Trump’s trade proposals fail to appropriately address currency manipulation

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Currency manipulation and manufacturing job loss

By Robert E. Scott • July 21, 2016

Why negotiating “great trade deals” is not the answer

Donald Trump’s recent speech in Pennsylvania about globalization and U.S. trade policy cited my research nearly 20 times. As a result, people have asked me if I agree with his trade policy prescriptions. The simple answer is no. There are particular issues that we agree on—such as the need to reject the Trans-Pacific Partnership (TPP). As I explain in a recent report (Scott 2016b), the TPP would cost jobs and drive down wages for most U.S. workers. But Trump’s claim, in that speech, that “the negotiation of great trade deals is the quickest way to bring our jobs back” is just wrong.

In his speech, the text of which was posted by Politico (2016), Trump says that he would “appoint the toughest and smartest trade negotiators to fight on behalf of American workers,” and immediately renegotiate the North American Free Trade Agreement (NAFTA). Like many of Trump’s statements and plans, this reflects a terrible mix of ignorance and hubris. First, it misses the simple truth—that the entire process by which we negotiate trade deals has been fundamentally captured by corporate interests. The idea that a billionaire who promises to cut taxes and regulations on corporations would negotiate better bargains for American workers is simply absurd. Second, and much more important, it misses the broader truth about what—beyond the recent recession—is causing our job losses. Over the past two decades, currency manipulation by about 20 countries, led by China, has inflated U.S. trade deficits, which (in combination with the lingering effects of the Great Recession) is largely responsible for the loss of more than five million U.S. manufacturing jobs. While Trump’s plan acknowledges the problem of currency manipulation, his plan for dealing with it—imposing tariffs on Chinese goods—would not work, and reveals a lack of understanding of how currency manipulation hurts U.S. workers and what to do about ...

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We need a trade agenda that addresses root causes

The core problem with Trump’s trade agenda is that it is not based on a coherent analysis of why globalization and trade and investment deals have hurt U.S. workers, and what should be done about it. Globalization and trade and investment deals have opened up trade with countries that engage in currency manipulation and other unfair trade practices to make their goods less expensive and undercut the competitiveness of U.S. products. While I touch on unfair trade later in this paper, the focus is on currency manipulation, because I believe it is the least understood and most important cause of manufacturing job losses.

Currency manipulation acts like an artificial subsidy to the host country’s exports (making their goods artificially less expensive) and as a tax on all U.S. exports, which undercuts the competitiveness of U.S. products, especially manufactured goods (which make up 70 percent of all U.S. goods exports [USITC 2016]). As a result, the growth of trade deficits since the late 1990s has eliminated millions of U.S. manufacturing jobs. Manufacturing provides good jobs with excellent benefits, especially for workers without a college degree. As unemployed manufacturing workers seek employment elsewhere, they are competing for the remaining jobs available to U.S. workers without a college degree, bringing down wages for all such workers....

Read more:
http://www.epi.org/publication/why-negotiating-great-trade-deals-is-not-the-answer/?utm_