Donald Trump assumes office following a nasty, divisive presidential campaign. Like many president-elects, he will spend time looking for those issues and opportunities with bipartisan consensus.
As unlikely as it seems, he can find no better bipartisan path than on trade policy.
True, he and his Democrat counterpart Hillary Clinton spent a lot of time criticizing trade policies and trade deals during this campaign. So the prospects of innovative thinking on trade policy seem bleak. But look closely and you will find that they shared a lot of agreement—about striving for better trade deals and for stepping up enforcement of the ones we’ve got.
It’s also true that this election reflected anger from the U.S. electorate.
Some of this anger is no doubt routed in frustration over U.S. trade policies, especially by Americans who feel they have not been able to take advantage of opportunities generated by previous trade deals. But a lot of the anger stems from broader economic or policy frustrations, like rising health care costs. This suggests we collectively need to look differently at trade policies, but there does not appear to be a mandate on what that different approach should be.
As he plans his transition and then takes office, President-elect Trump can embrace four concepts to make sure he starts on the right course on trade and the economy.
Make sure TPP passes soon
This may seem like unorthodox advice given the many times Trump stated his opposition to this agreement. But consider this. Trump also campaigned on the slogan to “Make America Great Again.” It’s hard to see how that happens if the U.S. withdraws from the world, and other countries negotiate agreements around us. And that’s precisely what will happen—starting with our Trans-Pacific Partnership (TPP) partners—if we pull out of the TPP.
Uniting 800 million consumers and 40 percent of the world’s economy, the TPP presents incredible opportunities for the nation and for the textile, apparel and footwear industry. Our industry alone stands to save more than one billion dollars a year, starting the first year the TPP is implemented, as the U.S. and its 11 TPP partners reduce duties. These savings will foster a more competitive industry as they are spread throughout the supply chain, hiring workers, improving working conditions, nurturing innovation, and reducing prices for consumers.
Similar benefits will accrue throughout the economy. The U.S. International Trade Commission (USITC) recently found that this agreement would add $58 billion a year to the American economy by 2032. And that number will grow. Although the number is widely viewed as understating the benefit of TPP, it’s important to stress that Congress has few other ways—with a single vote—to make such a lasting positive impact on our lives than to pass the TPP. Not only does Congress set the stage for that future trade-based economic growth with this vote, but it also equips Trump with new tools during 2017 to make sure our TPP trading partners undertake the commitments they’ve promised. Who can argue with that?
Realize that trade agreements work…but they can work better
Trump can also use free trade agreements (FTAs) to better leverage economic opportunities for all Americans. During the campaign, both he and Clinton took pot shots at existing FTAs. Clinton, for example, touted her opposition to the U.S. Central America-Dominican Republic Free Trade Agreement (CAFTA). Trump, in turn, has threatened to withdraw from the North American Free Trade Agreement (NAFTA), calling it the worst trade deal ever done (when it’s common knowledge that the worst trade deal ever done was when the Boston Red Sox traded Babe Ruth to the Yankees).
FTAs are easy punching bags, but that doesn’t mean they don’t work. Both CAFTA and NAFTA have provided important economic benefits for the U.S., particularly in our industry. And yet both these FTAs (like all FTAs) can and should work even better.
Fortunately TPP provides the first steps for that, linking NAFTA up with other agreements (Peru, Chile, Singapore and Australia) and key trading partners. U.S. trade policy should build on that initiative linking up other U.S.-negotiated FTAs so they create stronger markets. Continuous improvement should be a baseline concept built into all of our trade policies.
Moreover, in addition to creating more opportunities within our FTA networks, we need to do a better job of connecting Americans to those opportunities. More education and skills training, particularly on emerging technologies, will go a long way in accomplishing this task. This is particularly important in our industry, which is witnessing constant change through innovations like 3-D technologies, e-commerce and smart fabrics.
Understand that exports matter—but so do imports
For many politicians, trade policy is measured solely through U.S. exports. Trade policies, including the ones advocated by Trump during the campaign, often reflect this mercantilist philosophy.
At first, this makes sense since export opportunities are easily understood and appear to come at no expense to other U.S. interests. But exports only tell part of the picture. Through the power of global supply chains U.S. companies also benefit when their goods are made in other countries and exported from there, including to the United States. In other words, imports matter too. How is that possible? U.S. branded products made around the world contain large amounts of U.S. value. This value anchors millions of U.S. jobs in such diverse and highly compensated areas as intellectual property, quality control, R&D, technology, logistics, and so forth. Of course American consumers benefit too when imports provide access to affordable products, cutting-edge technologies and a wider range choices.
Similarly, articles manufactured in and exported from, the United States are often made using imported inputs. According to the World Trade Organization (WTO), the average import content of global exports today exceeds 40 percent. Pascal Lamy, former director general of the WTO said it best in 2012 when he declared, “To shoot at imports is to shoot yourself in the foot because you are undermining your exports as well.” Going forward, we need to start telling this story and making sure U.S. trade policies better reflect this fact.
Know that trade enforcement is important, but so is trade expansion
Likewise, politicians often call for more enforcement of trade deals. Trump emphasized more enforcement against trade violations. While this talk of enforcement is a convenient “go to” for candidates, and is immensely popular, it ignores a key premise—namely that our trade policy is based on rules.
And those rules were carved out through free trade agreements or other multilateral institutions like the WTO. In other words, our ability to bring trade cases and seek remedies stems directly from the agreements that we have signed with other countries. More agreements mean more enforcement tools. The TPP is a case-in-point. It will bind many of our top trade partners in a new network of high enforceable standards. Passing the TPP gives us more tools to do the very things Trump wants to do.
But we can’t measure our trade wins solely through the lawsuits we bring. What really matters is whether our trade policies generate trade flows—both exports and imports. Without that trade, we can’t create jobs. Fairly enforced agreements are essential to support that trade. But that’s not enough. Real economic growth occurs when we negotiate new opportunities and secure new commitments to reduce trade barriers, which are constantly evolving and challenging U.S. businesses and the workers they employ. One area of real promise is through trade facilitation (like reducing paperwork, automating operations and eliminating wait times at the borders) to remove the nuisances that add costs and hinder job creation. If we stop negotiating new agreements to tackle these new barriers, we will lose ground to our competitors.
Candidate Trump clearly demonstrated his ability to think outside the box. If President-elect Trump can apply those skills to trade, he can go a long way in addressing uncertainties, bridging divisions and setting the basis for sustained economic growth.
Steve Lamar is executive vice president for the American Apparel & Footwear Association and a trade policy expert. AAFA is a national trade association representing apparel, footwear and other sewn products companies, and their suppliers, which compete in the global market.