 More than 240 years ago, a powerful, clear and comprehensive case against mercantilism, against protectionism and cronyism was offered in the book that launched modern economics. That was Adam Smith's 1776 classic, an inquiry into the nature and causes of the wealth of nations. Being an economist, I regard that as being the most significant event of 1776. There were others. Since then, no topic in economics has been researched, studied and pondered more and more carefully than trade. One result of all this research, study and pondering is a strong and consistent consensus among economists that free trade is beneficial, especially for the poor. Just the other day, for example, the Economist magazine reported on a recent study by Pablo Faganbaum of UCLA and Amit Kendall, Kendall Wall of Columbia. These economists found, and I'm quoting them now in a recent paper, 2015 paper, in an average country, people on high incomes would lose 28% of their purchasing power if borders were closed to trade. But the poorest 10% of consumers would lose 63% of their spending power because they buy relatively more imported goods. That's just a sample of the sort of things that economists have discovered over the years about trade. The result is fully in line with what economists have known about trade for centuries. Trade is an unambiguous good, especially for the poor, and hence protectionism is an unambiguous bad, especially for the poor. And yet, here we are in 2016 nearing the climax of a presidential campaign in which two upstart national politicians, one a Republican, the other a Democrat, each got enormous traction and roaring applause for repeating without hardly any adornment of the very same myths that Adam Smith addressed 240 years ago. Of course, the sad reality is that Smith did not slay the myths that he addressed. At least he didn't do so permanently. He might have helped to put some of these myths into a coma for a few decades in a few places, such as mid-19th century Britain and more recently in Hong Kong, but the same myths that motivated Adam Smith to put quill departement remain with us today, alive, snarling, and I believe lethal. These myths include, and I'm quoting the myths now, and this is not me, exports are good, imports are the costs we pay to enjoy this good. The more we import, the more jobs we lose, the more we export, the more jobs we gain. Economic self-sufficiency is the path to prosperity. Being part of a global economy is a path to peril. Rich countries that trade with poor countries can't compete successfully against low wage workers unless rich country workers agree to work for lower wages and under worse work conditions. Trade deficits are symptoms of unfair trade practices by our trading partners and the cause of economic decline at home. None of this is true. It's all false and spectacularly so, but these myths are each widely held and they are passionately held. I therefore conclude that I and other economists have failed. We've rested content to convince ourselves of the virtues of trade but have done too little and we've done most of that too poorly to adequately convey our understanding of trade to the general public and to policy makers. Thus, this new program at Mercatus on the American economy and globalization. Among our chief goals is to help close the now capacious gap between what economists know about trade and what the public thinks it knows but really doesn't. Part of this task involves doing first-rate scholarly research. Another part involves translating our own research and that of other scholars. Into policy briefs, op-eds, blog posts, letters to the editor, magazine essays, congressional testimony, speeches, and interviews. Even tweets that promote improved public understanding of trade. I should say I do my part here. It's even shorter than a tweet. I have a Virginia vanity tag on my foreign assembled automobile. You get a maximum of seven characters and a space, and mine reads F-R-E, space-T-R-D-E. Doing my part. I venture to say that this task of translating the economics of trade into a greater public understanding of trade is the more challenging. My evidence that it's challenging is that after 240 years public understanding remains so poor. But this task beckons us. We don't have any fancies that will create a free trade nation as the British historian Frank Trentman described Britain in the second half of the 19th century, but we are sufficiently ambitious and confident to believe that we will be a major player in improving both the public's appreciation of and public policies toward free trade and a peaceful, globalized world. I will sit down in a moment. We're experimenting. We at Mercatus offer the first time with a new system. And I was just introduced to it myself. It's called, I believe, Slido or Slidoo. And I believe you all have access to it. You're encouraged to submit questions. And my colleagues and I will monitor these questions and use them to use the best ones that in our view will promote a good discussion as we move forward over the next couple of hours. With that, let me introduce my colleague and co-director of Page, Dan Griswold. He's an old friend. Dan is the author of the great 2009 book Mad About Trade. I love the title. Dan was, when I first met him many years ago, he was the director of the Trade and Immigration Studies at the Cata Institute. He then became the president of the National Association of Foreign Trade Zones. And now he's co-director of the Mercatus Center's program on the American economy and growth. Dan. Thank you very much, Don. And thank you all for coming out today. It's great to see you all here. What a privilege to serve as co-director with Don Boudreau, who I hold in very high esteem. And it's an honor to introduce our keynote speaker, Dr. Douglas Irwin. Douglas Irwin is the John Sloan Dickey Third Century Professor in the Social Sciences in the Economics Department of Dartmouth College in New Hampshire. I first heard of Dr. Irwin about 20 years ago. I was a lowly graduate student at the London School of Economics. And my advisor said, you've got to read this new book by Douglas Irwin. It was called Against the Tide, an Intellectual History of Free Trade. And I just devoured every chapter, and I've been reading Dr. Irwin's stuff and recommending him to everyone I can since then. He is the author also of Free Trade Under Fire now in its fourth edition. And I believe we are distributing copies of that. We have limited copies today. Also, the book Peddling Protectionism, Smooth Holly, and the Great Depression came out in 2011. And many articles in prestigious publications and academic journals, including just a wonderful article that I cannot recommend more highly in the recent foreign affairs called The Truth About Trade. And I think we have copies of that here. And he's also just sent off to the publisher a manuscript of a book he's been working on a long time. A History of U.S. Trade Policy from Colonial Times. And to the present, he may have to add a paragraph or two after this election, depending on how it turns out. He is also a research associate of the National Bureau of Economic Research. And he has served in the past on the staff of the President's Council of Economic Advisors and also on the Federal Reserve Board system. So, it's my pleasure to introduce Dr. Douglas Irwin. Well, thank you very much. I'm so happy to be here because, as Dan just said, I sent off my book, which is A History of U.S. Trade Policy, to the publisher just recently. And 90% of that book deals with what Congress has done and how Congress deals with the trade issue over the years, over the centuries, actually. And to be here where a lot of this history is being made and you're contributing to making that history is a great pleasure for me. I'm also very grateful to Mercatus for handing out copies of Free Trade Under Fire. I wrote that book for you. I wrote it for people who wanted a non-technical, no diagrams, no equation, exposition of basic trade issues. I wrote it for undergraduates, policy people, you here in Washington. And so I hope you'll have a chance to take a look at it. Usually, I'm horrible at titles, but Free Trade Under Fire works because it holds at all times. There's not a time in which Free Trade is not under fire. The attacks change over time. So when I originally wrote it, the big attacks were against the World Trade Organization. You might remember the Battle in Seattle in 1999. You're awfully young, so maybe you don't quite remember it. But actually, if you want to get up to date on that, there's a very bad movie you can watch on YouTube called The Battle in Seattle with Charles Theron and Woody Harrelson. It's so bad, no one cares about the intellectual property content anyway because it's just free on YouTube. So you can take a look at that, which brings me to actually the one reason why I'm sad to be here. And that's because unlike that attack which is against the WTO and is relatively mild, I think in terms of what we're dealing with today, the attacks on today are just incredibly intense. Free Trade is very much under fire, and it's bipartisan fire. It's not just the Republicans or the Democrats. It's both parties have a big angst about trade. And the attacks, I think, distort the role of trade in the economy and distort the possibility of trade policy remedying some of the economic problems and challenges we face. The distortion is this basically, that we hear a lot about lost jobs because of imports, bad trade agreements or something like that. But that's all we hear. We don't hear about jobs created by exports, opportunities for American businesses. We hear about the benefits to American consumers from being able to partake of the world marketplace. And unfortunately, this distorts our politics. So you probably haven't heard of a representative, John Ray, who served in the 15th district from New York in the 1950s. He was a Republican, and he sort of led to something that's known as the bird cage phenomenon. He represented Staten Island and the New York dock area when there was a major port and a lot of commerce going through New York at this time. And he voted against trade agreements in the 1950s. And he did so because there was one bird cage factory in Brooklyn