The trade debate drinking game

Three trite - but untrue - claims about trade.

Image credit: iStock

Political drinking games are a time-honored Washington tradition for acknowledging the trite phrases and political clichés that too often litter a State of the Union address or any presidential debate. But as anyone knows who’s tipped a glass every time a Democrat celebrates “the middle class” or a Republican extols “job creators,” political drinking games can lead to real headaches the morning after.

And nowhere is this more true than on trade. As Congress engages in a serious and long-overdue debate on trade, organizers of drinking games would be smart to avoid a number of trade catchphrases that could lead to some serious hangovers, as well.

Trade proponents, for example, almost always cite the very true—but mind-numbingly repeated—statistic that “95 percent of customers are outside the United States.” And trade critics will label any new trade deal “another NAFTA,” even though the Obama Administration has made upgrading NAFTA—by adding strong, enforceable labor and environmental rules—a key component of the Trans Pacific Partnership.

But trade critics will also repeat other points in the trade debate that are certain to cause even bigger headaches—even for those not in a drinking game. These go-to arguments in the anti-trade playbook are especially frustrating, not just because they are repeated incessantly, but because they are demonstrably untrue.

Here are three familiar anti-trade claims that can lead to splitting trade debate headaches—even for Diet Coke drinkers:

1. Trade Agreements and the Trade Deficit

For decades, trade opponents have sought to tie America’s overall trade deficit to free trade agreements (FTAs) with America’s 20 FTA partners. But there’s simply no such link.

In 2014, over 91 percent America’s $721B trade deficit for goods was the result of trade with countries that are not parties to U.S. FTAs. Indeed, when petroleum imports from Canada and Mexico are excluded, America has a $7.3B trade surplus with its FTA partners, including a $55B trade surplus in job-generating manufactured goods, like machinery, plastics, auto parts, and chemicals. And, for those concerned with reducing the trade deficit, exports to FTA countries—which account for 47 percent of all U.S. exports and have grown by 64 percent since 2009—should to be a significant part of the solution.

2. China PNTR and U.S. Free Trade Agreements

To sidestep these inconvenient facts, trade opponents frequently try to loop China—which accounted for almost half of America’s goods trade deficit in 2014—into the debate over U.S. free trade agreements. They do this by implying that Permanent Normal Trade Relations for China in 2000 was the equivalent of a U.S. FTA. But PNTR is not and never was an FTA.

In granting PNTR status to China, the United States effectively agreed to trade with China the same way it trades with the now-161 members of the World Trade Organization—including most every nation short of North Korea. Although the United States used China’s accession to the WTO to press China on a number of trade barriers, this effort was a far cry from the comprehensive, “WTO-Plus” approach that America takes in opening trade through modern FTAs.

Indeed, China’s continued use of many barriers to U.S. trade illustrates precisely why America needs new FTAs like the Trans Pacific Partnership and the Transatlantic Trade and Investment Partnership. These agreements would enable the United States and like-minded countries in Asia, Europe, and the Americas to build an emerging global consensus on strong new rules against stealing innovation, favoring state-owned companies, and blocking electronic trade—and many other unfair tactics in China’s extensive trade barrier playbook.

3. Trade as a “Zero-Sum” Game

Trade critics are preoccupied with trade deficits because they see trade as a zero-sum game. To critics, exports are essentially “good” and imports necessarily “bad.” But that’s not how trade works.

Imports make very significant contributions to the U.S. economy, supporting jobs for over 16 million Americans—including large numbers of unionized workers, women, and minorities. Over 60 percent of imports are purchased by U.S. factories and farms, which use imported materials to stay competitive globally and make a wide range of “Made in the USA” products. And imports help American families. A recent White House study noted that trade—both imports and exports—boosted the buying power of Middle Class Americans by some 29 percent.

The global economy holds great promise for America, including opportunities to sell our products to billions of global middle class consumers and to spread trade’s benefits more broadly through tools like digital commerce. To craft smart trade policies for this future, it’s important that we avoid the same-old trade debates. And we’ll certainly have fewer headaches if we do.

Ed Gerwin is Senior Fellow for Trade and Global Opportunity at the Progressive Policy Institute and Senior Contributing Editor for Republic 3.0.