The US 2016 presidential race has been notable for how often both major party candidates have trumpeted trade as a major issue. But just how different are the proposed trade policies of Hillary Clinton and Donald Trump, and what do they mean for America’s stance on trade moving forward?
In a campaign taking place during a sluggish economic recovery with rising income inequality, it is unsurprising that both candidates have adopted populist trade policies that agree on many points.
The fact that the US ran a $500 billion trade deficit in 2015 has not been lost on the Republican and Democratic standard bearers. American manufacturing, especially, has taken a heavy hit, shedding 7 million jobs since 1979. While most economists believe that the largest culprits are globalization and technological change, both candidates lay much of the blame on foreign exporters who, in their view, openly disregard global trade rules.
Talking tough to trade partners
Trump would consolidate the varied federal agencies that handle trade policy into one “American Desk,” which he would “call three times a day,” and toughen up US trade negotiators. Similarly, Clinton would appoint a special prosecutor to deal with trade disputes, which actually already exists.
In addition, even though Clinton once called the Trans-Pacific Partnership (TPP) the “gold standard” for trade deals, both are currently against the massive trade and investment agreement involving a dozen Pacific Rim nations, with Trump even accusing the TPP of continuing the “rape of our country.” The agreement’s investor-state dispute settlement mechanism, where companies can sue countries in front of appointed investment tribunals, has taken much of the heat.
Rhetorical flourishes aside, Trump’s critique of current trade agreements does extend far past the TPP, encompassing the North American Free Trade Agreement (NAFTA), the US-South Korea Free Trade Agreement, and even the US-Colombia accord. He has also been far more willing to name Beijing as the biggest impediment to US job growth, and has threatened to levy its imports with a 45% tariff.
No time for nuance
Besides the irony that at least one of Trump’s branded developments has actively recruited wealthy Chinese investors via the EB-5 visa program, Trump has additionally sought to connect China’s alleged currency manipulation to his arguments on trade. Here, too, the GOP nominee is several years behind economic reality since, if anything, Beijing has been trying to prop up the yuan of late.
Mexico has been a favorite target of Trump’s as well, with the property mogul vowing to slap a 35% tariff on Mexican vehicles, which would essentially roll back all of NAFTA’s liberalization. However, little has been made of the fact that importing assembled vehicles from America’s second-largest export market and third-largest trading partner supports thousands of US jobs across the automotive supply chain.
Still, Clinton’s positions are not much more cohesive, particularly in light of how recently-leaked documents of a 2013 speech in which she extolls a “hemispheric common market” fly in the face of her current skepticism towards trade agreements.
Incentivize American goods whilepPunishing outsourcers
Another area where both candidates broadly agree is supporting American manufacturing while stopping American firms who “outsource” jobs.
“Buy American” is a common refrain of both the Trump and Clinton campaigns. Clinton is pushing for a $10 billion initiative aimed at linking together supply chains and solidifying economic regionalism for companies that pledge to keep jobs in the US and adhere to American rules of origin for inputs. She has also offered a lofty-sounding “Manufacturing Renaissance Tax Credit” for firms who invest in economically depressed areas.
Trump has opted for more supply side policies, including allowing US manufacturers to fully expense new plants and equipment, and scaling back on a host of federal regulations enacted by agencies like the Environmental Protection Agency (EPA) and the Occupational Safety and Health Administration (OSHA).
Moreover, both candidates support cracking down on companies who leave American shores with exit taxes, though Trump has also made it clear he wants to woo them back with a range of incentives for repatriating capital.
How realistic is the rhetoric?
Given the tepid nature of Clinton’s recent “surrender” to Trump on trade, as well as Trump’s lack of hesitation in openly changing his stated policies in the past, it is difficult to predict how much either candidate will keep their word.
What is clear, though, is that executive privilege on trade deals has been growing for decades. To be sure, Trump or Clinton will inherit five more years of the “fast track” authority which President Obama narrowly convinced Congress to renew, allowing for legislators to only vote up or down on trade deals.
What does this bode for NAFTA and the TPP?
Don’t expect much action on the landmark North American deal if Clinton is elected, even though she has emphasized the need to “figure out how we can make it work.” Both Clinton and Obama spoke of reopening NAFTA talks on labor rights in 2008, but those words were not followed by meaningful actions.
If Trump were elected, however, the situation would become more complex. His promise to dismantle NAFTA if renegotiations fail coupled with Article 2205’s allowance for withdrawal from the pact with six months’ notice does not augur well for supporters of increased economic integration between the US and its neighbors.
Still, the US has not withdrawn from a trade agreement since 1866. Trump’s administration would undo hundreds of regulations across numerous industries that NAFTA put into place.
The ambiguity of whether tariffs, quotas, and capital controls would automatically revert to pre-NAFTA levels would only be matched by the swarm of lawsuits Washington would face from US firms the morning afterwards. Still, it should be mentioned that NAFTA’s implementation law does seem to give the US president the power to bypass Congress and increase trade restrictions on Mexico and Canada using emergency- and national security-related legal loopholes.
The TPP, on the other hand, would likely fall victim to this election season’s uptick in anti-globalism if Senate Majority Leader Mitch McConnell’s promise not to bring it to a vote this year is to be believed. It is difficult to imagine Trump being able (and willing) to alter the terms of seven years of detailed talks between the US and 11 other parties.