By Michael Stumo, CEO
Peter Navarro, Director of the White House National Trade Council, wrote a "trade policy manifesto" op-ed published in the Wall Street Journal this week focusing upon balanced trade. The new balanced trade policy is unwelcome on Wall Street and in some congressional leadership offices. But it is welcomed by workers, farmers, ranchers and manufacturers that make and grow things in the US between the urban centers.
Navarro (you really, really need to read the whole piece) writes:
Do trade deficits matter? The question is important because America’s trade deficit in goods is large and persistent, about $2 billion every day. ...
[R]unning large and persistent trade deficits also facilitates a pattern of wealth transfers offshore.
Today, after decades of trade deficits and a mass migration of factories offshore, there is only one American company that can repair Navy submarine propellers—and not a single company that can make flat-panel displays for military aircraft or night-vision goggles. Meanwhile, America’s steel industry is on the ropes, its aluminum industry is flat on its back, and its shipbuilding industry is gathering barnacles. The U.S. has begun to lose control of its food-supply chain, and foreign firms are eager to purchase large swaths of Silicon Valley’s treasures.
That’s why, for both economic and national-security reasons, it is important to bring America’s trade back into balance... .
Navarro's piece makes clear that balanced trade is the priority to promote job creation, economic growth and national security. This is an economic nationalist message that helps Republicans with voters even though many elected Republicans do not share the administration's position. The message harms Democrats because the modern Democratic coalition cannot agree on an effective competing message (compassionate economic nationalism anyone?) and set of policies. This is because the modern Democratic party coalition consists of neoliberal free traders, college educated whites, racial and ethnic minorities, compassionate globalists, and working class voters who just want a good paying, secure job.
Both former President Obama and Hillary Clinton promised Ohio voters, during the 2008 primary, that he would renegotiate NAFTA. Clinton won the Ohio primary. Obama won Ohio in the general election... and the election. Republican presidential candidate John McCain has never seen a stack of documents marked "free trade agreement" that he did not support.
Certainly "renegotiate NAFTA" is not a comprehensive trade reform plan, but that is all we had to choose from.
Then Obama reneged. He did not renegotiate NAFTA. He pushed through the same old trade deals with Colombia, Peru and South Korea. Then he prioritized negotiating the Trans-Pacific Partnership (TPP) with Secretary of State Clinton helping.
Trump campaigned consistently on trade and jobs with a form of economic nationalism that some shy away from because of confusion with other more problematic forms of nationalism. Trump surprisingly disposed of the more globalist GOP rivals in the primary and then disposed of the more globalist Clinton in the general election. Clinton reversed her TPP support but not convincingly and with no other persuasive message for working class economic concerns.
The working class voters in the midwest and industrial states who shifted from their 2012 votes for Obama to Trump decided the election.
Stephen Bannon told a CPAC audience that Trump's governing agenda has three prongs:
Bannon gave a clear insight into the way the Trump team is approaching its rightwing agenda, setting out three “verticals”: national security and sovereignty; economic nationalism; and “deconstruction of the administrative state”.
He added: “One of the most pivotal moments of modern American history was his immediate withdrawal from TPP [Trans-Pacific Partnership].”
Bannon, who is either hated or loved, envisions a realignment of party coalitions that permanently wins elections for the GOP.
Many congressional Republicans are uneasy as we see with Senate Finance Committee and Ways and Means Committee pushback on the administration's trade plans. They still worry about the importers and multinationals. Traditionally, the majority of House Democrats have opposed trade agreements for social justice and/or economic reasons. Senate Dems and Republicans, as well as House Republicans, supported them. Now we are seeing more populist/nationalist Republicans in the House (not so much in the Senate) that are challenging the country club globalist Republicans.
Will Republicans change for the longer term absent the Trump influence? Will Democrats figure out an economic nationalism that works for them as opposed to compassionate globalism? For Democrats, the Bernie supporters may be the force of change if they can craft an economic message properly for the working class kitchen table.
CPA, with dedicated Democrats and Republicans among our membership, has championed "balanced trade" or "eliminating the trade deficit" since our founding in 2007. It is an American issue, not a partisan issue. The academic, financial and policy elite told us "trade deficits don't matter" even though basic global macro-economics considers persistent trade imbalances destructive. Many of our solid Democratic supporters consider themselves economic nationalists. Every year we made headway convincing more of the country and the DC folks, but the bastardized-ivory-tower-free-trade-theory-of-the-elites still held sway.
Wilbur Ross, Secretary of Commerce, is a business strategist. He replaced Penny Pritzker, a trust fund baby from Chicago who touted the TPP. Navarro is the rare economist that thinks about strategy rather than the outdated invisible hand. They know that nations that trade with each other are rivals, especially those that are competing for the same jobs and industries.
The US has not had a strategy for many years, relying upon in its old, failed free trade model. Executing a strategy sometimes means that somebody loses. Thus far it has been the US losing.
One reason for that lack of strategy is that economic policy leaders in past administrations think trade deficits are ok. Those include Jason Furman, top economic adviser for the Obama administration, and Douglas Holtz-Eakin, a senior economist for both the George H.W. Bush and George W. Bush administrations who bashed Navarro this week in DC.
But the academic elites and the Davos crowd no longer hold sway. Furman's and Holtz-Eakin's protestations may be last gasps of a failed ideology destined for the historical dustbin. What will replace it? We will see.