Donald Trump made trade a central issue of his 2016 campaign. It is scarcely mentioned now. Issues of race, policing and COVID-19 are in the forefront.
But trade remains vital to important sectors in the U.S. economy, especially agriculture. The election is 130 days away. Polls indicate that Trump may lose. But anything can happen in politics, and pending trade issues will be the same regardless of who is sworn in seven months from now.
The problem for both parties is that Trump upset the partisan apple cart by running on the most outspoken anti-trade platform in more than a century. Over the last 70 years, the GOP favored free trade and supported agreements that opened trade and investment flows. Democrats were split and often opposed trade agreements.
Understanding this needs historical background.
First, immediately after World War II, as industrialized nations sought systems of international rules for trade and investment to prevent the global clashes of the 1920s and 1930s, a rump faction of isolationist GOP senators opposed U.S. participation in the new Bretton Woods institutions, which included an International Trade Organization in addition to the World Bank and International Monetary Fund.
This group included “Mr. Republican,” Robert Taft, and joined with anti-trade Democrats to kill the proposed International Trade Organization. The General Agreement on Tariffs and Trade emerged as a weak replacement. With strong U.S. pressure, it eventually became the World Trade Organization in 1994.
Democratic opposition to trade sprang from its labor union base, then predominantly blue-collar industrial workers. In practice, organized labor was mercantilistic, enthusiastically in favor of U.S. exports, as in the first 15 years after the war when U.S. heavy industry and manufacturing dominated the world economy, but opposing imports with the exception of raw materials or foodstuffs that could not be produced here, such as coffee.
Successive Democratic presidents, including Kennedy, Johnson, Carter and Clinton, favored trade more than their party’s base because foreign policy and defense issues always permeated trade questions. Tying an anti-communist alliance together with trade and investment flows was important in a bi-partisan consensus on foreign relations until after the 1991 fall of the Berlin Wall.
Moreover, as agricultural exports became more important once the dollar floated in value against other currencies, after 1972, administrations of both parties knew trade was critical to the farm sector. However, our country had insisted on excluding ag trade from the rules developed under the GATT in the 1950s. Starting in the 1970s, getting farm commodity trade back under international rules and using those rules to pry open closed markets, like Japan’s, was a bi-partisan goal.
The upshot of all this was that presidents of both parties generally supported signing trade agreements when combined economic and foreign policy results seemed favorable.
When such agreements needed ratification, both parties in Congress were split, with a majority of Republicans favoring ratification, but some opposing. Most Democrats usually voted against agreements, but substantial minorities were in favor. And in one key case, Permanent Normal Trade Relations status for China, Democrats favored the measure nearly as strongly as the GOP.
NAFTA is a good case study. It started with the Canadian-United States Trade Agreement in 1987 and was broadened to include Mexico in 1992.
In both steps, the impetus came from a friendly neighbor.
The Reagan administration had talked about a North American agreement, but did nothing until Brian Mulroney, a Conservative Canadian Prime Minister, requested one. He did so because, hard pressed by Liberals in his country, he wanted to freeze conservative economic policies in place by embedding them in a treaty with a friendly neighbor nation.
No U.S. administration, particularly a Republican one, would have spurned a request from our closest ally. So, the Canadian-U.S. Trade Agreement came into being.
Four years later, Carlos Salinas de Gortari, a conservative Mexican president in a near-identical situation, wanted to join our country and Canada as a way of tying the hands of possible left-wing successors. By then, George H.W. Bush, a very foreign-policy-minded Republican was in the White House. As a lame duck, he signed the new NAFTA agreement on Dec. 17, 1992, five weeks before Bill Clinton was inaugurated.
Opponents often blame Clinton for NAFTA. In his self-promiting way, he did claim credit for it. But he only submitted an already-signed deal to the Senate for ratification. It was a Bush 41 agreement through and through.
The Senate vote was 34 Republicans and 27 Democrats in favor, with 10 Republicans and 28 Democrats opposed. In other words, three-fourths of Republicans voted for, with Democrats split right down the middle.
Two years later, ratification of the new World Trade Organization came up for a vote. It was formed from the old GATT in eight years of negotiations. Our country got pretty much all it wanted.
Having the strong support of Clinton, many farm-state Democrats and Wall Street, this passed with majorities in both parties. Forty Democrats and 28 Republicans voted to ratify, with 13 Democrats and 11 Republicans voting nay.
The 2000 vote extending permanent normal trade relations status to China had 36 Democrats and 47 Republicans in favor, with seven Democrats and eight Republicans opposed.
So the history is that the GOP was the pro-trade party until January 2017, while Democrats were opposed or split. Blaming NAFTA and trade with China for a broad range of economic ills, Trump sharply reversed the long-standing GOP position. Intimidated GOP members of Congress have fallen in line. The GOP is no longer a pro-trade party.
In this regard, there was not much difference between Trump and Democratis Sen. Bernie Sanders on trade, and the left-wing of the Democratic party is more strongly anti-trade than in many decades. Joe Biden, long the ranking Democrat on foreign relations, was always a pro-trade Democrat.
But now, no one appears the pro-trade candidate. This may play well on the Iron Range, but Minnesota farmers and U.S. business interests hang on tenterhooks with the world economic system is in disarray.
St. Paul economist and writer Edward Lotterman can be reached at stpaul@edlotterman.com.
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Real World Economics: After election, trade issues will linger - TwinCities.com-Pioneer Press
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