In a new interview with the New York Daily News, Bernie Sanders said something striking — he basically doesn't think the US should be trading very much at all with countries where wages are much lower than its own.
"You have to have standards," the senator said. "And what fair trade means to say that it is fair. It is roughly equivalent to the wages and environmental standards in the United States."
From Sanders's point of view, this makes sense. He has recognized, correctly, that freer trade with countries like China has hurt a subset of American workers (while benefiting others).
But there's one big problem, according to development economists I spoke to: Limiting trade with low-wage countries as severely as Sanders wants to would hurt the very poorest people on Earth. A lot.
Free trade is one of the best tools we have for fighting extreme poverty. If Sanders wins, and is serious about implementing his trade agenda as outlined in the NYDN interview and elsewhere, he will impoverish millions of already-poor people.
What's worse is that the specific ways Sanders has proposed to roll back previous trade agreements could lead to serious reprisals from the affected countries. The nightmare scenario, experts say, is a global slide toward protectionism, wherein China and other countries take cues from the US and impose their own retaliatory tariffs. That would devastate economies in the developing world, dooming many more millions to a lifetime of crushing poverty.
What makes this issue particularly tricky, though, is that there's real truth to Sanders's critique: Recent economic research suggests that freer trade has hurt many Americans, particularly those who worked in manufacturing. The question, then, is how much we're willing to hurt the world's poor in order to help ourselves.
Sanders wants to reverse decades of US trade liberalization
Bernie Sanders's opposition to trade goes far beyond opposing new agreements, like the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP).
His website promises to "reverse" NAFTA and the Central American FTA (CAFTA), bills slashing US tariffs on goods from around the Americas. It also promises to get rid of permanent normal trade relations (PNTR) with China, a Clinton-era designation that prevents the US from imposing special tariffs on China that it doesn't impose on other trading partners.
"If corporate America wants us to buy their products they need to manufacture those products in this country, not in China or other low-wage countries," Sanders's website says.
According to Gary Hufbauer, a senior fellow at the Peterson Institute for International Economics and an expert on trade law, Sanders could unilaterally withdraw from NAFTA and CAFTA. Ending PNTR for China would probably be impossible without congressional buy-in, but Sanders could unilaterally impose new tariffs on Chinese goods, which would accomplish the same end of limiting imports from China.
"There is power within the White House to increase duties on imported goods," Hufbauer tells me. "That's especially true with so-called safeguard laws, where [the president alleges] an injury to a domestic industry."
But would Sanders actually do it?
There's certainly reason for skepticism. Kim Elliott, an expert on trade at the Center for Global Development, notes that previous candidates (including both Barack Obama and Hillary Clinton in 2008) have suggested they would quit NAFTA. Of course, she points out, Obama did no such thing.
Daniel Drezner, a professor and trade expert at Tufts University's Fletcher School of Law and Diplomacy who's been following the campaign closely, disagrees. He thinks Sanders's strong convictions on corporate America — his deep, ideological belief that American economic policy is arranged to benefit the rich and hurt the poor — would cause him to take a harder line on trade than any prior president.
"Bernie thinks the American worker has gotten screwed," Drezner tells me. "He thinks the solution to that, at least in part, is to raise trade barriers against China and other low-wage economies."
Sanders's record in Congress strongly supports Drezner's case. The candidate has bragged, in debates, of never supporting a trade agreement. In 1993, he was literally on the picket line against NAFTA; in 2005, Rep. Sanders spearheaded a congressional effort to reverse PNTR status for China. His campaign issued a fact sheet contrasting his decades of opposition to trade with Clinton's decades of supporting new agreements.
"If we are serious about rebuilding the middle class and creating the millions of good paying jobs we desperately need, we must fundamentally rewrite our trade policies," Sanders wrote in a 2015 piece for the Guardian. There is no reason to doubt his sincerity on this issue. If he doesn't prioritize rolling back trade agreements, he betrays not only a series of campaign promises but an entire career's worth of advocacy.