that was being threatened by imports. And that firm had 50 employees. All 50 employees wrote to him telling him that their jobs were under threat because of imports. Now, he was representing a district where there are thousands of longshoremen whose jobs depended on exports and imports. But he said, I never heard from any of them. I did hear from every 50 one of those bird cage manufacturer workers, and therefore I had to do what I did. And I think if we want a trade policy that sort of represents all of America, we have to think about the broader considerations as well. Now, in the time allotted, I can't but scratch the surface of many of the trade issues that are on your mind. But I just want to raise three. One is trade and jobs because that tends to be the most important argument that's brought up about trade. I want to talk about the trade deficit briefly and try to understand what it is. And then I want to talk about whether protectionism is really a solution to any of these problems. So first of all, trade and jobs. Now, it is certainly true that imports can destroy jobs and import competing industries and that domestic firms that are producing head-to-head against foreign firms, they may have to lay off some workers. So the apparel industry in the United States, the furniture industry in the United States, these industries have suffered as a result of foreign competition. Now, of course, that's not the same thing as saying consumers suffer. There are offsetting benefits that I'll mention in a moment. But I think we have to acknowledge that. But let's ask the question, is the job loss large or small? Let's try to put it into proportion. And even more importantly, might it not be offset by job gains elsewhere in the economy? So in terms of the size of job losses as a result of imports, the Bureau of Labor Statistics, until budget cuts forced them to stop producing these numbers to use to calculate why are people being displaced from their current job? And throughout the 1990s and into the 2000s, only 3% of job dislocation in the United States was involuntary job dislocation, was due to import competition. So the numbers were fairly small. When we look more broadly at manufacturing, people are always concerned about the loss of manufacturing jobs. If we look at the share of the workforce in manufacturing, it's undergone a secular, linear decline since the 1950s. There's no China shock that you can see. There's no NAFTA effect. It literally is linear. Bob Lawrence at the Peterson Institute has done a lot of work on this. Why is the share of the workforce in manufacturing shrinking so much? So it used to be almost a third after World War II to about 10% today. It's largely due to productivity gains and new technology in manufacturing industries that allow us to make more and more goods with fewer and fewer people. It's not as though manufacturing output is falling or is lower in the United States. There's huge industry composition effects, of course. Some industries rise, some industries fall, but overall manufacturing output is up, but the number of workers needed to produce those goods is down. Technological change is the major driver here. If you look at a picture of an automobile factory in the 1980s and the number of people actually putting things on the chassis versus today when you just have a few engineers overseeing the whole automated system, there's been a revolution in manufacturing that has affected the need for workers in manufacturing. This is not a U.S. phenomenon. There's a worldwide phenomenon across Europe and Asia, too. The share of the workforce in manufacturing has shrunk. And so it's not an issue of other countries taking our jobs because it's happening around the world. Could those job losses be offset by gains elsewhere? Well, once again, if we acknowledge that some jobs are being lost as a result of imports, a lot of imports actually don't compete with domestic producers and have nothing to do with domestic employment. But there are exports that create jobs. The Commerce Department estimates about 11 million jobs are associated with exports. Those tend to be high-wage jobs, unlike the apparel jobs which we've been shedding, which are relatively low-wage jobs. And so exports are a good thing, and we'd want to keep trade open to keep those export jobs there. Imports also create jobs. Now, you'll never hear a politician saying this, but imports create jobs because half of all imports are intermediate goods that are components into the production process for domestic manufacturers. And those manufacturers are facing very competitive conditions domestically and abroad, and they need the best and the cheapest inputs to make themselves the most efficient competitors to serve their customers on the world market. If we raise the price of those intermediate goods to those firms, we hinder their ability to compete and we might sacrifice jobs in downstream industries, as I'll mention a bit later. So we can come back to the issue of jobs, but it's a key one, but it's important to put things into perspective. Now, what about the trade deficit? I find it a little bit curious that there's so much attention to the trade deficit these days because I can understand the 1980s when the trade deficit was growing. It was a concern for many people, but the current account, which is the broadest measure of U.S. trade imbalance, that current account deficit has been stable at about 3% of GDP for about 6 or 7 years now. Imports are not surging into the country. The trade deficit as a share of the economy is not growing. It's been relatively stable. But how do we understand the trade deficit? First of all, it's important to know that it's not being caused by foreign unfair trade practices. That's not the driver. It's caused by the flow of capital between countries. And so let me illustrate. Alexander Hamilton will help me illustrate this. So I brought my Alexander Hamilton here. So let's say I'm an American consumer. I have this $10 and I want to buy a foreign good, an imported good. So I get the good, they get the dollar. We now have $10 trade deficit. Now, what is the foreign firm going to do with this $10? Well, they can't use it to pay their workers in Germany or Japan or China. They can't use it to pay off their bank loans in Germany, Japan or China or wherever. So they have to do something else with this. Now, if they buy a U.S. good, we have balanced trade. $10 import, $10 export. It turns out that on net foreigners, you want to use $7 of this or $8 of this to buy U.S. goods. That will be U.S. exports. And one or $2 to buy U.S. assets. That's a capital inflow from the standpoint of the United States. It's either greenfield investment in the United States in terms of foreign investment. It's buying treasury bonds or bills, keeping U.S. interest rates lower than they otherwise would be. It's other stock market investment or what have you. But the point is that that trade deficit doesn't automatically translate to job losses because either through foreign investment or keeping U.S. interest rates lower than they otherwise would be is creating jobs in interest sensitive sectors of the economy. We can't identify the particular jobs that will be created, but it will have that effect. Another point about the trade deficit, it's easily manipulated and exaggerated. So how many people own an iPhone here? Raise your hand. Okay, just almost everyone. Now, what does it say in the back? Where is it made? It'll say, assembled in China. Designed in California, it doesn't say where it's made, but the unit cost of an iPhone is $150. Now, you paid a lot more because there's a big markup for Apple, but the unit cost when it comes off the docks or it's flown in on 747s from China is $150. So every one of those that comes in, it's $150 import from China. What's the Chinese content of that iPhone? Of that $150, how much stays in China? How much is value added in China? $3. It's assembled in China. Chinese workers are putting it together, but the components are coming from Germany, Japan, Korea, the United States. It's really made everywhere, but we're attributing $150 of a trade deficit to China. The good came to us from China as its last destination, but it's not really Chinese product. So the bilateral trade deficit is very misleading about where products are coming from and even just about anything. So I run a bilateral trade deficit with my grocery store. I spent a lot of money there. They don't buy a single thing from me. It doesn't matter as long as the overall books balance, and that's what the current account is. Finally, the last thing, we have to be careful what we wish for. So everyone says it would be great if we had a trade surplus. We'd be creating jobs. Well, we've run trade surpluses in the past. We had them in 1960s and nearly 1970s. Guess what? There are complaints here in Washington about that trade surplus. Why? What does it mean? Well, if we have a trade surplus, trade deficit because we have a capital inflow, if we have a trade surplus that means we have a capital outflow. The complaint in the 1960s was what is it with these unpatriotic companies that don't want to make investments here that are making foreign investments? We have to stop that foreign investment. So the trade surplus was considered a problem. So just because things flip doesn't mean things will be better on that score. Well, that brings me to my last point. What about protectionism as a possible solution, either to trade deficit or jobs or what have you? And here I guess I have a very simple message, and that protectionism will not bring the jobs back that have been lost and will be harmful to the overall economic performance of the U.S. economy. So a couple of simple points here. First of all, as I've already mentioned, we lost a lot of jobs in certain manufacturing industries as a result of technological change, automation, and increased productivity. We also lose jobs because of domestic competition. So you hear a lot about lost jobs in the coal industry. Is that because of foreign competition or because of fracking in North Dakota? The price of natural gas is incredibly low, so consumers are substituting away from coal towards natural gas. We've lost jobs in West Virginia. We gained