If you’ve listened to some of the discussions on trade policy during the Presidential primary season, you’d be forgiven for thinking that trade deals have had a negative impact on the U.S. economy. That’s far from the case. Indeed, it’s been a frustrating few months for those in favor of rational, evidence-based debate on U.S. trade policy and its impact on the nation’s economy.
The latest example came from actor and activist Mark Ruffalo over the weekend. Ruffalo’s piece in the Huffington Post repeats a number of tropes and allegations about trade policy and the Trans-Pacific Partnership (TPP) that are factually incorrect. Let’s take a deeper dive.
U.S. manufacturing decline?
It’s true that manufacturing employment as a proportion of the overall economy in the United States has been in a period of long-term decline. In fact, it has been declining for more than half a century.
This decline significantly pre-dates the trade agreements that Ruffalo cites, beginning with the North American Free Trade Agreement (NAFTA) in 1993. The reasons for this decline are many and varied, including technological advances, a shift to less labor-intensive manufacturing, higher productivity, relative wage rates, etc.
The point here is that the decline in U.S. manufacturing is a long-term trend, and while trade policy (most notably the granting of permanent normal trade relations to China in 2000) may have had some impact, it’s only a small part of the picture.
Moreover, trade agreements entered into by the U.S. in recent decades have been unambiguously good for the overall U.S. economy. Living standards have risen, as has consumer choice, and huge new markets have been established for U.S. exporters. TPP has the promise to further this progress.
As this week’s Economist points out, America’s economy benefits hugely from trade, although we do need to ensure that those who lose out from trade get appropriate adjustment assistance for re-training and finding new positions.
U.S. manufacturing game-changer
One of the ironies about Ruffalo’s piece is that he has also opposed the single most significant development that has the potential to promote a manufacturing renaissance in the U.S., and create new American jobs.
Increased supplies of low-cost natural gas, mainly as a result of the technological innovation of hydraulic fracturing, have been a game changer for U.S. chemical manufacturing. To date, more than $164 billion in new investment in U.S. chemical production has been announced, 61 percent of which is foreign direct investment.
Access to shale gas means that American manufacturers have a comparative advantage, one that ACC projects will generate more than 700,000 new jobs in manufacturing and elsewhere in the economy. More than 96% of all manufactured goods rely on the business of chemistry, meaning hydraulic fracturing is a game changer for downstream manufacturers, too.
More gains to come
U.S. chemical exports are anticipated to increase significantly in future years as the new production generated from this increased investment comes on stream.
An ACC report released last year estimated that net exports of shale-gas advantaged chemical products will double by 2030. That only increases the importance of opening new markets for U.S. chemical manufacturers, and indeed for U.S. manufacturers as a whole.
ACC has strongly supported TPP and called for its early ratification. Success in today’s global economy requires continued and effective engagement with trading partners on a level playing field. We simply can’t afford to sit this one out.
One final irony from Ruffalo’s piece: the film industry has been one of the biggest beneficiaries of international trade. The very trade policies Ruffalo rails against have been critical to the success of the industry that made him famous.
You can’t have your cake and eat it, too.