Sanders's policies would be devastating for China and Latin America
To understand why these policies trouble development economists, you need to understand a little bit about who the world's poorest people really are.
Extreme poverty — defined by the World Bank as living on less than $1.90 a day — is crushing. It's the kind of grinding poverty where you don't get access to running water, adequate food, proper toilets, or basic health care. Wealthy countries like the US have (nearly) eradicated this kind of poverty. Thankfully, extreme poverty is in decline globally, with the biggest declines (roughly 800 million people's worth since 1981) coming in China:
Here's the problem for Sanders: The global decline in extreme poverty is inseparable from the global trading regime. When poor countries can sell cheap goods to rich countries, or bring in a lot of foreign direct investment, growth skyrockets. This means more jobs, better government services, and thus less poverty.
"The free trade, or freer trade, that we've had since the end of the Second World War has been the great engine which has lifted up literally hundreds of millions of people out of poverty — far more than any aid programs," Hufbauer says. "The econometrics is indisputable."
See, for example, this 2008 study by UCLA economist Romain Wacziarg and Karen Horn Welch. Wacziarg and Welch looked at 50 years of trade data to figure out the effects of trade liberalization on economic growth. They found that, on average, economic growth increased by 1.5 points after a country passed laws opening up to foreign trade:
China is, of course, the most dramatic example of this effect: Its incredible economic growth since 1981 came principally from exports. While the Chinese economy has since shifted away from exports somewhat, the sector still makes up 22.6 percent of Chinese GDP.
Trade with the US — the world's largest economy — is a key part of that story of uplift. Any serious attempt by a Sanders administration to impede trade with China would put a serious crimp in Chinese economic growth, which is already slowing down. This would make it harder for the roughly 54 million Chinese people still living in extreme poverty to escape — and it could potentially could throw even more Chinese people into poverty.
"If Sanders were to impose significant trade barriers with China," Drezner says, "the marginal middle class, or the ones who had just gotten out of poverty, would likely wind up falling back into poverty."
"China's economy is already not doing as well as it was," Charles Kenny, a senior fellow at the Center for Global Development, says. "Anything that slows down the growth of exports … is going to be bad for future reductions in Chinese poverty."
Canceling NAFTA and CAFTA would also be quite bad. While there's not a lot of extreme poverty in Mexico and Central America, these countries are still far poorer than the US. Impeding free trade with those countries would prevent US dollars from flowing in, thus further impoverishing their poorest.
"The proposals to end particular trade agreements — that could be devastating for Central America," Elliott says. "If it meant going back to the trade barriers that we had in place a decade ago, that's going to mean much less trade coming out of Central America to the United States, [and thus] many fewer jobs."
Even Dani Rodrik — a Harvard economist who called NAFTA a "huge disappointment" for Mexico in our conversation — thinks rolling back it and CAFTA would be a bad idea.
"It would make a big difference to how America's partners in the world look at it, in terms of its credibility to be a leader," he says. Asked about a major tariff on Chinese goods, he waxed apocalyptic.
"The example of the 1930s — with the US Smoot-Hawley tariff increases, and the kind of trade war that seriously exacerbated the Great Depression in the world economy, and the downward spiral of global trade — I think that should stand as a very serious warning," he says.
The global consequences could be even worse
These decisions don't happen in a vacuum. The global trade system, generally speaking, depends on leadership by example. When the United States opens up its own markets, other countries tend to do the same. If the US were to embrace protectionism, other countries would follow suit.
The logic here is fairly ironclad. If the world's largest economy feels the need to protect its own industries from foreign competition, why shouldn't other, less economically powerful countries do the same?
"Without the United States, you can't have global trade deals, you can't have progress in this area," Kenny says. "If the United States does start backsliding towards protectionism, that is quite likely to set off a spiral toward greater protectionism worldwide."