jobs in North Dakota. That's domestic competition. The same thing applies in the steel industry. We've lost a lot of jobs in the integrated steel plants in the United States. Why? The mini-mills have grown up over the past 20 or 30 years. The mini-mills are much smaller, more nimble, more productive, produces of steel. So we're losing jobs in Pennsylvania and Ohio, gaining jobs in Alabama and elsewhere where the mini-mills are located. That's technological change. That's domestic competition. You can't stop that at the border. Number two, if we adopt higher tariffs or higher trade barriers, we're more likely to divert trade to other trading partners. So the example here I would give is the Obama Administration's decision in 2009 to impose tariffs on imported tires against China. If we raise tariffs just against China, we're not going to create jobs here. We're going to divert those imports to other countries in Southeast Asia. So in the tire example, yes, our imports of tires from China went way down, but our imports went up one-for-one from Thailand and Indonesia. And so overall imports weren't changed. Even if we gain jobs in some import competing sectors as a result of trade barriers, we're going to lose them among the downstream users that need those as essential input. So for example, sugar. If we impose, we have high quotas, very tight quotas on imported sugar. We may have a few more jobs in the sugar cane industry and the sugar beet industry than otherwise, but we've lost numerous jobs in the sugar industries that use sugar as an input. The candy industry has basically, we used to produce lifesavers in Michigan and Illinois. We're pushing that overseas because of the high cost of sugar. Same with Caterpillar and Boeing and car producers. If we raise the price of steel, we're going to hurt their competitive position and they're going to think about moving elsewhere. Another reason why protections won't help us in terms of jobs is retaliation. So if we go around imposing higher trade barriers, we can't expect other countries not to respond in kind. That means lower exports for us. That means if we retaliate against China, for example, are they going to start buying Airbus instead of Boeing? Argentine soybeans instead of American soybeans? Other Rolls-Royce engines instead of General Electric engines? There's a whole host of export dependent industries who are going to be sacrificed if we start raising trade barriers because other countries will retaliate. What about consumers as well? If we raise trade barriers and raise the cost of imported apparel, raise the cost of imported goods, they're going to have less money to spend on other products. We're going to see job losses in other sectors of the economy. Once again, not easily identifiable, but no less real. So we can get into all these issues in the discussion. I do want to close with what I call Ronald Reagan's golden rule with regard to trade policy, where he basically said or implied that we should never consider imposing or implementing a policy that we wouldn't want to see other countries also impose. So if we start raising trade barriers, we won't be the only ones. And we have to ask the question, will the whole world economy, will the United States economy be better off in a world with higher trade barriers? And I think the evidence of history, recent experience and even economic theory says it's not going to be a winner for the U.S. or the world overall and that we'll all end up losers if we go down that road. So I look forward to your questions and thank you very much for coming. Very illuminating. And we look forward to some time for questions and hopefully I'll get to some of the questions from you all as well. I don't know if anybody's mentioned China yet. Let's just say a few words about China. A lot of focus on the bilateral deficit with China and you've explained some of the things I guess you did mention with the iPhone example, but currency manipulation I guess is what I wanted to ask about. How serious is currency manipulation? Is China guilty of it? And if so, is there anything we can or should do about it? Well, China currently is manipulating their currency. They're propping it up. They're spending foreign exchange reserves trying to prevent it from falling even faster than otherwise would be. So we have to differentiate between different time periods. In the 2000s, China was... I don't know, is this echoing too much? China was accumulating foreign exchange reserves at a very rapid rate. One could argue that the renambi was undervalued and it was giving their exporters an assist in terms of their ability to export more. But that's history now. That stopped and now they're actually trying to prop up their currency which is capital flight from China. And so they're overpricing their exports in some sense by keeping up the value. So it depends on the time period that you want to talk about. Economists disagree about how important the trade impact was at the time. But in terms of responding now, it's sort of mistimed. Yeah. There was a movement in Congress to crack down on it. Oh, 10 years or more, Senator Schumer and Graham. And I found a press release from Lindsey Graham's office in 2004 that said economists estimate the yuan is undervalued by 15 to 40%. If you go to the website of a certain presidential candidate under China, it says economists estimate the yuan is undervalued by 15 to 40%. It's like they haven't noticed that the world has changed in the last decade. And this is more than 10 years out of date now because in 2005 China allowed their principles to start appreciating. And then when you factor into the higher rate of inflation in China, the real appreciation of the RMB has been much more substantial. So those estimates are, even the Peterson Institute, which sometimes looks at these things in the IMF, it's nowhere near that and it might be overvalued. It gets fair value or overvalued. Doug, you touched on foreign investment and investment flows. Let's look for a moment at direct investment. It's still controversial when U.S. companies invest abroad, isn't it? The air conditioner company in Indiana investing in Mexico, partly I understand because of steel prices. We do already have a lot of protection on steel. What wasn't noted in the press is almost at the same time Subaru, the Japanese car maker, is doubling down on its investment in auto production in Indiana, creating almost exactly the same number of jobs. And I wondered if you could just talk for a moment about the importance of direct investment, both into the United States as the flip side. That's where that $2 on the $10 comes back, creating these jobs in the United States. But can you say something positive about the ability and necessity of U.S. companies investing productive assets abroad? Why is that not a bad thing? Well, once again, it's helping U.S. firms. So there's different ways you can cut this. A lot of what they're doing abroad is just service facilities that will support manufactured exports here in the United States. Some of it is like carrier, maybe moving some of the manufacturing capability overseas to serve overseas customers as well, not just sending goods back to the U.S. But your point about the Subaru is absolutely right. So we lose jobs because of one activity or one firm, but we're gaining jobs elsewhere and we don't notice that. It doesn't get as much attention. Getting back to the political problem that sometimes causes, another Senator Bob Packwood from Oregon was a major figure in the passage of the U.S.-Canada free-traded agreement in 1988. And he said that it was actually a very tough political pull because there may be 10 people who benefit, one person who's hurt, but he's going to hear from those who are hurt. He's not going to hear from the beneficiaries. So that creates the political problem. And of course, when you get this churning, exporters and others who are benefiting from trade are not going to contact their members of Congress and say, thank you for allowing this to happen. But anyone who's adversely affected will definitely let their congressional delegation know that there's a problem. So I sort of beseech the members of Congress and their staff to think a little bit more carefully about it's not just who you hear from that's important. It's other things that are going on in your district. And creating jobs in Indiana or elsewhere because of foreign investment. And a lot of it's occurring in the South too. So we're losing jobs in the North because there's investment and firms moving to the South. You have to think about the broader picture. Doug, you talked about the displacement of workers and the fact that 95, 97 percent of the people displaced aren't displaced by trade but by technology, changing consumer tastes. We have a question through our system here. Somebody wants to know what can we do better to help people, to help prepare people for the negative consequences of free trade and helping them after they're affected by it and basically prepare for a transition in their career. So one of the things I show my class is a video of Bill Moyer's program where he goes to a small town in Pennsylvania and talks about what happens when the textile mill closes down there. And he interviews a lot of different workers and what you see is that older workers are going to face a much more difficult time. They don't have time to retrain. They're not going to move from that particular city and they're going to face a lot of difficulties. Younger and middle-aged workers can, in fact, go back to school and learn new skills and move to a different sector of the economy. In that video that I referred to, a lot of them moving to healthcare. So you used to work in a textile mill and then you'd become a nurse or something like that. Obviously we want to facilitate that but it raises the broader issue of what can the government do or what can the private sector do to sort of facilitate this process. And fortunately, I have a whole chapter of free trade under fire on trade and employment and the evidence both on government trade adjustment assistance and government retraining programs is unfortunately very, very poor because the way we run trade adjustment assistance today is it's