Clinton and Kaine become globalization’s defenders

July 23, 2016

The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

Hillary Clinton and Tim Kaine are now America’s defending duo of globalization and free trade. The Democratic presidential candidate selected the Virginia senator as her running mate on Friday. The former governor is a moderate who has backed trade deals. One of their first tasks is to win over liberals and Rust Belt voters who supported Bernie Sanders, and are being vigorously courted by Donald Trump.

The unimpeded flow of goods, services, capital and above all, people, has been under attack in this year’s campaign, as it was in Britain’s referendum on EU membership. Sixty percent of voters believe international trade has led to job cuts in the United States, while 55 percent said the country has lost more than it has gained by opening to the world, a CBS News/New York Times poll in July showed.

Vermont Senator Sanders, who proved to be a tough opponent for Clinton before bowing out of the race earlier this month, blasted the Trans-Pacific Partnership as a deal that hurts American workers. Trump has also threatened to scrap the pact with 12 Pacific Rim countries and mentioned his shared views with Sanders twice during his acceptance speech at the Republican convention on Thursday.

The TPP backlash forced Clinton to rein in her support of the pact. But once she clinched the nomination, she rejected efforts to include attacks on the deal in the Democratic Party platform, despite heavy pressure from the Sanders camp.

Kaine has been a strong supporter of trade agreements and voted to give President Obama “fast-track” authority for the TPP. That meant Congress couldn’t change the terms of the deal and could only give a yes or no vote. In 2014, for the 20th anniversary of the North American Free Trade Agreement, Kaine noted in a speech that 40 percent of the parts in Mexican imports came from the United States, making it a win-win situation for both countries.

Most economists believe trade deals boost overall growth and exports, but bipartisan supporters have not been able to articulate the benefits in a way that resonates with blue-collar workers. They have been particularly hurt, with 5 million U.S. manufacturing jobs lost in the last 15 years. Explaining to everyone else why globalization is an unstoppable, and mostly positive, force for economic empowerment is a difficult task – one that Clinton now has someone to help her with.

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“Most economists believe trade deals boost overall growth and exports, but bipartisan supporters have not been able to articulate the benefits in a way that resonates with blue-collar workers.”

The issue with globalization is probably not whether overall growth or the overall financial value of exports increase as a result of international trade. Instead, the issue is more along the lines of whether the average voter’s welfare is improved as a result of international trade. Gross domestic product can increase even if the median income decreases if the benefits from international trade are concentrated among a small group of voters, while other voters’ incomes decline as they find themselves replaced at work by workers in other countries who are not voters in U.S. elections. Similarly, if exports include the export of financial services, then payment for foreign firms for goods formerly provided by U.S. suppliers can be booked as an export of financial services if U.S. firms handle financing and/or the investment of foreign firms’ profits.

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