Shifting Trade Winds

In 2008, major public opinion surveys revealed record-high levels of skepticism about trade and record-low support for trade agreements among Americans. In 2009, results of those same surveys from Gallup, the Pew Research Center, CNN/Opinion Research, and CBS News/New York Times all suggest that American attitudes toward trade have lightened up considerably and are more in line with public opinion in years past. What explains this turnaround?

In a new Cato analysis, Scott Lincicome and I argue that America’s growing skepticism toward trade in recent years derives mostly from the perpetuation and persistence of three myths: 

  1. U.S. manufacturing is in decline. 
  2. The U.S. trade deficit means that America is losing at trade.
  3. Past administrations have been unwilling to enforce trade agreements.

Popularization of these myths by campaigning politicians has been abetted by mainstream media that have become fixated on selling information in dramatic, provocative, scary, and too-often misleading sound bites. When one considers the facts about the impact of trade on our lives, the degree of skepticism is inexplicable unless the impact of “bad press” is considered.

Too many Americans benefit from trade on a daily basis and too few have been adversely affected by trade for the survey results to reflect personal experiences or legitimate worries. After all, the Council of Economic Advisers reports that less than 3 percent of U.S. job loss is attributable to import competition or outsourcing, which means that most Americans don’t even know anyone who can attribute his woes to increased trade.

During the incredibly long election campaign of 2007–2008, antitrade rhetoric was rampant on the campaign trail. In most presidential debates (Republican and Democratic) leading into and during the primaries, trade was disparaged by one or more of the candidates on the stage. In February 2008, in the Democratic presidential debate at Cleveland State University, before millions of American television viewers, the late Tim Russert extracted promises from candidates Obama and Clinton to force Mexico and Canada to reopen NAFTA to fix its allegedly flawed and unfair provisions. If it wasn’t already by then, the word “trade” became an expletive in households across the country. And the public opinion polls cited above all bear that out.

But since the end of the political campaigns in November 2008, the imperative of politicians to disparage trade and demonize trade partners has dissipated (for the time being, at least). And a few other things have happened too. Without the constant buzz of antitrade political rhetoric filling the airwaves, Americans have had the opportunity to actually think about trade in the context of the current recession — and perhaps make some connections.

For example, the economy has been shrinking and unemployment has been rising, while imports and the trade deficit have been declining, too. When imports and the trade deficit were rising, the economy was growing and creating jobs, and unemployment was low. That is at odds with the stories politicians tell about how imports take our jobs away and that the trade deficit means that we’re losing at trade. Americans may be reckoning that higher levels of imports aren’t quite so bad, and that they even reflect a healthy, growing economy. After all, U.S. producers account for the majority of U.S. import value — mostly raw materials, components, and capital equipment purchases used to make things here — and, lo and behold, manufacturing exports are way down over the past year as well. Maybe more trade isn’t such a bad idea.

In addition to the decline in antitrade rhetoric and the linkage that Americans can more readily draw between trade and economic growth, there is the fact that the trade rhetoric has actually turned favorable since President Obama assumed office. Avoiding protectionism and growing our economy out of recession through trade have been thematic in Obama’s early trade policy articulations. That is not to say that there haven’t been incidences of protectionism since January 20. There have been a few and there continues to be consideration of measures that would further limit the freedom of Americans to transact with whomever and as they see fit. But in the preferred political rhetoric of this administration, trade is no longer the bad guy. And protectionism, quite appropriately, in the current dialogue is being linked successfully with policies that turned the recession in the 1930s into the Great Depression.

This set-up is laying the foundation for an Obama trade policy that is likely to be far more accommodating and liberalizing, and far less provocative and restricting, than many had feared. And I can’t say that I’m not looking forward to watching chagrined protectionist constituencies come to terms with the fact that their moment appears to have passed.