Is Trade Good or Bad for Americans?

Trade agreements have become a hot-button issue in the 2016 presidential election. Not long ago, most voters accepted the idea that trade, over the big picture, at least, is good for Americans. Americans generally like capitalism, and free trade is one of its pillars. But views are changing. A Pew opinion poll in March found that, while most voters still support trade deals with other countries, increasing numbers see free trade agreements as bad for the United States.

The immediate focus of this tension is the Trans-Pacific Partnership, an agreement that’s been negotiated but not yet ratified by Congress. It is meant to ease trade among the United States and 11 other nations in the Pacific region, and importantly, to provide a counterbalance to China, which is not one of the 12 would-be signatories.

Where they stand

Let’s begin with where the two major party candidates stand on the issue:

  • GOP presidential candidate Donald J. Trump promises to impose tariffs on Chinese imports, renegotiate the North American Free Trade Agreement (NAFTA) and refuse to sign the TPP. Republicans traditionally have been pro-free trade, but not Trump. He advocates taxing imports to force U.S. companies to use American labor in manufacturing.
  • Democratic presidential candidate Hillary Rodham Clinton historically has liked some trade deals and disliked others. She did initially support the TPP but says new information convinces her it’s not in our best interests, despite President Barack Obama’s desire to pass the deal. She needs support from unions and perhaps she was swayed by the popularity of her rival Sen. Bernie Sanders’ opposition to deals that he says lacked “safeguards to protect American jobs and the environment while giving massive benefits to large multinational corporations.”

Although politicians like to take a strong stand on free trade the truth is that its costs and benefits are complicated. Not only that, but the practice is as old as any civilization on Earth. It is basic human nature to trade in things gathered, produced, harvested and made. Usually the real conflict is over who has the upper hand under the existing trade rules and who is bending the rules. Here are some of the ways that it works in the real world, pro and con.

Trade: Pros

Trade delivers a big bonus to consumers: cheap goods. Low labor costs abroad let Americans enjoy cheap imports — clothes, shoes, toys, household goods, consumer electronics, fruits and vegetables and pet food, just to name a few.

“Americans have higher living standards because trade enables them to afford more goods,” Jeffrey J. Schott, an author, economist and U.S. government trade negotiator writes in The New York Times. Schott says workers in U.S. companies that export their goods “generally earn wages 12 to 18 percent higher than their counterparts in firms that only serve the domestic market.”

Job losses don’t tell the whole story since trade also creates jobs, supporters say. According to USA Today:

Opening U.S. borders to imports also lowers prices for consumers and creates jobs for Americans who distribute or sell imports. Trade also fuels economic growth in developing nations, which increases demand for U.S. exports and creates new manufacturing and service jobs in the United States.

“Trade — like technology — destroys some jobs but creates others,” write Anthony B. Kim and Brian Riley, policy analysts for the conservative Heritage Foundation.

Trade: Cons

The benefits have come at a cost that has been borne mostly by U.S. workers, their communities and small businesses that serve them. Buying cheap goods from abroad meant losing high-wage manufacturing jobs.

“Generally … the benefits of globalization flow largely to investors and consumers while workers bear a disproportionate share of the costs, depending on how well-educated, skilled, and mobile they are,” blogs James L. Heskett, a retired Harvard Business School professor.

Robert Scott, an economist at the Economic Policy Institute (which is partially funded by unions) calls for a “re-set” on trade agreements, to reconsider the costs to American workers.

  • “The agreement allowing China into the World Trade Organization led to trade deficits that eliminated 3.2 million jobs between 2001 and 2013 alone,” he writes in another Times article.
  • Pointing to the 1994 NAFTA agreement between the U.S., Canada and Mexico, Scott writes at the EPI website, “More than 5 million U.S. manufacturing jobs were lost between 1997 and 2014, and most of those job losses were due to growing trade deficits with countries that have negotiated trade and investment deals with the United States.” (By “deficit” he means that the U.S. imports more goods than it sells abroad.)

Josh Bivens, another EPI economist, counters claims that free trade raises workers’ incomes. By 2011, trade with low-wage countries had reduced median wages for full-time American workers without college degrees by roughly $1,800 a year, he writes. Since workers without college degrees are about two-thirds of our labor force, that’s a huge impact.

Where do we go from here?

The politics of trade may make it hard for Congress to pass the TPP, even though this particular agreement won’t have a huge impact, according to a study by the U.S. International Trade Commission.

“TPP would have positive effects, albeit small as a percentage of the overall size of the U.S. economy,” the study says, predicting that modest increases to the economy and the equivalent of 128,000 new full-time jobs would result.