American tariffs "are legally capped at 2, 3, 4 percent" under international trade law, says Elliott. Violating that restriction "risks setting off the kind of trade war that we saw in the early years of the Great Depression. Other countries are not just going to sit around and not respond to that."
How bad this gets, of course, depends on how committed Sanders is to throwing up barriers to foreign trade. The more he uses executive authority to enact new tariffs, the more retaliation from other countries you're likely to see.
The people who would be screwed over the most by a global backlash to free trade would, clearly, be the roughly 900 million people still living in extreme poverty. These people, clustered in South Asia and sub-Saharan Africa, could still reap tremendous benefits from exporting goods to foreign markets — essentially replicating a major part of China's growth strategy.
But if richer countries like China and the US get into a serious trade war, with overall tariffs escalating on both sides, they could lose access to these markets. No more exports means much less growth, which in turn dooms millions — maybe hundreds of millions — of people to extreme poverty.
Smaller, poorer countries "are just going to be bystanders who have to take what comes at them from the global economy," Elliott says. "The poor countries don't have anything in the way of fiscal or financial sources to cushion the blow, especially for the poorest people."
Sanders's war on trade might be aimed at helping the American working class. But if he were really serious about it, the damage to the world's very poorest would be astronomical.
The highly revealing defense of Sanders
Is there any defense of Sanders? There is, but it's one that a lot of liberals won't like: Screwing over the global poor might well be in America's interests, or at least the interests of some Americans.
A 2016 study by economists David H. Autor, David Dorn, and Gordon H. Hanson took a look at the effect of passing PNTR with China on the availability of jobs inside the United States. They found that opening trade to China decimated the US manufacturing industry, as China just made cheaper stuff. What's more, no jobs emerged to support the workers displaced by Chinese competition.
"Exposed workers experience greater job churning and reduced lifetime income," Autor et al. found. "At the national level, employment has fallen in US industries more exposed to import competition, as expected, but offsetting employment gains in other industries have yet to materialize."
The Autor study is powerful evidence in favor of Sanders's core argument: Liberalizing trade has hurt the American working class. While most of the trade and development experts I spoke to insisted that benefits American consumers reap from cheaper goods probably outweighed the costs Autor et al. document, they all conceded there's a plausible case going the other way.
"The way we have done trade in the United States has been of some benefit to most people, a lot of benefit to a few people, and of real harm to a million-plus people who've lost manufacturing jobs," Kenny says. "From a purely US-centric view, I see where this opposition is coming from."
The key phrase there is "purely US-centric." The other thing the experts generally agreed on is that whatever the harm to American manufacturing workers, the benefits of trade for the world's most vulnerable far outweighed the costs. Justifying Sanders's policy requires only counting the benefits to Americans and ignoring the costs to the world. "It's economic nationalism from the left," Drezner says.
It also requires assuming that the US could actually restore jobs already lost to China, which isn't obvious. "Manufacturing employment has been declining in the United States, as a share of total employment, for decades," Rodrik argues. "The reality is that the manufacturing jobs are not going to come back. Altering those trade agreements or even abolishing them I don't think would make a big difference."
There's a solution for the damage trade has done to the American working class, one embraced by the Nordic countries that Sanders often cites as models for the United States.
These countries tend to be extremely open to free trade. But they also have expansive welfare states that take money from globalization's winners and use it to compensate the workers who lose out. Everyone in these countries benefits from cheaper goods, the domestic lower middle class doesn't suffer, and the global poor benefit from selling their goods to rich consumers.
According to the experts, something like this is the ideal solution to the dilemma of American trade policy. "I hope the next president would look for policies that help the poor both here and in poor countries, and don't pit them against one another," Elliott says.
But American politics, clearly, won't allow that: It is, to say the least, unlikely that a Republican-controlled Congress would allow President Sanders to expand the US welfare state to Nordic levels in order to compensate the losers of the global economy.
Which puts Bernie in a very awkward position: Delivering on his campaign promises requires doing real damage to the global poor.