Why Sanders and Trump are wrong on trade

Former deputy States trade representative Miriam Sapiro writes in the NYT:

Here are some facts lost in the heat of primary season. Excluding oil, the States actually has a trade in manufactured goods (you read that right) with the 20 countries with which it has trade agreements (although that does not include China). Over all, the States enjoys an annual trade surplus in services, driven by financial services and intellectual-property licensing, of more than $200 billion.

Trade agreements support these trends by prying open foreign markets for American goods and services. Without greater access, the States will have a difficult time creating more jobs: Nearly all of the world’s population lives outside its borders.

The Department of Commerce estimates that every increase of $1 billion in exports sustains nearly 6,000 jobs, and that export-related pay on average 18 percent more than jobs focused on the domestic market. We’d be foolish to start a trade war by imposing tariffs on products from China, Mexico or other countries, which would increase prices and invite retaliation that would hurt American exports.

Tariffs damage both countries. They damage exporters, they damage consumers and they also damage the overall economy by protecting selected industries and not having investment flow to the areas where a country has the best competitive advantage.

To understand how dismantling trade barriers helps the country, we also need to take a broader view of the American economy, and not focus solely on disruptions and lost in particular sectors.

There are many things economists disagree on. But there is a near universal (over 85%) view that reducing trade barriers helps the economy of all countries. The political problem is that the sectors that lose are specific and known and can be blamed on the loss of protection, while the job gains are more widespread and not associated with the removal of barriers.

For example, while the North American Free Trade Agreement is routinely criticized as sending American abroad, data from the Peterson Institute shows that in the seven years after the pact’s passage, nearly 17 million jobs were added in this country and unemployment fell to 4.0 percent, from 6.9 percent.

The rhetoric against NAFTA is false.

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