Supporters of the pact, though, say the deal is important for other reasons — to offset China’s advance in the Pacific region (China is promoting its own Asian trade alliance) and because the TPP includes advances in labor, environmental and human rights protections.

The future of trade agreements, and of much else, will be determined by the presidential election this fall. What, if anything, do you think should be done about trade deals? Share your thoughts on Money Talks News’ Facebook page.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Read Next
The Annuity Everyone Needs — and Anybody Can Get
The Annuity Everyone Needs — and Anybody Can Get

This simple strategy can put more money in your pocket during retirement.

15 Ways Retirees Can Make Their Savings Last Longer
15 Ways Retirees Can Make Their Savings Last Longer

Study these strategies to make your golden years gleam.

Not Asking About This in the Hospital Can Cost You Thousands
Not Asking About This in the Hospital Can Cost You Thousands

Medicare recipients who fail to clarify their hospital status can pay a high price.

6 Types of People Who Can’t Count on Social Security
6 Types of People Who Can’t Count on Social Security

If you fall into one of these groups, don’t assume that you will receive benefits.

These 5 Laptops Have the Best Battery Life
These 5 Laptops Have the Best Battery Life

Need a laptop that runs as long as you do? Check out these models.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Most Popular
9 Mistakes Everyone Makes When Shopping on Amazon
9 Mistakes Everyone Makes When Shopping on Amazon

Are you losing money due to any of these missteps?

Can a Divorced Widow Claim Her First Husband’s Social Security Benefits?
Can a Divorced Widow Claim Her First Husband’s Social Security Benefits?

The rules are complicated when it comes to eligibility for survivors benefits.

Can a Twice-Divorced Woman Claim Social Security Survivors Benefits?
Can a Twice-Divorced Woman Claim Social Security Survivors Benefits?

Understanding survivors benefits rules is the key to getting the most from your benefit.

These Are the 10 Worst Cars for Depreciation
These Are the 10 Worst Cars for Depreciation

Two types of vehicles are especially likely to see steep plunges in value.

20 Things That Are Actually Worth Stockpiling
20 Things That Are Actually Worth Stockpiling

You don’t need a year’s supply of toilet paper to survive an outbreak, but consider stocking up on these items.

9 Things You’ll Never See at Costco Again
9 Things You’ll Never See at Costco Again

The warehouse store offers an enormous selection, but these products aren’t coming back.

10 Things I Always Buy at Trader Joe’s
10 Things I Always Buy at Trader Joe’s

From snacks to sweets to side dishes, stock your cart with these time-tested favorites on your next TJ’s run.

Never Buy These 10 Things With Your Credit Card
Never Buy These 10 Things With Your Credit Card

Credit cards offer many conveniences and protections, but sometimes it’s simply smarter to keep the plastic tucked away.

13 Amazon Purchases That We Are Loving Right Now
13 Amazon Purchases That We Are Loving Right Now

These practical products make everyday life a little easier.

5 Ways Social Security Will Change in 2021
5 Ways Social Security Will Change in 2021

These adjustments will affect both workers and retirees in the new year.

11 ‘Disposable’ Items You Should Be Reusing
8 Things You Should Buy at Restaurant Supply Stores
8 Things You Should Buy at Restaurant Supply Stores

You don’t have to be a chef or a restaurant owner to shop here.

Stop Buying These 19 Things Online
Stop Buying These 19 Things Online

The internet has changed how we shop. But for some things, you’re still better off buying the old-fashioned way.

3 Ways to Get Microsoft Office for Free
3 Ways to Get Microsoft Office for Free

With a little ingenuity, you can cut Office costs to zero.

19 High-Paying Jobs You Can Get With a 2-Year Degree
19 High-Paying Jobs You Can Get With a 2-Year Degree

There are easy high-paying majors available in the U.S. — and no bachelor’s degree is required. We’re here to help you find easy degrees that pay well.

Cut These 11 Expenses Now If You Hope to Retire Early
Cut These 11 Expenses Now If You Hope to Retire Early

Like the idea of financial independence? Part of the FIRE equation is cutting costs.

7 Tips for Building an Emergency Food Supply
7 Tips for Building an Emergency Food Supply

A pandemic or natural disaster could leave you reliant on your existing emergency food supply. Is your pantry well-prepared for emergencies? Knowing what to stock up on for emergencies can be a difficult task and we’re here to help.

5 Secrets of Seniors Who Keep Their Minds ‘Young’
5 Secrets of Seniors Who Keep Their Minds ‘Young’

Here is why some seniors’ brains work as well as those of people who are decades younger.

These Are the 4 Best Medicare Advantage Plans for 2020
These Are the 4 Best Medicare Advantage Plans for 2020

Medicare Advantage customers themselves rate these plans highest.

View More Articles

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Add a Comment

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.