What Trump’s ‘America first’ means for trade

Presumptive GOP nominee Donald Trump’s widely covered speech in New York yesterday fleshed out a bit of what he means by “America first,” particularly with regard to trade. Trump made claims about trade that do not stand up well to scrutiny. He also implied certain policies that would in fact help strengthen the U.S. economy and address key complaints about globalization.

Trump’s sweeping attack on globalization contained outright factual mistakes. For example, he again pointed to the North American Free Trade Agreement (NAFTA) as costing American jobs.

{mosads}The Bureau of Labor Statistics reports lower unemployment, higher labor force participation and higher manufacturing employment for a full six years after NAFTA went into effect. The constant attacks on NAFTA during this election season, from many candidates, have been made on the basis of emotion rather than evidence.

The NAFTA mistake is especially relevant since Trump also criticized the Trans-Pacific Partnership (TPP) because it will supposedly cost millions more jobs. A much better criticism of the TPP is that it fails to alter the nature of globalization — for example, by not expanding the market for services exports. In fact, the TPP will have little impact, either positive or negative, on the American economy.

Trump emphasized manufacturing and the middle class in response to the sustained loss of manufacturing jobs. But the losses have occurred both with and without trade deals. Moreover, trade is not just about manufacturing and the middle class; it is also about selling agriculture and services to the world and reducing the cost of food and clothing for the poorest here.

Trump did not restrict himself to the last 20 years, going so far back as to cite George Washington as supporting protectionism. The economy during Washington’s time relied heavily on high immigration — manufacturing could not have expanded much without it. Trump might respond that the situation now is dramatically different with regard to the best amount of immigration; the same is true for trade.

Trump’s explanation of America first had errors, and has an unfortunate echo in political history. It’s not a bad approach economically, though, if it means the priority should be improving domestic policies.

Because the U.S. economy is so large, trade agreements rarely have the impact their supporters or detractors insist. What matters most to American jobs and prosperity is action at home.

With regard to such policies, the speech was more implicit than explicit, but some of the implications are encouraging. As Trump indicated, our tax system does badly need an overhaul, in particular with respect to not encouraging companies to locate overseas.

The best tax policy avoids paternalism: It does not try to push companies or people to behave a certain way. Any tax policy that effectively encourages some businesses to leave the country is shockingly unwise, and addressing that matter should be a priority for the next administration.

Another trade–related policy that should be improved concerns theft of intellectual property. This does not bear only on the middle class and manufacturing, but the whole country.

If those with valuable new ideas quickly see them stolen by Chinese thieves or anyone else, they will innovate less and everyone will lose out. As the speech implied, the American reaction to cyberattacks and other intellectual property infringement has been badly inadequate in light of the scope of the problem. This would make a much better target for Trump than NAFTA.

Inequality is too high and labor force participation is too low. But the unemployment rate was 4.7 percent in May. There is no good reason to throw open trade (or automation) out the window. “America First” would be better if it were literal: fewer inaccurate indictments of our deals with other countries and more details about what we can and should do better here at home.

Scissors is a resident scholar at the American Enterprise Institute (AEI), where he studies Asian economic issues and trends.