extended unemployment insurance which is essentially paying people to stay out of the labor force for a longer period of time which means you're going to get worse job market matches. That's not very good. Retraining too turns out to produce negative effects both for the worker and society according to some external studies. So I'll ask you to take a look at that. But that's horrible news because obviously the thing that you could say is yes, to the extent that there are costs on certain sectors or certain workers or in certain states, if you could facilitate the process of adjustment you'd help things out. So I think what if those things don't work and obviously schooling is very important, vocational education is very important, I think those regions of the country that are not doing well either because of technological change or because of trade have to think about how can they foster reinvestment? And James Fallows of the Atlantic magazine has done some work in North Carolina looking at public-private sector partnerships in certain cities to actually try to bring jobs back and see what their advantage would be in that area. So there's no easy solution. But I think... Anyway, we can get into that. And I think an important point you make is that in a way trade adjustment assistance besides the program is not working very well. It's really kind of misleading in that we should just have adjustment assistance somehow. It doesn't even have to be government. It can be more labor, mobility, retraining, being able to take advantage of community college training and things like that to help people make adjustments for the jobs being created today and tomorrow not holding on to the jobs of the past that weren't all that great necessarily anyway. Doug, we have another question from the audience. China's metal production is massively subsidized. Probably mean steel, aluminum, it's been in the news, leading to artificially low prices in world markets. What's the best way to address those subsidies? Well, here's where history sort of repeats itself because we had exactly the same issue in the early 1970s with the European Union. When a lot of the steel industries were nationalized, were supported by the state taxpayers, there was a lot of excess capacity, and the U.S. working through the OECD and trade negotiations managed to scale back those subsidies and not eliminate the problem but mitigate it. Now China's doing so on a much larger scale and there are sort of two ways you can look at it. One is that this is not free market capitalism, this is state capitalism, and to the extent that you're creating excess capacity, creating a lot of potential problems for trade friction. So what I expect is the anti-dumping and countervailing petitions soar as a result of this and you'd want to do something to push China to reform its state-owned enterprise system. The other argument would be, well, trade barriers may not be the best way to deal with that because then, once again, you're going to make the U.S. a high-priced island for these commodities and these goods. And if other firms in other countries have access to cheap inputs, they're going to have a competitive advantage over American manufacturers. So I'm sure that, you know, even if we're going to have a lot of friction with China going forward as, you know, economic growth slows and we have some of these high-access capacity issues. Don Boudreau mentioned in his introduction that low-income consumers have a lot to gain from trade because the tradable commodities like food and clothing and footwear loom much larger in their budgets. You've got a wonderful illustration in your Foreign Affairs article where you point out the apparel industry, and this is a good example of the policy of trade too. If I get the numbers right, 135,000 workers in the apparel industry and you point out we have 45 million people living in officially defined poverty and yet who are buying clothes and barely able to make ends meet. Could you talk a little bit about either the regressive nature of existing tariffs or the pro-poor implications of free trade and the politics of it as well? It seems like we spend a lot of attention on the 135,000 workers probably unionized. There are representatives up there on Capitol Hill. We don't talk about those 45 million families, not to mention the 300 million Americans who buy clothes who seem to be left out of the equation. And here's actually a point to Ed Gresser's piece in Foreign Affairs and a bunch of other places where he's pointed out the regressive nature of the tariffs that the U.S. still does have. We're not a free trade country completely. We still have high tariffs on labor-intensive manufactured goods, particularly apparel, footwear and things of that sort. And you're absolutely right that once again it's this imbalance in the political debate, weighing the welfare of the jobs of the 135 people in the apparel industry versus the benefits to so many people that are at the poverty line trying to stretch every dollar that they have. In terms of taxing them, it's a very regressive tax because the greater share their expenditures are on exactly those labor-intensive goods, hindering their ability to get ahead and get up the next rung of the economic ladder. And so what's... You mentioned Amit Kamdual of Columbia. So economists... There's two ways to view the impact of trade on a household. One is in terms of their income, the job they have. The other is in terms of what they're spending their money on. And economists have sort of neglected the expenditure side of the story, and yet recent work is finding exactly what you were suggesting, that trade barriers hurt the poor more on the expenditure side than higher-income households, and therefore they'd benefit from having more open markets in terms of some of these other manufactured goods. In fact, there's a related question from the audience. What can be done to overcome the concentrated benefits, dispersed costs, dynamic, which drive support for protectionism? You've kind of hinted at it, but got the political advice for the staffers when they hear from those 50 birdcage employees. It's been... Well, as I said, I've written this history that covers over 200 years of trade policy history. It's a perennial problem. It's a perennial issue, and there's no way of truly overcoming it. Obviously, I think trade policy works best when the economy is growing, and we have other complementary policies that are expanding opportunities for workers so that you don't see that just if you lose your job, there's no hope, there's nothing else. There are other opportunities. I think education plays a role. I think being aware of the potential gains from foreign investment and exports in your state or district are important. So, once again, I think if you both look at the gains to consumers, the gains to exporters in your state or district, as well as the benefits for consumers, and the counterproductive nature of trade barriers, that it's sort of like there's a potential short-run fix, but actually it's not a short-run fix. And that there are knockoff effects on downstream user industries and others in terms of retaliation and what have you that will just not make it a wise policy. Doug, last question, then we'll move on to our panel, TPP. One of the things I love about your work is you're a technical economist. You can go toe-to-toe with people with their models and their regression analysis. You're also a historian. You're able to tell a narrative story. You've written a book on smooth holly and the Great Depression. That had a profound effect on that generation. What did we learn from the smooth holly experience in the 1930s, not just the economics, but the whole geopolitical strain? What lessons did we take after the war and that we should be sure not to lose sight of in the current environment? I think it would go back to that Ronald Reagan dictum about do unto others as you'd have them do unto you. If you look at the congressional debate over smooth holly, there was no recognition in Congress that other countries might respond in any way. It was considered purely a domestic measure. In fact, they weren't even thinking about exports, let alone consumers. If we think about the various groups that are involved in trade, if we think about those who are competing against imports, that's one of just many important constituencies. If you don't think about exports, if you don't think about consumers, if you don't think about what other countries are going to do to you, too, once again, your policy will become potentially very misguided. Right as the U.S. is going into the Great Depression, Congress passes a unilateral tariff increase. Imports, as I mentioned, were not surging into the country. Unemployment was not being caused by too many imports. It was a misdiagnosis of what was going on. They were warned about foreign retaliation. They did it anyway, and the consequences were just horrific. It was the last tariff act that Congress ever passed. Sort of they learned their lesson that Congress doesn't really weigh all interests equally and therefore come out with a rational trade policy for the United States. They began delegating trade policy powers to the president. And we began to move away from pure protectionism in stages. But I think, first and foremost, the lesson of smooth hauling is never underestimate foreign retaliation and that other countries can respond in kind. And then even if you do create some jobs in import competing industries, you're going to lose as much, if not more, in downstream industries. So just one quick example, if I could, on that. Cordell Hull, who was Secretary of State at the time, had this example of U.S. egg trade, because we imposed a high tariff on imported eggs from Canada. We weren't importing that many eggs, but we decided to reduce them a little bit further by raising that tariff. Canada, which had a very low tariff on eggs, we were a big net exporter of eggs, they decided to match the U.S. tariff on eggs. So they raised their tariff on eggs grammatically and our exports plummeted to Canada. So while we squeezed out some imports of eggs, we lost dozens, who knows how many pounds or how you count egg exports. We lost much more on the