To listen to presidential candidates Bernie Sanders and Donald Trump talk about free trade, one might think free trade is a bad thing and something our country should not be participating in.
Sanders charges that Hillary Clinton isn’t qualified to be president in part because of her support for free trade agreements. The hostility is even greater among Republican candidate Donald Trump. Trump launched his candidacy by repeatedly criticizing "bad trade agreements" with China, Mexico ("NAFTA was a disaster)," and everywhere else.
What none of these candidates has acknowledged is that American farmers, the business community and consumers are dependent on trade with countries like China, Mexico, Canada, Japan, Australia, Indonesia, Brazil and the European Union.
China, for example, buys 60% of U.S. soybean exports. In February, U.S. exports accounted for 13.4% of U.S. milk production, which is quite high but dairy exports are down 20% from a year ago due primarily to the strength of the U.S. dollar. While domestic consumption of dairy products rose in 2015, U.S. consumers would never be able to consume 13.4% more of U.S. milk production if the export markets suddenly dried up. Thirteen percent may not sound like a lot, but consider how fragile U.S. milk markets are. According to Bob Cropp, University of Wisconsin dairy economist, it only takes a 3% surplus of milk to generate $10 milk prices in the U.S., while a 1% milk surplus generates $25 milk prices. Adding 13.4% more milk to the U.S. milk supply would have a devastating impact on milk prices. Ditto for soybeans and other ag commodities.
In recent years, the trade deficit has been shrinking despite a strong U.S. dollar. In 2015, it was $540 billion compared with $761 billion in 2009.
American consumers like buying imported goods including cars from Japan and Germany, clothing from Vietnam and Bangladesh, plastic stuff from China and electronics and video games from Japan. In fact, Americans favor free-trade deals according to the Pew Research Center generally by a 51% to 39% margin. Republicans, however say free trade deals have been a bad thing for the United States, by a 53% to 38% margin, while Trump supporters disapprove of such deals by a 67% to 28% margin, according to the Pew Research Center.
So why are so many Americans opposed to free trade? The reality is that free trade exposes Americans to competition with lower-paid workers. That has led to consumers being able to buy foreign cars, electronics and cheap stuff at Walmart. But it has also contributed to jobs being lost to overseas competition. In 1970, more than a quarter of U.S. employees worked in manufacturing. By 2010, only one in 10 did.
But what fails to get mentioned by presidential candidates is that exports are also creating American jobs. According to the U.S. Commerce Department, export-supported jobs rose from 7.6 million in 1993 to 10.3 million in 2008, an increase of 2.7 million jobs. This increase accounted for 40% of total job growth in the U.S. during this period.
I think it's time for presidential candidates to tell it like it really is. Maybe it plays well to tell their voters what they think they want to hear and get them all fired up, but I think they need to realize like with anything else trade agreements have positive and negative impacts. For agriculture, consumers and businesses, the positives of trade agreements far outweigh the negatives.