With tonight’s opening presidential debate between Hillary Clinton and Donald Trump expected to draw Super Bowl sized audience as the two candidates face each other directly for the first time to argue about topics that will include “America’s direction,” “Achieving Prosperity,” and “Securing America,” Politico magazine has identified some “Trade Pinocchios” to look for.
The news organization estimates there will be a “good chance” that trade will figure prominently in the debate, but warns viewers not to believe everything they hear. To that end, Politico tasked five of its reporters to fact-check every statement made by both candidates over a recent five-day period. Unsurprisingly, they found “quite a few examples of mistruths, including several from Trump on trade.”
“The World Trade Organization — disaster for us,” said Trump at a rally, Sept. 20, in Kenansville, N.C. This is an oversimplification, the POLITICO fact-checkers advise. The WTO adjudicates countries’ economic claims against each other, and the U.S. has both won and lost cases in front of the body — including in February, when the U.S. won a big decision against rules in India that discriminated against foreign solar power technology.
“Hillary Clinton wants to approve the Trans-Pacific Partnership; that deal will be a disaster for North Carolina, for every state. Your state,” Trump said the same day at a rally in High Point, N.C. CNN tracked 45 instances in which Clinton supported the TPP, including in 2012 when she called it the “gold standard” of trade deals, POLITICO’s fact checkers found. But facing a challenge to her left from Bernie Sanders, Clinton this year said she opposed it and would continue to as president.
As expected, last night’s presidential debate was rife with wildly inaccurate statements, half-truths, and demonstrable falsehoods. Among the ones related to trade were the following:
Trump accused China of “devaluing their currency” in order to gain an economic advantage.
While countries that artificially suppress the value of their currency can sell goods in other countries more cheaply and many economists see evidence that China engaged in this practice for years, arguably helping contribute to its rise as an industrial power, this is no longer the case. In recent years, China has sought to stabilize and even increase the value of renminbi or yuan, part of a broader shift in its economic policies. There is no evidence that China is presently engaging in currency devaluation and a 2014 review by the International Monetary Fund has determined that its currency is fairly valued.
Trump described a dire situation for the United States’ industrial economy, saying that “Ford is leaving,” referring to the auto giant, and that “thousands of jobs are leaving Michigan, leaving Ohio. They’re all leaving.”
Although Ford is transferring the manufacture of many of its smaller, less profitable cars to Mexico, the company has stated that the move will not result in job losses in the U.S. Ford CEO Mark Fields said that “zero” jobs will be lost in the U.S., adding that “it is really unfortunate when politics get in the way of the facts.” Fact-checkers also pointed out that while Ohio and Michigan have undeniably suffered major manufacturing job losses over the past generation, in the past year, Ohio has gained 78,300 jobs and Michigan has gained 75,800 jobs. In August, the unemployment rate was 4.9% in Michigan and 4.7% in Ohio, both roughly in line with the national rate.
Trump claimed that Bill Clinton approved North American Free Trade Agreement, which he denounced as “the worst trade deal” in American history, and possibly in world history.
Despite more than 20 years having passed since NAFTA came into effect, opinion is still strongly divided about the trade deal and it remains a political lightening rod in every election cycle. Even so, evidence suggests that its overall economic impact has been overstated by both supporters and detractors. In this regard, a study published last year by the non-partisan Congressional Research Service concluded that the “net overall effect of NAFTA on the U.S. economy appears to have been relatively modest.” This is owing to the fact that trade with Canada and Mexico, though significant, comprises a relatively small portion of total U.S. economic activity.
Also, the negotiations for NAFTA actually began while President George H.W. Bush was in office and though he signed the agreement in December of 1992, he was unable to push it through Congress before leaving office. President Bill Clinton subsequently ratified and signed the agreement in 1993 after Congressional approval (with more Republicans supporting the agreement than did Democrats).
Trump claimed that America’s current trade deals such as NAFTA were all “defective” because other countries such as Mexico have a Value Added Tax (VAT), something that he maintains gives them an inherently unfair trading advantage.
This contention is apparently founded on misinformation Trump has received from Peter Navarro and Wilbur Ross, two of his economic advisers, that has been dismissed out of hand as being “not just iffy, or a tad mistaken, nor even wrong, it’s simply flat out untrue.” The assertion is based on a fundamental misunderstanding that is “very wrong indeed” about the interaction of VAT and trade, as explained in detail here by Forbes contributor Tim Worstall.
Trump claimed that the U.S. is “being ripped off by every single country in the world” and asserted that U.S. has “a trade deficit with all of the countries that we do business with, of almost $800 billion a year.”
At $745.6 billion, Trump overstated the merchandise trade deficit by $55 billion (he also didn’t factor in the trade in services, which would have made the total figure much smaller) and was simply dead wrong about the U.S. running deficits with all of its trading partners. Last year, the U.S. ran individual goods surpluses with 14 of its 20 free-trade partners, which also bought 47% of exported U.S. goods, according to figures from the Department of Commerce.
Click here for a complete transcript of the debate.