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Presidential Issues: Trade


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The High Cost of Protectionism

March 14, 2016

By Shanker A. Singham

After the recent spate of primary elections, many are saying that it is inevitable that Donald Trump will be the Republican nominee in the 2016 election.  If Donald Trump were to become President and enact the policies he has espoused on the campaign trail -- signature policies such as his call for China and Mexico tariffs (the latter to build his famous wall), those policies will be the biggest job-killer we have seen since the Great Depression.  Bernie Sanders, also doing much better than anyone had expected advocates the same brand of protectionist policies.

Trump has all too often embraced a nationalist-populist-protectionist stance that draws more from the policies of Bernie Sanders than from a typical Republican candidate. Hillary Clinton is being pulled to the protectionist side also, partly by Sanders and partly by Elizabeth Warren -- she disavowed the Trans-Pacific Partnership, a trade area that includes a tranche of countries in Asia, an agreement she was pivotal in concluding.

This rise in protectionism is understandable given the anger the electorate feels and the perceived and real unfairness in the economic order.  And we do need to have policies which tell voters that if they lose their job because the Chinese or other countries' markets are so distorted that foreign firms cannot enter in a meaningful way or that their firms have undue advantages that we have a policy that deals with that situation.  But at the same time, we need to also communicate that the power of fair competition is immensely beneficial to consumers whose clothing, food and the basic necessaries of life are much cheaper.  In a fair competition, of course American firms will be successful, and create jobs for their people. Indeed any firm located in America, no matter what its origin will be successful and create jobs for Americans.  In America, where competition is part of the national DNA, such an argument should resonate with people.

Read the full article at Economics 21: The High Cost of Protectionism