export side than we did on the import side. And once again, that idea never crossed the lines of any member of Congress voting for Smith-Holley. Well, thank you, Doug. We're going to make a way now for our panel discussion. Don Boudreau is going to moderate and we have a distinguished panel looking at the prospects part of our program to look at the Trans-Pacific Partnership. It's not easy to follow a panel that features Dan Griswold and Doug Irwin, but we'll try to do it here. We'll move more from a general discussion or discussion of trading general to a particular topic, one that's very timely now, as you know, the Trans-Pacific Partnership TPP, which is much in the news, much in the political news, much in the economic news. And we have, as Dan said, a truly distinguished panel to help us grapple with TPP and some of the issues that it raises. On the far, to my far left is Ed Gerwin. He's a senior fellow for trading global opportunity at the Progressive Policy Institute. Ed has authored numerous reports on trade policy issues and is a frequent speaker at Congressional think tank and business forums. He also is the author of editorials and trade topics for publications such as Bloomberg, Forbes, The Hill, The Huffington Post, Roll Call, and The Wall Street Journal. Next to Ed is Linda Dempsey. Linda is the vice president of International Economic Affairs at the National Association of Manufacturers. Prior to that position, Linda worked in both the private sector and on Capitol Hill. Most recently, she served as vice president of the Emergency Committee for American Trade, where she represented Fortune 500 companies on trade investment and international tax policy. And finally, to my immediate left, Ed Gresser, who's assistant U.S. trade representative for trade policy and economics. The Office of Trade Policy and Economics is responsible for economic research and oversees the use of trade data. Author of the book, Freedom from Want, the Global Economy and American Liberalism, which was published in 2007. Ed received the Washington International Trade Association Lighthouse Award in 2013 in recognition of his contributions over the career to this important topic. So let me... Let me just ask, put a question to the panel. We can take it in order. What, briefly, is TPP and do you believe that it will make trade freer? Because not everyone believes that it will. Do you want to start? I'll start. So the Trans-Pacific Partnership is a free trade agreement between the United States and 11 other countries. We have free trade agreements with six of those countries and five we don't. One of those countries is like Vietnam and Malaysia, New Zealand and Japan. It, and there's some copies of some information that you have, some slides. It cuts tariffs. It will cut all tariffs on manufactured goods. It cuts agricultural tariffs substantially. It eliminates other non-tariff barriers that our manufacturers, our farm and services communities face overseas. It sets in place stronger rules on issues like transparency, good government practices, investment, non-discrimination, fair treatment, reciprocal government procurement and it provides binding rules on dispute settlement to make sure that the words on those pieces of paper and they're long and most of those thousands of pages, mind you, are tariff cuts, that those obligations will be upheld. In a world where imports of U.S. manufactured products come into the United States, two-thirds of them already come in duty free. From the manufacturing perspective, we see huge gains in eliminating up to 100% tariffs that our manufacturers are facing in big and growing markets like Vietnam and Malaysia. But the non-tariff barrier side, the basic rules of the road, of the system, which by the way, are sort of the basic rules we have here in the United States, like in the investment chapter, which comes exactly from our Constitution and the Administrative Procedure Act so that governments don't misuse their power against the private sector. These are strong rules and we believe that this is going to grow the ability of manufacturers to engage in that part of the world and grow our manufacturing here. We have two eds in there. The last name is both beginning with G. So I can't say edgy. Ed Gerwin? Well, I think the important thing about the Trans-Pacific Partnership is that it is a modern trade agreement. You know, our politicians seem hell bent every time you turn on the TV and watch a political debate. Everyone wants to relitigate NAFTA. NAFTA is a 20-year-old agreement and trade has changed remarkably since then. Primarily because of the power of the Internet and because of efficient and modern transportation and logistics. It's a lot easier in many ways to trade. But trade is also changing and I like to talk about the three major changes that are occurring in trade. We're seeing big changes in who can trade. We're seeing big changes in what we trade and we're seeing big changes in how we trade. So for example, who can trade? It used to be really hard for small businesses to trade. But now with Internet platforms like eBay and Etsy and PayPal, it is a lot easier for small businesses to trade. And if you look at what small businesses now do, those that are Internet-enabled, those on the eBay platform, 97% of them trade. But only about 5% of our regular small businesses trade. In terms of what we trade, look at the digital apps on your smartphone. Nobody envisioned any of this back at the time of NAFTA. The global market for digital apps is only about 10 years old. It drives hundreds of billions of dollars of commerce and it depends on digital trade flows. Something that is probably a footnote at the time of NAFTA. And then how we trade, there are whole new ways of trading. Sending, you know, I've told a story in an article I've written about a woman who's designed 3D printable shoes. And her business model is she's going to ship them to boutiques all around the world. You go, they scan your foot and zap. Outcomes a custom designed pair of shoes. That's an entirely different way of trading than back in NAFTA. And you're probably wondering, is he going to get back around to TPP? The important thing about TPP is it sets modern rules for a changing global economy, for changing global trade. It has, and I've written extensively on this, extensive provisions to help small businesses trade. They can take advantage of these new platforms but then at the same time we're using the power of the government to do what I'm sure many of you in this room think is important. And that is getting rid of governmental barriers to American trade. There are extensive provisions for small business. There are also important rules of the road for digital trade. You know, think about it. Google was registered as a domain name in 1997. That's about the time our global trade rules were last updated. So what that means is we don't have a lot on the books globally to govern digital trade. The way we do have rules that make it easier for we're open, freer trade for goods and services. So what the TPP would do, I think, Ed, you and your colleagues have estimated what? Different digital provisions that the TPP would help? I think that's right. It would do many things to make digital trade flow more readily, including establishing the very important principle that governments aren't to interfere with the free flow of digital information unless they have a legitimate reason for doing it like privacy or national security. So I've been really focused on the TPP, on small business and on the digital economy. And the reason I have is because we're ignoring the fact in much of our political debate that trade has changed and we need modern agreements like the TPP that will help the United States take advantage of that. I mean, if there is a country in the world that should be able to benefit from trade that's more friendly to small business than the digital economy, it should be the United States. Thanks. Let me dial a little bit back or pull back a little bit. TPP Trans-Pacific Partnership is an agreement that we've negotiated with 11 partner countries. They are Canada, Mexico, Peru, Chile, Australia, New Zealand, Brunei, Malaysia, Singapore, Vietnam and Japan. Together our 14 partners are 11 partners make up about $3 trillion in imports each year. That means every 1% of market share gains is about $30 billion in exports. They include 3 of our 5 largest trading partners in the world, Canada, Mexico and Japan. And second, TPP is what we call a comprehensive agreement. There are 4 chapters trying to take on pretty much every major issue that Congress has identified to the administration in its bipartisan negotiating objectives set out last year. It takes a while to describe it, but let me hit 4 things that I think are really high points of this agreement. One, as Linda mentioned, you may have seen pictures of TPP looking about 3 feet high. About 2 feet of that is the elimination of tariffs. That includes 3 inches of U.S. tariff elimination and about 21 inches of foreign tariff elimination. Examples range from Vietnam's 70% tariff on cars to Japan's 600% tariff on out of quota peanuts to Malaysia's 30% tariff on paint. Our 3 inches of tariff elimination, they include things like 11.2% tariff on bamboo shoots and 1.2% tariff on straw mushrooms. Those are things that are going to help the proprietors of Asian groceries across the river in Alicantria. Or likewise, elimination of 48% tariff on cheap shoes that people will buy up the street in southeast. Second thing about TPP that we're quite proud of, TPP is the first U.S. trade agreement in 22 years since the Uruguay Round that created the DELTO to eliminate a subsidy. The subsidies that contribute to overfishing and depletion of fisheries in the Pacific region. That is a major environmental accomplishment. It is also a very appropriate reform of bringing government out of an area that it shouldn't be operating in. Third, TPP is a very comprehensive agricultural agreement. It includes tariffs, sanitary and phytosanitary rules, fair approaches to geographical indications and other issues to just give a sense of the scope of the farm trade part of this. Japan eliminates a 40% tariff on American cheese. It creates a 114,000 ton country