WASHINGTON — Global trade has taken a beating in the presidential race, potentially hurting the chances for a sweeping Asia-Pacific trade deal and raising questions about the direction of U.S. trade policy.
As Republicans and Democrats head to their nominating conventions — led by the Republicans from Monday to July 21 in Cleveland, followed by the Democrats July 25 to 28 in Philadelphia — the debate over trade will follow them as delegates vote on platforms that reflect the parties’ principles and help guide the next president.
The antitrade forces have slowed down approval of a cornerstone of President Obama’s trade agenda this year — the 12-nation Trans-Pacific Partnership — and, in so doing, muddied the outlook for the future of global sourcing and commerce.
TPP includes the U.S., Australia, Japan, Mexico, Canada, Vietnam, Malaysia, Peru, Singapore, Chile, Brunei and New Zealand and would encompass nearly 40 percent of the world’s GDP.
Analysts and industry officials acknowledge the image of trade has been tarnished, making it more difficult to sway the argument in favor of free trade and open markets. But most said they do not believe the U.S. is headed back to the days of isolationism and protectionism, or the Smoot-Hawley Act of 1930 that significantly raised tariffs on imports, crippled trade and contributed to the Great Depression in the U.S.
Conventional wisdom points to a presidential candidate softening his or her tone and picking up the mantle of free trade once in office.
“Global trade will continue to expand even during the U.S. policy debate,” said Phillip Swagel, a professor of international economic policy at the University of Maryland. “The rest of the world is moving without us. Ultimately, that’s why any President will look to further trade agreements — it’s about U.S. leadership as much as about economic benefits, and there are many.”
Swagel said the opposition to trade stems from economic uncertainty.
“It’s an easy stand-in for our economic woes — slow growth, meager wage increases and stagnant incomes for many families,” he said. “The answers are not simple — there is no one magic-wand action to fix these problems, but instead a range of policy changes are needed to boost growth.”
A key pillar of Democratic presumptive nominee Hillary Clinton’s jobs plan is centered around cracking down on unfair trade and countries that intentionally undervalue their currencies to gain an unfair commercial advantage. China, in particular, is often accused of doing that. If elected, Clinton has pledged to appoint a special trade prosecutor who directly reports to the president to enforce trade deals.
She has also said that she opposes the TPP trade deal as it is currently written and has outlined three criteria for trade deals: create American jobs, raise wages and advance national security.
Republican presumptive nominee Donald Trump, on the other hand, has vowed to withdraw the U.S. from TPP, label China a currency manipulator and renegotiate the North American Free Trade Agreement with Mexico and Canada, if elected.
Trump’s harsh populist tone on trade has many in the business community concerned. The industry has significant exposure to trade policies, having imported $100.1 billion worth of apparel and textiles from the world, particularly from China, in the past year.
Rick Helfenbein, president and chief executive officer at the American Apparel & Footwear Association, said it is hard to judge what a trade world would look like with Trump in the White House.
“He is so against everything,” he said.
He noted that in a Trump presidency, TPP would have “zero chance,” while in a Clinton presidency, it would at least be “revisited.”
“Secretary Clinton’s position is different,” Helfenbein said. “She has come out against it, but you have to listen to what she has said. She said when she was working as Secretary of State it was supposed to be the gold standard, but when it was completed it didn’t meet her standards. What were her standards? New jobs for Americans and raising wages for Americans. These are, at least in my opinion, positions that could be repaired.
“She has left some negotiating room. He has left no negotiating room,” Helfenbein added.
Gary Hufbauer, senior fellow at the Peterson Institute for International Economics, said if Clinton is elected she “will rediscover the geopolitical rationale for trade.”
“She has subscribed to that [in the past]. That’s why she said TPP was a gold standard [while serving as Secretary of State under Obama],” he added. “She’ll re-prioritize it and then come back to it with her changes. It might not be a high priority in 2017 but by 2018, she will probably be pushing it again.
“If Trump is president, I think it [TPP] goes in the trash,” Hufbauer predicted. “Of course, he has reversed himself on other issues, but this is such a leading part of his campaign that it would be very hard for him to reverse on this.”
Trump’s antitrade rhetoric has some former Bush administration trade officials concerned.
David Spooner, a partner at Barnes & Thornburg LLP, who was the chief textile and apparel negotiator at the Office of the U.S. Trade Representative from 2002 to 2006, said Trump’s rhetoric on trade has hurt the debate.
“With Trump it hurts, not only because he’s the party’s standard-bearer, of course, but also because he’s a businessman. I think voters see him as an international businessman and [think] he must be right if he thinks trade agreements are terrible,” Spooner said.
The country could pull back from trade for a while before “people realize again that opening markets is good for the U.S. and other countries” and a new president has time to put a trade team in place, Spooner said.
Sheng Lu, assistant professor for the Department of Fashion & Apparel Studies at the University of Delaware, said he does not worry about the potential for trade wars because “nations are very rational these days. They understand the costs of trade wars. In the 21st century, [economies] are interdependent.
“China is the third largest export market for the U.S.,” Lu said. “The largest and second-largest are Canada and Mexico and that is because of NAFTA. A lot of U.S. businesses benefit from a stable relationship with China. So I don’t think [the rhetoric of imposing tariffs on China or Mexico] will become true. That is just presidential election year rhetoric and really has no meaning to policy.”
Even if free trade takes a pause in the short-term, most experts believe the resurgence in U.S. manufacturing, particularly in textiles, will continue unabated.
“I think there are legitimate economic anxieties that American workers feel. Those are valid and folks who support free trade should not dismiss them,” said Josh Teitelbaum, deputy assistant secretary for textiles, consumer goods and materials at the Commerce Department. “But withdrawing from the world stage and failing to pass agreements like TPP does nothing to open up new markets.”
The Obama administration has been an active supporter of the textile industry, recently investing millions in a public-private institute to develop smart textiles and promoting the industry at trade shows around the world. It also negotiated strict rules in TPP to help protect the industry.
Teitelbaum acknowledged the U.S. textile and apparel industry went through a “difficult time” in the late Nineties and in early 2000, a time when NAFTA was enacted and China joined the WTO. But he said there was also a paradigm shift in sourcing, primarily the lifting of global apparel and textile quotas and an “information technology revolution” where automation began substituting labor with technology.
He said the textile industry saw declines in shipments, sales and exports from 2000 through 2009.
Since then, the value of the industry’s shipments are up 13 percent, the value of sales up 20 percent and the value of exports grew 17 percent, “making up for the loss of exports in the first decade of the 21st century,” Teitelbaum said.
“We certainly went through difficult times but I think what we have seen is that we have come out of that period in the last six years with a textile industry that is more capital-intensive and competitive than it was before.”