The Skills Gap: Washington Post Economic Columnist Edition

July 10, 2017

Folks who passed their intro econ class know that it is net exports (exports minus imports) that affect output and employment. Not exports alone. Nonetheless, we find people like Washington Post columnist Robert Samuelson telling readers that Trump's decision to pull out of the Trans-Pacific Partnership (TPP) might undermine his agenda because "being outside these agreements [a TPP without the U.S. and European Union-Japan trade deal) would weaken U.S. exports."

[Dean Baker | July 10, 2017 |CEPR]

Since it is not exports that matter for output and employment, but net exports, it is not clear that Trump should be worried. The United States International Trade Commission (USITC) projected that the TPP would lead to a net loss of manufacturing jobs, meaning that it would increase imports more than exports. Since Trump made increasing manufacturing employment a centerpiece of his campaign, it doesn't seem unreasonable that he would oppose a deal that is projected to reduce manufacturing employment.

It is also important to realize that the USITC projections rule out the possibility that some of the countries in the agreement may deliberately keep down the value of their currency to increase their trade surpluses, as they have done in the past. The TPP would reduce the ability of the United States to take measures to punish such behavior.

It is also worth noting that contrary to what Samuelson implies, the U.S. is generally helped, not hurt, when our trading partners remove barriers between them. If an EU-Japan trade deal actually leads to stronger growth for both sides, these countries will be better trading partners for the United States. (It is possible that the increased protectionism in the pact, associated with longer and stronger patent and copyright and related protections may do more to slow growth than the liberalization measures do to increase it.)

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