Trade war starts new chapter in age of Trump

The 2008 recession hit Columbus, Ind., hard. 

The city’s largest employer, the heavy equipment manufacturer Cummins, saw its sales drop 30 percent, or more than $1 billion, in the space of just the first quarter of 2009. The company announced a round of 800 layoffs, then another 600 and then another 2,600. 

{mosads}“We were in pretty good shape prior to that,” said Bill Lentz, chairman of the Bartholomew County Council.

But as the rest of the country struggled through a moribund recovery, Columbus bounced back faster. It was bolstered by foreign trade, which Cummins relies on for about half of its business. Massive stimulus measures taken by governments in China, India and Brazil fueled demand at a time when Cummins, and Columbus, needed it most.

“Our strong global position has enabled us to quickly capture the growth now occurring in these regions,” Cummins President Tom Linebarger told investors on the company’s first-quarter 2010 earnings call.

This is the eighth story in The Hill’s Changing America series, in which we explore the trends shaping society and politics today. The growing divide between thriving urban cores and struggling rural regions is exacerbating a widening political dispute over the benefits and drawbacks of international trade agreements, a debate that threatens to splinter long-established political coalitions.

The debate over free-trade deals has for decades pitted globalists on both sides against both more liberal and conservative opponents. It divides the political elite, who embrace a rising-tide-lifts-all-boats view of trade deals, from those who believe such deals leave the American worker behind.

And it exposes a major divide between big metropolitan areas that benefit most from international trade and smaller towns that are the most vulnerable to global economic fluctuations. It is in those towns that dissatisfaction with trade deals has grown, even while trade remains the lifeblood that fuels their economies.

Cummins is an integral part of the community in Columbus, where it now employs about 8,500 people. The company has recently invested $300 million in a new plant in nearby Seymour and in a technical center, opting to build at home rather than at sites in India or the United Kingdom. In the last three years, the company’s philanthropic foundation has given away $27 million, much of it to the local United Way, Indiana’s Boy Scouts affiliate, the Columbus Philharmonic and the Columbus Park Foundation.

Without trade, those jobs and that community support may have gone elsewhere — or dried up altogether.

“Accessing consumers in international markets are really important to our business and critical to job creation here at home,” said Jon Mills, a Cummins spokesman. 

Large metropolitan areas dominate American exports: Just six cities — New York, Los Angeles, Houston, Dallas, Chicago and Seattle — account for a quarter of the nation’s international export trade.

But smaller towns are more reliant on trade for a share of their gross domestic product (GDP). The $2.8 billion in goods exported from Columbus in 2015 accounted for 50.6 percent of the city’s entire GDP, a higher share than any other city in America. 

By contrast, Seattle-area businesses exported $51 billion in goods that year, accounting for 17.9 percent of the city’s GDP. Seattle benefited more from trade, but trade mattered less to the city’s overall economy than it did to Columbus’s economy.

The dependence of small towns such as Columbus on international trade can lead to tougher times during a recession than what big, less dependent cities experience. Between September 2008 and June 2009, Columbus’s unemployment rate rose from 4.5 percent to 11.2 percent.

“There are costs to trade,” said Joseph Parilla, a fellow at the Brookings Institution’s Metropolitan Policy Program. “If you’re one of those places where an industry is in decline because it’s being outperformed by global competitors, it can lead to social changes.”

Big cities, too, are better able to absorb workers who have lost their jobs due to trade-related causes. The federal government offers those workers retraining and education through trade adjustment assistance programs, and the percentage of workers affected by trade is higher in small communities.

Half of all workers who have become eligible for trade adjustment assistance since 1994 live in the 100 largest metro areas, according to Parilla’s research. But three times as many trade-displaced workers live in rural areas and twice as many live in micropolitan areas as in larger cities, according to the Department of Labor — a sign that those who lost jobs in big cities were reabsorbed more easily into other companies or other industries.

“If you look at where trade adjustment assistance has been most intense, it’s been in these smaller places,” Parilla said. “Diversity of the economy is important for resilience reasons. You can take a punch or a shock and absorb those workers that may have lost their jobs.”

In a small community without a diversified economy, losing a job is akin to losing a livelihood. And the recession, during which the nation lost more than 2 million manufacturing jobs, represented what amounted to a national shock to the system.

“You see pools or populations of people that were not able to assimilate back into a capitalistic economic environment,” said Marquita Walker, a labor studies expert at Indiana University-Purdue University Indianapolis. “There is no place else for these workers to go.”

And that makes those workers receptive to a messenger promising change — especially change to the trade programs they believe cost them their jobs.

No presidential nominee took a tougher line against international trade deals than Donald Trump, who as a candidate pledged to kill the Trans-Pacific Partnership (TPP) and renegotiate the North American Free Trade Agreement (NAFTA). Trump repeatedly cited debunked statistics and studies, but his rhetoric tapped into a growing vein of dissatisfaction with the deals that free billions in commerce across international borders.

On the Democratic side, Sen. Bernie Sanders (I-Vt.) also promised to kill the TPP. His opposition forced Hillary Clinton, who as secretary of State in the Obama administration had once called the deal the “gold standard” of international agreements, to disavow her support for the TPP. 

Trump’s attacks on the TPP and NAFTA came after a remarkable shift in public opinion of trade deals. During the last days of George W. Bush’s presidency, Republican voters were more likely than Democrats to say trade deals benefited them financially. 

By the end of the Obama administration, Republicans were more likely to say trade deals hurt them, while two-thirds of Democrats said those deals were good for the country.

Those in small towns rewarded Trump’s skepticism. In the 25 cities most dependent on trade, cities where former President Obama scored an average of 44 percent of the vote in 2008, Clinton won just 35 percent of the vote in 2016. Twenty-two of those 25 cities most dependent on trade, including the entire top 20, are represented in Congress by Republicans.

Clinton struggled in cities dependent on trade during the Democratic primaries, too. Among the top 25 cities most dependent on trade, Clinton beat Sanders in 13 — all but one of which were heavily African-American counties in the South. Sanders won the 12 most trade-dependent counties north of the Mason-Dixon line. 

“The majority of our members are discouraged by the negative impacts trade deals have on their jobs and future,” said Dean Wright, president of the International Association of Machinists and Aerospace Workers District Lodge 54 in Cleveland. Wright said his members were drawn to Trump’s promise to bring jobs back to Ohio — a promise they didn’t hear from the other side.

“The Democratic Party failed to embrace [a jobs message] or make a clear-cut message to middle, working class Americans that their livelihoods were being looked after,” Wright said in an email.

But if Trump moves to dramatically rewrite NAFTA or other trade deals, he is likely to risk raising import costs on the very firms that fuel economies in small cities like Columbus and companies like Cummins.

“The challenge with modern trade is, to be able to export, you need to be able to import,” Parilla said. “You may end up hurting the same type of workers and communities you were trying to help.”

That’s a message Trump may hear from businesses like Cummins, from communities like Columbus — and from Columbus’s most famous son, Trump’s vice president, Mike Pence.