specific quota for American wheat. It cuts tariffs on beef from 38.5% to 9%. And it agrees that Japan will never accept rules that bar imports of U.S. wine which use labels such as ruby, tawny, vintage, fine, chateau and other words that certain parties across the different ocean are trying to lock down and take out of the world of trade. As Ed mentioned it is the most advanced and ambitious digital trade agreement the U.S. has ever done. It requires all the TPP members must allow free flows of digital data across borders. That is very important to internet companies. That is very important to manufacturers. If you see for example modern tractor they take data flowing about weather, about seed placement and they transfer it back and forth all the time to senators in the United States and that is what makes an American tractor so attractive and so effective. TPP countries cannot require servers or other computer capacity to be located in country if you want to serve the market there. And TPP countries must have anti-spam privacy and anti-cyber theft policies. So we feel that this is a very advanced and very high quality internet and digital agreement and it is also a kind of strategically important one because each day the future of the internet is kind of being determined. One of the things that Ambassador Froman, our cabinet officer likes to say is that TPP is an effort to write the rules for the next global economy. In this world of digital trade which is important to us as computer users, to services companies, to manufacturers, all the rest the United States stands for free flows of information and consumer protection and open flows of information around the world. Government of China, Government of Russia, Government of Egypt, others are trying very hard in the United Nations World Conference on Information and Telecommunications, International Telecommunications Union to set up a principle of internet sovereignty which is to say that the digital border is the same as the physical border and any government has an absolute right to stop flows of data, the sensor to redirect it to as they choose. This is a case where one of those visions can determine the future but they can't coexist very easily and this is one of the biggest long term things that we see at stake as Congress is considering TPP. Not that I need it much convincing but each of you have done a great job to reinforce a view that I had that TPP is as far as trade agreements go sort of, I don't know, like the gold standard maybe of trade agreements. It's a coin of phrase. Yeah, I copyright it. I write a lot on trade and when I express public support for TPP one of the objections that I get I get it with surprising frequency maybe you do as well and perhaps this is a softball question for you but let me put it to you because I really, I think I know how to handle it but I wonder how you handle it. People will say oh this is an affront to American sovereignty. Let's stop TPP because it's undermining American sovereignty. How do you respond to that? It's a concern that apparently at least people that I encounter have. I think it's mistaken but I wonder your thoughts. Well I think first of all as I mentioned a lot of what the TPP does is reduce foreign governmental barriers to American commerce. It makes trade freer for American companies and workers. Many countries want to impose these barriers and make our economic activities more restricted. I want to get those numbers from you Ed by the way of inches of TPP. It's a wonderful word picture but much of what TPP does is reduce governmental barriers imposed by foreign countries and in terms of the way the process works I'm not a congressional person but my understanding is that there is nothing in any of these trade agreements that requires the United States to do anything. At the end of the day it's Congress that would have to react to actions that for example violations of the TPP Congress has the last word and that is very important but I think the key point is that we're actually creating greater freedom for people by eliminating many of the barriers that currently exist in the trade system. For example as Ed mentioned the efforts of countries to limit the ability of people to trade digitally by trying to acquire that our companies put servers in their country we're saying that we can only store data in their locations. I would add two points on this it is a sovereign act of a government to negotiate and conclude a trade agreement that's a choice. If we want to isolate ourselves we heard how Doug described smooth holly unemployment went up, exports went down, imports went down not the type of result and it was found following that with Cordell Hall and beyond that unemployment only went up again after this smooth holly terrorist when the United States started its reciprocal trade agreements program and started negotiating as a sovereign with other sovereign countries so that everybody would be reducing their tariffs and that's the trading system that began in that period and has continued forward so it is a sovereign act of a government to choose to enter into a trade agreement and make these but I think the more important point in building on something both heads have said this is building on US values, US rules US systems so much of what is in the TPP is reflective of the rules we already have in the United States if we hopefully get to implement it this year is not going to be making a lot of legal changes, we're not changing things that we've done wrong we've got a few tweaks here and a few statutes to make but this is basically exporting basic values, things like the Takings Clause of our US Constitution that requires the government to compensate a private property owner if they take their property, do process principles, equal protection principles fair and equitable treatment type principles that we see also in our Administrative Procedure Act these are baseline principles that we in the United States have developed as part of our democracy, as part of our capitalist system that we are trying to get the other parts of the world to adopt and so this is very much very much an act of our sovereignty I don't really have very much to add, these are very well presented points the only additional thing, Linda and I became acquainted as congressional staffers not so long ago well yeah and constitutionally all of this is foreseen and set out constitution tells Congress to regulate commerce with foreign nations, tells presidents to negotiate agreements with foreign countries and that is exactly how TPP has been done, Congress has looked at our relationships, they have set negotiating objectives for us, we have done our very best to meet those objectives and Congress now has the chance to act on them so no, I do not see that there's any diminution of sovereignty in that this is exactly the way US government has been told to act by the framers yeah it seems to me that anyone who objects to TPP on the grounds that it somehow is an unwarranted reduction in US sovereignty must object to all treaties in principle I mean, but the Constitution clearly provides for the treaty making power yes we had our very first treaty agreement I believe it was 1794, the J Treaty we've been sacrificing our sovereignty for quite some time well and to build on Linda's point, it's really amazing when you look at it the degree to which other countries are being asked to change their rules we went last September to Vietnam and we met with government people, manufacturers and people from the international labor organization Vietnam is agreeing to set up independent unions you got to remember, this is a socialist workers paradise they're not supposed to need anybody other than the government to look out for the welfare of workers but they've agreed to do that in part because they want this agreement but also in part that they recognize the fact that there are already a lot of wild cat strikes now in Vietnam and they recognize that maybe having independent representation for their workers would be a good thing for them as well but these are huge changes that other countries are making that redound in many instances to the benefits of American exporters and American workers who produce for exporters this is a question from someone in the audience how do you see TPP two years from now under either a Clinton or a Trump presidency wow can I take a first stab at that one of the laws that we in the government operate under is the Hatch Act and we are not permitted to say anything about presidential candidates or their proposals but let me talk about TPP as it is likely to play out as analysts have looked at it and modeled it and as people who are kind of engaged in some of the issues it raised make the case for it and point out what might happen in its absence there have been a number of professional independent modelings done on the TPP these show different things depending on what your assumptions are and how much of the agreement you model but they agree both the International Trade Commission and the Peters Institute that TPP will raise the rate of economic growth in the United States to some extent that it will raise wages in the United States and in the ITC's model they find the first year which would be 2017 if we were implemented coming this year there is a jump in GDP of about $20 billion about two thirds of that goes to workers in the form of higher wages and some degree of new jobs Peters Institute has different figures but comes out with the same figure of growth beginning quickly and two thirds of the benefits going to workers look a little bit more detailed one of the groups that's really interested in TPP and working very hard on its ratification National Cattlemen's Beef Association I've mentioned big cut in Japanese beef tariffs what they say is that I have this written down somewhere NCBA says our future success rests on our ability to compete in the playing field in the Pacific Rim and TPP presents us with that golden opportunity so that's they say if we have TPP going to effect we'll be selling more beef to Japan rancher incomes will rise all those sorts of things without the TPP we have some erosion we are not the only country that's doing trade agreements in Australia