As National Taxpayers Union (NTU) has done in the days since the 2016 Republican Party’s platform was released, we have analyzed its policy proposals and how they would affect taxpayers’ bottom line.
Free trade is a no-brainer for taxpayers. Tariffs are simply taxes on goods imported into the United States and eliminating tariffs amounts to tax cuts for families and businesses. As NTU has noted recently, the cause of free trade is under its most serious assault since World War II, in large part due to irresponsible rhetoric from leading politicians. Given this regrettable development, we were eager to examine the Platform’s treatment of trade. What we found was disappointing, but that’s not surprising given the Party’s current standard bearer has made hostility to free trade a centerpiece of his presidential campaign.
The Platform’s trade section begins by lamenting “[m]assive trade deficits.” Worries about trade deficits – importing more than we export – are a favorite canard of protectionists. Trade deficits, also known as capital account surpluses, are not necessarily a problem; the United States benefits from both exports and imports. Businesses and families purchase all sorts of items manufactured abroad, which keeps costs of consumer goods and inputs for firms low.
Not only are imports a positive for the United States, but a trade deficit does not cause job losses, despite the rhetoric of reckless politicians. As Derek Scissors of the American Enterprise Institute has noted, “our trade deficit set a record high in 2006. Unemployment was just 4.6 percent. The trade deficit fell more than $300 billion in 2009, yet unemployment that year soared from 5.8 percent to 9.3 percent.” Simply put, the Platform’s concerns about the trade deficit are ill-advised.
The Platform’s treatment of China is a mixed bag. It expresses some legitimate concerns about China and other countries for their theft of U.S. intellectual property. Reasonable intellectual property protections encourage innovation and theft of such property poses serious problems for the U.S. economy.
While many of the Platform’s points about intellectual property theft may be well-founded, its treatment of alleged Chinese currency manipulation is not. Critics of Chinese monetary policy allege that the country devalues its currency in order to encourage exports, which harms U.S. domestic manufacturers. Like concerns about trade deficits, Chinese currency manipulation is a red herring. Currency manipulation is not a panacea in global commerce. If a country devalues its currency to encourage exports, it raises the price of items it imports from foreign countries. At the same time, forcing countries to raise the value of their currency could raise the prices of imported goods that families and businesses in the United States rely on. The economic impact of changes in currency value is a highly complex matter – currency manipulation does not provide a simple, clear-cut path to prosperity.
Threat of Tariffs
The Platform states, “A Republican president will insist on parity in trade and stand ready to implement countervailing duties if other countries refuse to cooperate” with U.S. trade negotiators’ demands. By marching in lockstep with Mr. Trump’s irresponsible threats to impose massive tariffs on imports, the Platform further raises the specter of a trade war with foreign nations. Should these ill-considered policies come to fruition, American families and businesses would bear the brunt of such protectionism, not foreign nations.
TPP in Lame Duck
The final sentence in the trade section of the Platform says, “Significant trade agreements should not be rushed or undertaken in a Lame Duck Congress.” This sentence is in reference to the Trans Pacific Partnership (TPP), a 12-nation trade agreement between the United States and other Pacific Rim nations currently awaiting ratification by the United States Congress. While NTU is still evaluating the massive and complicated trade agreement, foreclosing the possibility of its ratification this year is ill-advised.
If TPP merits support, it should be ratified as quickly as possible for two reasons. First, delaying its ratification could cost U.S. families and businesses dearly. Additionally, the current makeup of Congress is favorable to free trade, but there is no guarantee it will be in the future.