Bryan Riley of the Heritage Foundation is shown speaking at a Mobile Area Chamber of Commerce forum held Tuesday, June 13, 2017, to discuss the impact of Trump administration policies. At center is moderator Ellyn Ferguson; at right is Josh Meltzer of the Brookings Institute. (Lawrence Specker/LSpecker@AL.com)
How will Trump administration views affect the nation’s trade policies, and how might that in turn affect Alabama? Firm answers were in short supply this week at a panel discussion presented by the Mobile Area Chamber of Commerce, but it was clear some areas of concerns are taking shape.
The breakfast session, held at the Battle House Hotel, featured Josh Meltzer of the Brookings Institution and Bryan Riley of the Heritage Foundation, assisted by moderator Ellyn Ferguson of CQ Roll Call. While their institutions have different philosophical starting points – with Brookings generally classed as centrist and Heritage as conservative – Meltzer and Riley nonetheless had common ground on support for free trade, and concern about the possibly restrictive impact of President Donald Trump’s policy leanings.
Mobile Area Chamber of Commerce President and CEO Bill Sisson opened the session by saying that the Mobile Area has a particular interest in international trade, partly because of the shipping traffic through the Alabama State Docks. “Eight of our top 10 manufacturers are internationally headquartered,” he said. “We have some 49 businesses that are internationally headquartered in this area, employing well over 13,000 people.”
“Obviously trade is extraordinarily important to our Chamber of Commerce and certainly this area, we’re dependent on it, in fact,” Sisson said, adding that Mobile was founded as a trading colony and arguably was built around its port. He said the Mobile Area Chamber has an international business department, which is relatively unusual.
According to industry reports cited by the Mobile Area Chamber of Commerce, business has boomed at the Port of Mobile in recent years, with the city topping one list of the fastest-growing North American Ports in 2016. According to industry site JOC.com, Mobile’s share of total trade moving through Gulf Coast ports jumped from 7.1 percent in 2015 to 8.2 percent in 2016. A 2015 Brookings Institute report said that the value of exports out of Mobile was $2.5 billion.
In many respects, Meltzer and Riley said, analyst were still waiting to see how Trump talk would translate into Trump action. But they did identify a range of areas where the new administration’s views could have the greatest impact.
Some key points from Tuesday’s session follow.
Deficit thinking: “So what have we seen so far from the Trump administration?” asked Meltzer. “One of the things we’ve seen is a focus on this concern around bilateral trade deficits as a metric.” Meltzer said Trump has held up trade imbalances with specific countries, notably Mexico and Germany, as evidence that the U.S. is getting the short end of the stick. But Meltzer said “the problem of course with this is that no one seriously thinks” such bilateral balances are a basis for sweeping judgments.
It’s not a good way to evaluate “the health of that relationship” between two countries, he said, and excessive focus on it could have unintended consequences.
Meltzer said that looking at a bilateral balance of trade doesn’t reflect the reality of global supply chains or the complexity of multinational partnerships. “Take for example Mexico,” he said. “Approximately 45 percent of the value of Mexico’s exports to the United States comes from the United States.” That could mean, for example, that parts or raw materials from the States are shipped to Mexico, where they’re used to make products exported back to the States. Slapping a tariff on the products coming into the States could hurt the demand for the American-made materials going into Mexico.
Riley said that aiming for balance or an advantage in every bilateral relationship is “the wrong goal to shoot for.”
TPP repercussions: Meltzer said it came as no surprise that Trump had withdrawn the U.S. from the Trans-Pacific Partnership, since he’d made a clear campaign promise to do so. But he said that the Bush and Obama administrations had generally viewed the pact as “the core vehicle for the United States to essentially update the rules of the trading system” on its own terms, and in the process to update the North American Free Trade Agreement (NAFTA). In the absence of TPP, the U.S. would have to negotiate NAFTA, Meltzer said, and that could take time. It would also have to find another “strategic vehicle” to influence trade with Asian nations.
“The U.S. has been and continues to be the creator and master of globalization,” said Meltzer. It has had a major hand in shaping international trade rules, and those trade rules generally serve the United States well, he said.
Mexico blues: Meanwhile, the panelists expressed concern that Trump’s frequent targeting of Mexico on economic issues, immigration and his proposed border wall could bear bitter fruit. Facing anti-Trump sentiment and a 2018 election cycle in which its incumbent President President Enrique Pena Nieto cannot run again, the ruling PRI party may think twice before doing anything that seems to favor U.S. interests. And that discontent with Trump could bolster the fortune of challengers likely to be far less inclined to work with U.S. leadership in the future.
Manufacturing an issue: Both panelists expressed concern about what Meltzer described as a heavy focus on using trade policy to bring back manufacturing jobs. The problem, Meltzer said, is that the more or less steady loss of manufacturing jobs since the 1950s has been driven largely by technology rather than by international competition. Where jobs have been eliminated by automation or other developments that have led to increased productivity, “Those jobs are never going to come back to the United States,” he said.
Meltzer said that in his view the American manufacturing sector was in “robust health.” Riley shared that view, describing how a recent trip from the Gulf Coast to Washington had taken him past the Hyundai plant in Montgomery, a Kia plant in Georgia, and a BMW plant in South Carolina.
The debate over manufacturing jobs during the election “drove me crazy,” he said. “In D.C. they act like we don’t make anything anymore.”
Riley quoted a remark that U.S. Rep. Terri Sewell recently made in an NPR interview: “It is also important that we don’t sell people here a bag of goods. Look, there are a lot of jobs that are not going to come back to America or back to the Deep South. But that doesn’t mean we don’t promote the opportunities that are coming this way. I think it is so important that we leverage the fact that we have Mercedes-Benz, and Hyundai and all those amazing manufacturing opportunities here.”
National security via tariffs: Meltzer said that he was concerned that the Trump administration might cite national security as a justification for raising tariffs on steel and aluminum. Such a move would be legal, he said, but “historically the U.S. rarely used this exception.” The problem, he said, is that if a major country like the United States justifies tariffs in this way, other countries follow suit, and the cycle of rising tariffs slows trade.
“The concern is, if you try to get at it using national security, you open up the floodgates,” he said. Riley said that in his opinion, if another country such as China dose impose unfair tariffs, it’s better in the long run to negotiate rather than simply respond in kind.
Cuba: On the United States’ relationship with China, panelists were especially hesitant to say which way things might go. “We’re all waiting for the administration to say something,” said moderator Ferguson. Speaking on Tuesday, she said many expected some sort of action on Friday — And on Friday, as suggested, Trump announced that he was rolling back some of the expanded access to Cuba that had been allowed under Obama.
Ferguson noted that Raul Castro, the current Cuban president and brother of longtime dictator Fidel Castro, is supposed to step down in February 2018. Whether that happens, and what follows, will shape a new stage in U.S.-Cuba relations, Ferguson said.
Wait and see: Meltzer said he was worried about Trump’s emerging budget priorities, which could undercut social support programs that help people deal with unemployment, retrain and seek new jobs. Riley said that despite all the potential concerns, “I’m pretty optimistic about the way things are going.”
It is a possibility that a tilt toward protectionism could have many negative effects, Riley said, but it’s too early to say for sure that a tipping point has been passed. It could turn out in hindsight that the Trump administration simply focused on a few unfair deals.
“Some of his words give me great alarm,” Riley said. “I don’t think we really should withdraw from NAFTA or put 30 percent tariffs on everything coming from China. But those are things he’s said. He really hasn’t taken a lot of, he really hasn’t taken any action so far, other than withdrawing from TPP, which is a big deal, but that was one of his campaign promises.”