Trump Speech Recants 30 Years of Republican Trade Thinking

  • Presumptive nominee sees globalization lifting the ‘elite’
  • Says free trade a deliberate try to boost growth outside U.S.

Trump Attacks Clinton, Free Trade in Economic Speech

In a matter of minutes on Tuesday, Donald Trump set fire to 30 years of Republican orthodoxy on trade.

QuickTake Free Trade Feud

He ripped a pending agreement with Pacific Rim trading partners and vowed to renegotiate the long-standing accord the U.S. has had with Mexico and Canada. In his strongest campaign trade comments to date, Trump made a clear break with his party, which for decades has stood behind the business interests that supported a freer flow of goods and services across borders.

“Globalization has made the financial elite who donate to politicians very wealthy,” the presumptive Republican nominee said in a speech at a factory in Monessen, Pennsylvania. Free trade, he continued, was deliberate policy to promote development outside the U.S.

To economists, Trump is describing what has become known as the “elephant graph,” work by Branko Milanovic of the University of Maryland School of Public Policy. The chart shows how the entire world has fared under 20 years of globalization, broken down by income. The lives of the world’s poorest have not improved much. The middle class of emerging countries has been lifted through exports. But the lives of middle classes in developed economies have not improved much, either. Even worse, they’re looking up at the world’s richest, who have done quite well.

Populist Tone

Emboldened by the Brexit backers’ win last week voting the U.K. out of the European Union, Trump struck a populist tone in appealing to voters who feel left behind by the U.S.’s integration into the world economy. Similar sentiment drove a majority of voters in the U.K. to approve last week’s referendum to leave the 28-nation EU.

Trade, said Trump, “has left millions of our workers with nothing but poverty and heartache.” Again, here, there’s some truth. Armed with data since China entered the World Trade Organization, economists David Autor, David Dorn and Gordon Hanson have been able to show in several papers that, even as trade creates economic growth overall, it leaves pockets of devastation -- towns like Providence, Rhode Island, that used to make the things that China now makes.

The remarks represent a shift in Trump’s thinking. Three years ago, he touted the benefits of an open global economy.

Thinking Shifts

"We will have to leave borders behind and go for global unity when it comes to financial stability,” Trump said in a 2013 opinion piece published by CNN. "The future of Europe, as well as the United States, depends on a cohesive global economy. All of us must work toward, together toward, that very significant common goal."

Strip away the jabs at Hillary and Bill Clinton on Tuesday, and there wasn’t much in the opening minutes of Trump’s speech that would be out of place in a graduate seminar in a public policy program. Globalization, it’s widely agreed, creates more wealth, even if distributed unevenly. Congress, for decades, has embraced the wealth-creation parts of trade, leaving grad students to puzzle about how to solve the challenge of who gets what.

The U.S. Chamber of Commerce, typically a reliable conduit of Republican pro-business positions, sought to counter Trump’s remarks, saying that the benefits of trade greatly outweigh the costs.

“In fact, trade has been a lifeline for many more workers in Pennsylvania and Ohio -- especially in the wake of the recession,” John G. Murphy, the Chamber’s senior vice president for international policy, said Tuesday in a blog post.

In May, when Trump spoke to Bloomberg Businessweek’s Josh Greene, he said his unorthodoxies were like the invention of the paper clip -- obvious ideas, just sitting there waiting for someone to see them, sell them and get rich. At the time, he was referring to his full-throated defense of Social Security. The ravages of globalization may be another such paper clip.

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