September 28, 2016
When the issue is trade deals, like the Trans-Pacific Partnership (TPP), the New York Times throws out its usual journalistic standards to push its pro-trade deal agenda. Therefore it is not surprising to see a story in the news section that was essentially a misleading advertisement for these trade deals.
The headline tells readers that Donald Trump’s comments on trade in the Monday night debate lacked accuracy. The second paragraph adds:
“His aggressiveness may have been offset somewhat by demerits on substance.”
These comments could well describe this NYT piece.
For example, it ostensibly indicts Trump with the comment:
“His [Trump’s] first words of the night were the claim that “our jobs are fleeing the country,” though nearly 15 million new jobs have been created since the economic recovery began.”
It is not clear what the NYT thinks it is telling readers with this comment. The economy grows and creates jobs, sort of like the tree in my backyard grows every year. The issue is the rate of growth and job creation. While the economy has recovered from the lows of the recession, employment rates of prime age workers (ages 25–54) are still down by almost 2.0 percentage points from the pre-recession level and almost 4.0 percentage points from 2000 peaks. There is much research showing that trade has played a role in this drop in employment.
The NYT piece continues:
“He [Trump] singled out Ford for sending thousands of jobs to Mexico to build small cars and worsening manufacturing job losses in Michigan and Ohio, but the company’s chief executive has said ‘zero’ American workers would be cut. Those states each gained more than 75,000 jobs in just the last year.”
It is not surprising that Ford’s CEO would say that shifting production to Mexico would not cost U.S. jobs. It is likely he would make this claim whether or not it is true. Furthermore, his actual statement is that Ford is not cutting U.S. jobs. If the jobs being created in Mexico would otherwise be created in the United States, then the switch is costing U.S. jobs. The fact that Michigan and Ohio added 75,000 jobs last year has as much to do with this issue as the winner of last night’s Yankees’ game.
The next sentence adds:
“Mr. Trump said China was devaluing its currency for unfair price advantages, yet it ended that practice several years ago and is now propping up the value of its currency.”
While China has recently been trying to keep up the value of its currency by selling reserves, it still holds more than $4 trillion in foreign reserves, counting its sovereign wealth fund. This is more than four times the holdings that would typically be expected of a country its side. These holdings have the effect of keeping down the value of China’s currency.
If this seems difficult to understand, the Federal Reserve now holds more than $3 trillion in assets as a result of its quantitative easing programs of the last seven years. It raised its short-term interest rate by a quarter point last December, nonetheless almost all economists would agree the net effect of the Fed’s actions is to keep interest rates lower than they would otherwise be. The same is true of China and its foreign reserve position.
The piece goes on to say that NAFTA has “for more than two decades has been widely counted as a main achievement of her husband [Bill Clinton].” It doesn’t say who holds this view. The deal did not lead to a rise in the U.S. trade surplus with Mexico, which was a claim by its proponents before its passage. It also has not led to more rapid growth in Mexico which has actually fallen further behind the United States in the two decades since NAFTA.
In later discussing the TPP the piece tells readers:
“Economists generally have said the Pacific nations agreement would increase incomes, exports and growth in the United States, but not significantly.”
It is worth noting that none of the analyses that provide the basis for this assertion take into the account the impact of the increased protectionism, in the form of longer and stronger patent and copyright protections, which are a major part of the TPP. These forms of protection are equivalent to tariffs of several thousand percent on the protected items. As they apply to an ever growing share of the economy, the resulting economic losses will expand substantially in the next decade, especially if the TPP is approved.
Comments