Democrats, including members of Congress and the two dozen running for president, are struggling to figure out how to effectively run against President Donald Trump on trade. The president is highly vulnerable on the issue, and there is a simple and compelling framework that explains where he has gone wrong and how Democrats can repair the damage.
The way to beat Trump on trade is twofold. First, put workers, not multinational profits, at the core of the trade debate. For decades, both parties have written trade deals and tax laws that have benefited international investors and corporate interests rather than workers. Second, forget walls, tariffs, trade barriers and tweets, and explain in concrete, granular terms an alternative program that will allow American workers to benefit from globalization.
Of course, with his antipathy toward "one terrible trade deal after another," his inveighing against our trading partners (Mexico, China, Europe) and his pledges to "bring back jobs," Trump pretended to put workers at the heart of his trade agenda, and in doing so, garnered the support of geographically key voters with an anti-globalization message that did not come naturally to most mainstream politicians, including virtually all of his Republican challengers and his prime opponent, Hillary Clinton.
Trump's actions show where his true priorities lie. His tax bill reveals that corporate profitability remains at the heart of the Republican agenda, and the notion that any of that largesse will trickle down to people and places hurt by trade has predictably proven false. By offering a special "global minimum" tax rate to U.S. companies that outsource production - a rate that's half that of the new, lower corporate rate - the tax cut incentivizes more outsourcing of U.S. production.
That puts domestic firms and workers at a disadvantage, one that has been deepened by the erratic nature of Trump's trade policy - the tariff threat against Mexico being the most recent example - and the existing tariffs. Workers in industries that use imports (steel and aluminum) have been hurt by the tax on those goods. Workers in exporting industries, such as farmers, are hurt by retaliatory tariffs. Consumers, especially lower-income consumers (who disproportionately buy imports), are hurt by tariff-induced price increases. Taxpayers, who are also consumers, are tapped to bail out farmers.
In other words, so far, Trump's trade agenda is all pain for no gain.
Surely all this pain is a political vulnerability for the president. His argument, of course, is that eventually the benefits will outweigh these costs. But as the Trump tariff policy expands without any clear strategic goal, Democrats can explain why no one should believe him.
One line of attack is that Trump's actions have had no impact on the trade deficit, which has not changed (as a share of GDP), in part, because trade wars reduce imports and exports. Another is that location decisions for production are unlikely to be based on short-term tariffs, especially with such an unpredictable, chaotic leader in charge.
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The other key to beating Trump on trade is an aggressive economic agenda that most Democrats have so far failed to propose or enact.
As presidential hopeful Sen. Elizabeth Warren, D-Mass., recently pointed out, a forward-looking industrial policy - wherein the government identifies and supports potentially promising innovations and investments that the private sector tends to underfund - offers challengers the chance to distinguish themselves from Trump's insular agenda. Politicians and economists often disparage this idea as the government "picking winners."
We're already knee deep in winner-picking, but of a particularly corrupt form: through tax breaks doled out to the firms and sectors with the most-connected lobbyists and the most generous campaign contributions. (The finance and pharmaceutical industries are egregious examples.)
Instead, policymakers need to look around corners to identify areas where the United States can compete globally in emerging areas such as green technology (such as energy storage), artificial intelligence, quantum computing, additive manufacturing (3-D printing), robotics, autonomous vehicles and more. Instead of erecting random trade barriers, the government should help smaller manufacturers link up to global supply chains - something China, Japan, Germany and Canada all do much more than we do.
Next, it's pointless to negotiate new trade deals - such as NAFTA 2.0 - if we're not enforcing existing rules on traditional trade measures such as subsidies, market access, fair pricing, internationally recognized workers' rights, consumer protections and environmental standards. If the United States devotes adequate resources to enforcement and monitoring, ignorance and neglect will not be excuses for inaction.
Finally, although Trump complains about the problem of the dollar's value in international markets, he has taken no action on it. For decades, other countries have sought to boost their net exports by intervening in currency markets to keep the dollar overvalued, making our exports expensive relative to our imports. This is a great deal for outsourcers, but a bad deal for both domestic businesses and for American workers. There are a variety of ways to push back on such currency practices - through negotiation, federal intervention to purchase foreign currency assets or by taxing the foreign purchase of assets intended to manipulate exchange rates.
Beating Trump on trade requires a totally new mind-set. Workers, consumers and the environment must replace multinational profits at the core of our trade strategy. The current model - invent here, outsource production there, export back here - which still flourishes under Trump, can be reversed by investing in innovation, workers and new linkages to trade flows.
Democrats have been flummoxed by Trump on trade, in part, because many of them really do want to change the rules but have never articulated a coherent, comprehensive way to do so. That has ceded the field to Trump, who occupies it with phony, destructive actions. But he doesn't have to own it.