Japan FTA went into effect year ago January NCBA believes that has already cost them by virtue of tariff differentials about 140 million dollars in exports and in the absence of TPP that will continue and it will be replicated across many many industries because at the moment as we're debating TPP there's also negotiation of a much very large China centered regional closer economic partnership agreement which would create a large duty free zone excluding the United States for China and Korea and Japan and Australia and New Zealand East Asian countries plus India so that's a big thing and the future will evolve in the absence of TPP in a way that isn't all that great for us economically second point a person I'd like to quote this is our Pacific fleet commander Admiral Harris looking at the implications of TPP for security and strategy and what he says is TPP would strengthen stability and security deepening our relationships throughout the region and raising the bar to protect the things that matter things like enhanced cybersecurity privacy and provisions to combat the theft of trade secrets including by cyber theft to protect our defense industrial base and obviously our partners who've signed up for TPP this is our allies Japan Singapore Australia New Zealand Canada and so forth see it as a vital demonstration of America's enduring commitment to the region so in the United States it does not go into effect there will be a significant economic penalty in a number of areas and there will be a large and impossible to quantify but probably somewhat serious blow to the US position in the Asia Pacific which is a big thing this is a serious choice and one that has implications in a lot of areas maybe I could build on Ed's first point but look at it from the manufacturing sector US manufacturing is alive and well Doug sort of talked about that a bit we manufacture more today in the United States than we ever have before but for many of the reasons that Doug talked about we do so with fewer workers but we are at a status quo disadvantage in the global economy and you have on the slides we face in the United States as exporters higher tariffs than 129 other countries including China including Chile including Mexico and every member state of the European Union and all of those countries the reason why they face lower tariffs in their exports is because they've negotiated a heck of a lot more trade agreements than the United States has we have 14 trade agreements with 20 countries those 20 countries are outsized purchasers of our products purchasing nearly 50% of US manufactured exports even though they represent 6% of the world's population of the global economy we do better when markets are open when distortions are eliminated and we're in a global economy where we're not just competing against ourselves in these foreign markets we're competing against all these other countries from our perspective we've got to open up these economies and one easy example and this is in the slides as well is we are losing market share right now and we have been over a decade coming to China in those 4 TPP economies where we don't have trade agreements but they do so that's Brunei, New Zealand, Malaysia and Vietnam we used to be about 30% of the import share to those markets we're down to about 10% and China has completely taken it and taken it above our share we are losing under the status quo so we've got to figure out how to get this done or we are going to continue to lose and so we are working very hard trying to get the administration to solve some of the outstanding issues so that we have a political ability to move this agreement during the lame duck working with Congress as well because you need both sides to work on this but that's got to get done so that we can get this agreement implemented well Don, I think it's a truism that political candidates are usually a lot more a lot less favorable toward trade than presidents happen to be it's amazing when a candidate gets into office how they have a change in perspective when it comes to trade take for example President Obama you know he campaigned in many ways against NAFTA in 2008 he got into office it took his team a while to kind of get up and running eventually they realized the wisdom of three trade agreements that the United States had negotiated with Korea Columbia and Panama and pushed very hard for those agreements to get enacted then they have taken the reins as well on TPP and other initiatives that the Bush administration started I think the same would happen with the new president if TPP were enacted during the lame duck session I think a new president, whoever that is would start to realize how important those agreements are to the United States economy I think one of the things they would realize is the day they're in office they're going to be a whole bunch of other countries knocking on the door saying you know that TPP we want in too there are a number of other countries that are sitting on the sidelines who want to join the TPP part of this greater Asia Pacific free trade area and smart presidents would realize that's some geopolitical leverage that they could use to their advantage so I think that's something that's extremely important and you know again they would also recognize the benefits of these agreements Mr. Trump was quoted as saying in a rally I think it was in Kansas that the day after he's elected president he's going to get rid of high duties on American beef to Japan well if the TPP is enacted before he's into office that process will already begin and I think he and Secretary Clinton as well would recognize that ultimately this is in the strong benefit of the United States it's not easy it will be messy like all our politics are and I think eventually people come around to recognizing the benefits of these trade agreements Before I ask another question that the audience offers I understand that I know historically that's been the trend that particularly presidents they do become more trade friendly when they're in the oval office than they were on the campaign trail but do you not worry that there's something that's evident in this campaign season that maybe may I'm usually optimistic but the hostility against trade that is out there today the fact that one of the candidates was once a strong proponent of TPP and is now expressly skeptical of it the other candidate is downright hostile to it despite the fact that other candidate obviously doesn't know all the details of it is it misplaced to worry that maybe something is amiss now that wasn't in the past I think you're absolutely right Don you're absolutely right and I think this underscores the importance of programs like this one and the project at the Mercatus Center people generally don't understand these issues the interesting thing is we've done some polling at the Progressive Policy Institute among democratic leaning voters and you know if you saw the Philadelphia convention you'd think every democrat is opposed to trade there were all the anti-TPP signs up but if you look at the actual polling for example we polled democrats in swing states 66% of democrats think high standard trade agreements are a good thing only 25% think they're bad but the problem is those opinions are kind of really held the people whose jobs are impacted as Doug mentioned they have a very strong incentive to be loud and vocal and against these and you know speaking from the democratic side our friends in the labor union movement I think use trade is in many ways more an organizing principle than a philosophical argument so there's a ton of work that we have to do but the ground is is favorable if we can do more things like this to educate both you know the population generally and more of our elected officials but I'm not for any minute discounting how difficult it would be you know I think what we're seeing is a broader economic uncertainty and concern some of it is clearly related to the slower growth we've grown manufacturing jobs for instance we've seen slow economic growth in this country and globally but people are not feeling the benefits of that they're seeing other costs go up healthcare wages and certain parts of the economy are not as high as people want they haven't returned to the level they were right before the last recession and that's causing an uncertainty people are looking to blame somebody and when politicians are out there blaming trade or other things as the problem we are unfortunately missing a chance to really address those issues I think there's a broader issue here though and it is the change and my colleagues here have talked a lot about how much TPP does on e-commerce and the information technology when I was a Hill staffer on the senate finance committee decades ago sorry it was a long time ago the internet had just begun think about your lives today if you didn't have a smart phone I mean we had cell phones back then they weren't allowed on the senate floor for heaven's sake but the world was completely different the manufacturing shop floor is completely different I have our companies coming in and by the way NAM represents 90 some percent of our manufacturers small manufacturers which is reflective of the broader economy but we have some of our manufacturers come in say capital equipment and we talk to their plant managers before they come see members of congress I know we produce a lot I know we're exporting but I look around and I see factories that are closed that are not opening or there's communities in my state that haven't gone what's that about it's easy to blame trade especially when you have loud politicians other interest groups out there saying this is the reason we are in a cycle of major change like the industrial revolution was and the movement from agriculture to industry and it's changing our communities it's changing our factories it's changing the way we work and the way we live and we need policymakers and leaders and industry and we need local organizations to recognize and speak about that and not try to go blame somebody else because that's not going to solve those problems that's not going to get our economy growing again these other countries if they're not moving forward with the TPP and they keep