commentary on trade. Thomas Friedman, the New York Times columnist, once famously said that he didn’t have to know the details of a certain trade deal to write in support of it. “I just knew two words: free trade,” and for him that was enough. Similarly, for the classes of people who run and write about our two political parties, trade deals are something abstract, something almost holy, a matter of being on the right side of history.

For the classes of people who run and write about our two political parties, trade deals are something abstract, something almost holy, a matter of being on the right side of history.

To understand “free trade” in such a way has made it difficult for people in the bubble of the consensus to acknowledge the actual consequences of the agreements we have negotiated over the years. That these deals have pounded American manufacturing employment, for example, is only now starting to dawn on certain elements of the commentary class. Elsewhere, as the economist Dean Baker has pointed out, we have a whole genre of punditry dedicated to resisting such knowledge, with the thinker in question squirming this way and that to downplay or come up with alternative explanations for what has happened to manufacturing in America, always seeking to get trade deals off the hook somehow.

Other unpleasant facts about trade have yet to make a dent in the consensus. That trade deals massively altered the balance of power between management and labor has not made its way into journals of mainstream opinion. That such deals aren’t really about free trade at all is still only an unsettling concept at the dim boundaries of pundit awareness.

Mainstream centrist Democrats have a highly specific reason to evade criticism of our trade deals: a guilty conscience. After all, it was the 1993 fight over the North American Free Trade Agreement that saw the Clinton wing of the Democratic Party stick the knife deep into the back of its longtime ally, organized labor. Among labor types, the NAFTA betrayal, plus the many Democratic trade deals that followed, has rankled for years; whenever I talk to union members, bitterness over trade almost always comes welling to the surface.

For the Democrats who got their way with NAFTA, 1993 was a proud moment, an enormous victory in their struggle to transform the party into the vehicle of the supposedly enlightened professional class. Everything that followed over the next decade made sense, then: financial deregulation; a soaring stock market; a “New Economy” that showered great prosperity on well-educated, “creative class” workers. It all seemed inevitable, part of a beautiful Davos fairy tale in which high achievement and virtue became almost indistinguishable.

In reality, there is nothing noble or moral—or even inevitable—about the path that globalization has so far taken. The truth is that you could organize international trade in such a way as to benefit or to hurt almost any class or social cohort you chose to single out. As Baker has written, trade deals could just as easily be written to drive down the profits of the pharmaceutical industry, or the medical and legal professions, or virtually anyone else. Just imagine what such globalization would look like, as we imported cheap prescription drugs from India, making medication affordable for ordinary people, and bringing vigorous international competition to bear on some of our country’s most grotesquely overpaid elites.

It now seems the public understood all these things better than the consensus crowd in Washington, and it was only a matter of time before politicians noticed. As they did, they peeled off millions of voters who sensed they had been poorly served by their leaders. Bernie Sanders didn’t win the Democratic nomination, but his endless war against modern trade agreements forced Clinton to line up against a treaty she had once called the “gold standard” of trade deals. Donald Trump put trade high on his list of crucial American grievances, and despite his own personal habit of outsourcing production abroad, he managed to walk off with the largest share of the Republican electorate.

It may have been inevitable that the Davos consensus would eventually collapse. It’s less clear what will emerge to take its place. Trump’s proposals on trade don’t amount to much beyond retaliating against companies that take advantage of NAFTA and a promise to negotiate “better” trade deals to replace our “horrible” ones. If Clinton is elected, she’ll have the even stranger task of inventing a new Clintonism to replace the old Clintonism. Assuming she is in earnest about it, her first job will be to heal the fissure that her husband opened up in the Democratic Party—a gulf in some ways wider than anything the TPP was meant to bridge.

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  • commented 2016-09-14 10:11:02 -0400
    Thoughtful, interesting insights from everyone! I love Ms. Krantz’s “equal opportunity protectionism” proposal. The global system of trade is inherently unstable, everyone can crash & burn, and it is always a good idea to drive defensively!

    Mr. Lapila is right about who has been getting burned and the importance of good paying manufacturing jobs.

    Mr. Ryan is “on the money” with his attack on globalists! Their vision creates a rudderless nation-state, which creates a very dangerous leadership vacuum. And it is always good advice to listen to what Bill Moyers has to say.

    And Mr. Bishop clearly states the case for seeing the problem in terms of good and evil. And that is a strategy that has always worked well for the United States. What could be better, after all, than another episode of cowboys and Indians? You just kill all the buffalo, shoot all the redskins, and march what’s left tearfully off to Oklahoma. Maybe “Free Trade” was the 11th Commandment. Then again maybe we are all sinners.
  • commented 2016-09-14 07:45:13 -0400
    This free trade agreement has helped the “non working” class get richer~ they sit in their offices and make money with other countries no the US~ The working class, people that made the goods, fixed the goods machines, fed the workers, housed the workers, etc have suffered and continue to suffer~ Welfare & food stamps are at an all time high~ why? There is no work for people that don’t have a 4-6 year education in business and they weren’t born with a silver spoon in their mouth. Not everyone is made to go to college and get an executive job~ We need manufacturing jobs for our common working people to prosper ~
  • commented 2016-09-13 12:42:01 -0400
    Thank you all for the most enlightening comments on the most important topic of our time because it all goes to gross wealth hoarding of predatory capitalistic globalism inequality vs, democracy…"Free Trade " does not mean free trade to the elite oligarchs of the world it means power and control. The globalist do not see nor recognize borders, nations laws or sovereignty. They only worship profit at any cost, any where to anybody. All the things you see happening in the election, social unrest, crime, drugs, Wall St. and “nation building” is the direct or indirect result of the current greed and unballanced trade we have today from unchecked wealth hoarding globalism. Unchecked globalism does not care about trade deficits or inballances. They only care about profits…For a greater perspective on this please read the (9-12-16) Bill Moyers blog at Campaign for America’s future.org “We the plutocrats vs. We the people: Saving the soul of democracy”. We are all in this together and the religion of money, power and inequality are all false gods. We must liberate reboot democracy to become again the true meaning of “The American Experience”.
  • commented 2016-09-13 12:18:10 -0400
    What people call “free trade” is NOT free trade. Paul Craig Roberts, the “Father of Reaganomics” says that “outsourcing U.S. jobs to China is the ANTITHESIS of free trade.” What it is is labor arbitrage, and it is a betrayal of U.S. workers by “our” government. China is repaying our “free trade” with mercantilism — which is the opposite of free trade.

