Conscientious conservatives (some still exist), libertarians and business interests have struggled to make the intellectual and macro-economic arguments in favor of free trade. Now, perhaps, the time has come to get into the weeds, see which Americans would be hurt by trade protectionism and hold the White House and Congress responsible for the harm their protectionist policies would cause.
Mark Perry of the conservative American Enterprise Institute has provided a useful chart to track the percentage of each state’s gross domestic product that is dependent on trade. He finds that “the average trade share for U.S. states in 2015 was 17.7 percent and ranged from a low of 5.3 percent for South Dakota to a high of 38.0 percent for Michigan. Following Michigan, U.S. states with the next highest trade shares in 2015 were Louisiana (35.1 percent), South Carolina (34.8 percent), Tennessee (34.7 percent), Kentucky (34.3 percent), Washington (30.9 percent) and Texas (30.7 percent).”
You’ll note that, with the exception of Washington, all of those states voted for President Trump; all but two have two GOP U.S. senators; and all but Washington has a majority of Republicans in their congressional caucus. In short, Republicans will own the results and should be held accountable by those states most likely to be affected by a severe disruption of international trade.
Perry explains: “Many U.S. states, especially those that are manufacturing- or energy-intensive, are highly globalized and depend on foreign trade for a large share of their state’s economic output and jobs. International trade activities (exports and imports) represent more than 20 percent of economic output (GDP) for almost one in three U.S. states, more than 25 percent for nine states, and 30 percent or more for the seven states profiled above. Manufacturing activities in the U.S. for automobiles, commercial airplanes, energy and other manufactured goods are increasingly dependent on intricate, cross-country, global supply and value chains for inputs, raw materials, parts, supplies and final products that make international borders increasingly irrelevant.”
Trump and his trade gurus want to disrupt and dismantle global supply chains, but at what cost and to be replaced by what? (The extent to which President Trump’s chief trade maven Peter Navarro’s views have been debunked as “magical thinking” and misguided, lopsided or plain wrong — and even foolish — demonstrates the intellectual weakness of the positions adopted by his boss.)
Not only do consumers benefit from international trading systems but so do domestic manufacturers, in part because shutting off our markets has ramifications for our exporters.
“In Trump’s fantasy world of international trade, he somehow thinks he can penalize U.S. companies with tariffs that will raise their import/input prices, but with no reductions in exports for companies like Boeing, GM and Ford,” Perry observes. “In the real world, those increased costs for inputs from tariffs would reduce domestic and foreign sales (exports) for U.S.-based firms, reduce their competitiveness and reduce their staffing levels (jobs).
Opponents of protectionism need to make the costs of protectionism clear. For example, the Center for Automotive Research (CAR) in a report funded by the auto manufacturers’ trade group found:
“If the U.S. were to enact a 35 percent tariff on vehicles imported from Mexico, CAR estimates it would lead to a sales reduction of 450,000 cars, which would imply the loss of nearly 6,700 North American jobs (some of which are U.S. jobs).
“In addition, higher prices on Mexican auto parts would trickle throughout the supply chains on both sides of the border, resulting in the loss of 31,000 U.S. assembly and parts jobs, CAR estimates.”
For American businesses, consumers and state and local officials, now might be a good time to hold these Republicans’ feet to the fire. How do their plans translate into growth and employment in their particular state? What effect will they have on manufacturing in their home states? For Trump and Stephen Bannon this may be part of some political gamesmanship to fan the flames of discontent in their base back in the Rust Belt. For people back home, their agenda would make 2017 look like the good old days..
Jennifer Rubin writes the Right Turn blog for The Washington Post, offering reported opinion from a conservative perspective.