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Predictions about this year’s US presidential campaign are a mug’s game, but here is one that can be made with some confidence; the next president will be a declared opponent of the Trans-Pacific Partnership (TPP), the sweeping 12-nation trade agreement which the US signed in February.
The protectionist tone of the 2016 campaign is a watershed, and it could have profound political as well as economic consequences for the wider world.
Donald Trump has been an opponent of free trade deals all his public life, and the protectionist message has been central to the populist campaign that has made him the presumptive Republican nominee.
“We are like the piggy bank that’s been robbed,” he told a rally in Indiana this month. “We cannot continue to allow China to rape our country.”
Mr Trump’s stand is mirrored at the other end of the ideological spectrum.
The self-styled socialist Bernie Sanders said earlier this year: “Since 2001 we have lost 60,000 factories in America, a lot of those having to do with disastrous trade agreements. If elected president I will fundamentally re-write trade agreements in this country.”
Even Hillary Clinton has trimmed her sails to the prevailing protectionist wind. As secretary of state during Barack Obama’s first term she supported the TPP; now candidate Clinton says she is “learning” about the treaty and “I’m not in favour of what I have learnt about it”.
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The economic realities behind those political positions are evident in places like Steelton, in Pennsylvania.
Steel gave the town its name and has been its economic heart since the 1860s, but today vast tracts of the steelworks running along a bank of the sleepy Susquehanna River are silent, and the main street is pock-marked with empty shops and boarded-up offices.
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Al Quigley blames Steelton’s declining steel production on cheap foreign imports
I met one stout survivor who was in no doubt where the blame belongs; “imports of foreign steel really is what’s killed the steel mill,” Al Quigley, of Quigley’s Restaurant, told me.
Mr Quigley set up shop here in 1952; in those days, he says: “Steelton had probably about 6,000 workers and they ran three shifts, seven days a week,” while today the mill operates with “about 600 men and they operate two shifts and don’t work weekends”.
Popular anger about the loss of manufacturing jobs now has a precise target; in 2001 China joined the World Trade Organisation, and its vast economy which, back then, was heading for double-digit growth rates, became a full member of the world trading system.
Everyone knew that would mean some economic adjustment, but classical free trade theory holds that although imports do cost jobs in places like Steelton, exports will generate new ones – and competition keeps prices low, so, over time, everyone gains.
However, a recent study from the top-flight research organisation the Massachusetts Institute of Technology has turned up evidence that the real story is rather different; it found that traditional manufacturing areas which have been hit by Chinese competition since 2001 take much longer to recover than anyone imagined, and that many of the jobs are never replaced.
“It’s important to recognise that unlike medical services or retail, manufacturing is very geographically concentrated”, says MIT’s Dr David Autor, “so that kind of magnifies the pain. It’s something that people experience directly if they are… working in those industries, but also indirectly if they live in those communities”.
The president of Pennsylvania’s Manufacturers’ Association, David Taylor, is one of those mainstream Republicans who resent the way Donald Trump has, as he sees it, hijacked his party.
“I have been banging this drum for going on 15 years now,” he says, “and it’s a story that no one has wanted to hear – national leaders have utterly failed to take action… I loathe Mr Trump. But unfortunately this issue, which is very salient, has been left on the table for a demagogue like him to take advantage of.”
In fact, protectionism has a long Republican pedigree; the party split over the issue in the 1870s and 1880s – just as the British Tories split over trade a little earlier in the 19th Century – and has been closely associated with protectionist ideas for most of its history.
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Herbert Hoover was president during the Great Depression
The notorious Hawley-Smoot Act of 1930 – which was widely blamed for deepening the Great Depression by sparking a trade war – was sponsored by Republican lawmakers and signed by a Republican president.
Hawley-Smoot Act:
- Enacted in June 1930, it hiked import duties on more than 20,000 goods to record levels, in some cases by as much as 50%
- Initially designed to protect US farmers from agricultural imports, but was extended to cover imports from across a range of industries
- Economists signed a petition urging President Hoover not to pass the act, but it was signed and passed anyway
- Led to tariffs being imposed on US exports by America’s trading partners as a retaliation
And protectionism has often been associated with another powerful word in the American political lexicon; isolationism.
“These phenomena go hand-in-hand”, says Dr Bill Garston, a senior fellow in Governance Studies at Washington’s Brookings Institution.
Dr Garston characterises the current mood among Americans like this: “We use American force and we spend trillions of dollars, forfeit thousands of lives. We have nothing to show for it.
“We try to practise diplomacy and with people who just take advantage of us. And then our engagement with the global economy has turned out to be excellent for corporations and the governing classes, but not so excellent for everyone else.”
The smart money in Washington says that once Hillary Clinton is elected – and that is still, by any sober analysis, the most likely outcome in November – she will revert to her free-trading instincts and swing back behind the TPP.
But she certainly isn’t going to do that in the heat of the campaign, and because of the way the wider trade debate has swung towards protectionism, trying to force votes on the TPP early in her presidency would be risky.
It is likely that at the very least there will be a substantial delay before the treaty is ratified by the US, and some free-trade champions fear that will create space for the world to stumble into a new trade war.
Carla Hills, who served as the US Trade Representative under President George Bush senior, say TPP “is crucial to American leadership,” and warns that if it does not go through “it will be tit for tat, back to the law of the jungle”.
Ambassador Hills’ warning is echoed by MIT’s David Autor, who remains a believer in free trade, despite his influential research into the high price that American workers have paid because of Chinese competition.
“The global economy was extremely integrated until the eve of World War One, and then all of a sudden that was shut down”, he says, “it [a trade war] would be disastrous, but that doesn’t mean it can’t happen.”
Find out more
- Edward Stourton presents Analysis: Protectionism in the USA on BBC Radio 4 on Monday 30 May at 20:30 GMT
- You can listen to the programme after transmission on the BBC iPlayer
- Or download the Analysis programme podcast
Analysis is on BBC Radio 4 on Monday 30 May at 20:30 GMT. Or you can listen online or download the programme podcast.
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Why is the US turning to protectionism?
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