    Cheap stuff from China saves the typical U.S. family about $3,000 per year, but it costs the typical U.S. family over $15,000 in lost wages per year. Our middle class is being destroyed — with the full compliance of our greedy, self-serving government.

    China is draining our wealth to build up their military and to enrich the honchos of the Chinese Communist Party.

    Our nation was built on mercantilism. Alexander Hamilton convinced George Washington that, if we were to become an independent nation, we must have strong tariffs to protect our industries from foreign competition. This was adopted and became known as the “American System.” Until 1913, our government was funded totally by these protectionist tariffs, and without any income tax. Over the past decades, these tariffs were “politicked” away, leaving us vulnerable to any country with cheap labor and no regard for human rights, worker safety or the environment (China.)

    Now these half-wits, who know nothing about economics, condemn “protectionism,” as if they knew what they were talking about. When Ross Perot opposed NAFTA, and talked about that “giant sucking sound,” of our jobs going away, he was right. When Al Gore presented Perot with a framed photo of Hawley and Smoot, he was proclaimed a genius because, “everyone knows that tariffs will start a trade war.” Thanks to Al Gore, we have lost eight million manufacturing jobs, and another 20 million corollary jobs — decimating the middle class. Of course, all of those former middle class factory workers are now on food stamps — and are more likely to vote for the Democrats.

    We have been in a “trade war” since NAFTA and the WTO, and China is winning. Our government has abandoned out middle class to political correctness and to the “experts” who are being funded by the multi-national corporations, and indirectly by the Communist Chinese. As Thomas Sowell says, these “experts” pay no penalty for being wrong.
  • commented 2016-09-13 11:59:56 -0400
    Continued — China is stealing our intellectual property, and draining our wealth — not to improve the lives of the Chinese peasants, but to build up their military and to enrich the honchos of the Chinese Communist Party. Donald Trump is the first presidential candidate to recognize that China is robbing us blind, and the first to promise to force the Chinese to “play fair.” The Chinese continue to be astounded at how easy it is to “eat our lunch.” They realize that they are cheating us, and are prepared to renegotiate our “trade agreements” should a strong and savvy leader emerge in the U.S. Trump is that strong and savvy leader to will get us a better “deal” with the Chinese, the Russians, and with all of our other trading partners.
  • commented 2016-09-13 11:54:13 -0400
    Another excellent essay by Thomas Frank. President Clinton’s campaign slogan in 1992 was “Putting People First”; which was supported substantively by the policy proposals developed by Robert Reich, who called for investing in the human capital of the middle class. Clinton then threw Reich under the bus and governed by the lights of Robert Ruben. Given Nafta, Welfare Reform and repeal of Glass Stegal; Clinton was the best President the Republicans could have wished for.

    But being against Free Trade should not come at the expense of abandoning one’s high-minded tolerance of other nation’s and cultures. Nor should it overlook the fact that America’s fundamental belief in individual economic initiative predisposes us as a people to believe in Free Trade.
    Therefore allowing the debate to be framed as a choice between Free Trade and Protectionism will not be successful, not help create a new governing political coalition not generate actually improved Trade policies.
  • commented 2016-09-13 11:53:31 -0400
    As Thomas Sowell says, Our public intellectuals “pay no penalty for being wrong, even when the results of their bad advice is devastating for the rest of us.” You could call the Zika virus “free trade,” and Thomas Friedman (of the New York Times) would be for it.

    We are practicing “free trade” with China by opening our market to everything they produce. China is practicing mercantilism, which is the OPPOSITE of free trade. A Jeep Grand Cherokee, which costs $27.500 here, costs $85,000 in China because of their PROTECTIONIST tariffs. China is cheating us in every way possible. They are stealing our jobs, our technology, our intellectua
  • commented 2016-09-13 09:00:55 -0400
    The 2008 financial crisis exposed the consequences of international capital flows; massive trade imbalances, contagion of bad debt internationally, “too big to fail” banking, income disparity both between and within countries – dynamic system instability of the entire global system where nobody gains “comparative advantage” but anybody and everybody can crash and burn. The system could just as well be designed around equal opportunity “protectionism” to protect everybody from everybody else’s screw-ups, but that would be too politically incorrect. Economics is exposed as reckless engineering on purpose giving only an afterthought to “systemic risk” and no preventative thought to system stability.