their markets shut they're not going to grow either we all need to grow together and we can do that in a pro-competitive type of way we need other policies and things he's thinking about our organization certainly has lots of ideas about how to grow the competitiveness of the manufacturing sector in the United States but we need to be talking about what's really out there and not just finding that easy scapegoat I don't have that much to add maybe one little anecdote we should be I think kind of optimistic about the American industrial economy we have added factory jobs for the last six years in a row that's the first time that's happened since the 1960s we are near an all-time production record I was in Los Angeles last week and talking to a garment manufacturer an interesting name, Chewy he makes high-end baby and girls clothes which he exports to Japan so I asked her how do you feel what do you think about that and she said well if someone wants to import baby clothes duty-free they can do it from Mexico what I tried to do is to emphasize branding to say this is an LA product this is sexy, this is cool this has assets that you're not going to get on the mass market I'm worried about counterfeiting and loss of control of my brand I'm worried about the cost of shipping tell me what TPP does in these things there are a lot of very successful very creative small light manufacturing businesses in the country I think the first place in the world to launch a major automobile manufacturer in 50 years so we shouldn't buy into an idea that things are really bad and things are going downhill we certainly have a lot of challenges we think TPP will help with some of them won't help with all of them but it is one piece I think and this is the case the president has made and others have made about why it's so important to get this done here's another question from from the audience if, let's hope this if does not come to pass, but if TPP fails Congress refuses to approve TPP do you see the ability of the next administration whatever that might be to at least minimize the failures by negotiating individual trade agreements with different countries that's a lot of work I mean the TPP has taken an immense amount of work from negotiating teams of two administrations going back I think the British experience in Brexit it may be a little bit instructive on this they have to reassemble a whole trade negotiation team because they've decided to pull out of the EU we don't have to do that but we would basically with many countries have to go back to ground zero and start negotiating again and of course if you're doing it with individual countries the dynamics are completely different you know the dynamics of a 12 country agreement are very different from an individual country agreement but the question I have for that is that strikes me as a very inefficient way to do trade policy with lots of countries in the world it could take us a long time to do that and no one has really underscored for me why it is a preferable course of action you know it seems to me for example if we can get 12 countries to agree on common rules of origin for products that's a lot more efficient than the current spaghetti bowl or noodle bowl that we have now where you have all of these different trade agreements with different rules of origin and different requirements and different standards Linda can speak much better to this than I can but I know when I was in private practice as a trade lawyer if a company came to me and said there are 12 different kinds of rules you have to comply with to get these benefits I'd probably tell them just forget it just trade the way you do now because of a bunch of one off trade agreements without some coordination really doesn't get people there it certainly doesn't help the United States maximize its influence and particularly on things like the digital economy if we want to write the rules for global digital trade that reflect American values that reflect openness rather than have them being written by the Chinese and the Russians we should maximize our influence and larger agreements are a way to do that and building on Ed's point about the spaghetti bowl boy in my perfect world we would be at the WTO we'd be doing all of these rules globally because it's a heck of a lot of red tape we all know the problems with red tape but for these small companies it really hurts them most of all but I want to take it back to another piece of this I'm going back to NAFTA and I will be one of those people for every day of my life to defend NAFTA as having helped grow and make U.S. manufacturing stronger we are stronger today we produce about double U.S. manufacturing output in this country since 1993 and NAFTA is a big part of that if we were to negotiate Canada and Mexico joining the TPP negotiations with something NAM and others in the manufacturing sector generally applauded this was seen we have supply chains with these three countries and this industrial base that makes us stronger it makes our steel industry stronger as they testified to the international trade commission it makes our automotive industry stronger here we do better and we do better globally because of NAFTA if we're going to be negotiating ourselves with Vietnam without NAFTA that's going to have a negative impact on just the production model that we have here in the United States and that's just NAFTA we have global supply chains you heard Doug talk about how much of global trade is intermediate trade that helps us be stronger where that product is finally assembled may not matter so much of that technology that research and development that capital investment is actually done here in the United States you know our latest statistic is 80% of US manufacturing firms are looking for skilled workers because we don't have enough skilled workers in this country starting again boy I don't see where it's going to take time and it's just not going to give the benefits that moving forward on TPP is really going to give to our economy I guess without giving a personal opinion US has a lot of friends some of them are very polite and cautious when they speak about us and others are blunt and say exactly what they think you don't want to have every friend be like that but you want a few the Prime Minister of Singapore I was here a few weeks ago said was asked exactly this question he said well we Singaporeans we've been asked a lot in the TPP we've been asked to discipline state owned enterprises we've been asked to open services markets we've been asked to labor and environmental standards if US doesn't do this and say okay we're not going to do it you're not going to have a lot of credibility as soon as you go back to the beginning and start over again so let me ask a quick follow up question it's going to be the last before we close out again it's a pessimistic question if TPP fails what then would you recommend the next steps be would private recommendations would you give to whoever is the most pro-free trade supporter in the next administration for how to capture some of the benefits that are lost by this conjectured failure of TPP well you know trade negotiations as Professor Irwin can certainly attest to you know have their ups and downs and you know oftentimes you have something that has failed but then it's been revived I mean I would urge anyone to do everything they possibly can to maintain TPP you know to recognize that if it kind of fails at one point we ought to do everything we can to try to revive it as a model I think this alternative of doing a bunch of one-off trade agreements really doesn't make any sense to me at all it is not useful at all and I think one of the things that I think is overlooked in this is the geopolitical benefits of having Asia-Pacific wide trade agreements we've heard a lot about this from diplomats at the TPP countries and they're relatively forceful when they say it's extremely important for them to have these agreements with the United States but at the same time they're also diplomats so they have to be diplomatic I've had some kind of off the record discussions with people at the various embassies and they say basically this they say you know if we don't do the TPP with you we're very concerned that China is going to have a heck of a lot more leverage over us because so many of these countries trade heavily with China and what they fear is a situation in which they have great trade with China and someday the Chinese call up their prime minister and say you know that maritime dispute we have we want you on board on our side on this and if you don't you know all your shipments of widgets or meat or milk or whatever it is it's suddenly going to have difficulties at the border. This is not an unknown thing for the Chinese to do and I think it really underscores why it's very important for us to have these broader regional agreements. I agree with Linda it would be nice if we could do global trade agreements at the WTO but failing that I think it's very important to have these broader regional agreements because that helps us maximize America's geopolitical influence that helps us spread values that are important to us as Americans I will be very upset I think many in this room and certainly I know many manufacturers will be look we're going to have to start at ground zero. I mean part of it is focusing on the real issues that are slowing the U.S. economy that are slowing the job growth the income growth that we all want to see in this country and some of those are domestic issues they tax. Let's all talk about infrastructure and modernizing U.S. infrastructure so we can compete better globally there's energy policy regulatory policy etc that we need to tackle as a country and I certainly hope that we can do so but we've also got to recognize that global trade is about 14 trillion yes it's slowed considerably it's not growing as fast as it was it is still so much more than what we're selling here in the United States and the more we are cut off the worse we are going to be the less innovative we are going to be and the less strong we are going to be across all the sectors of our economy we're just going to have to double down and go back about how can we grow and how can we stay engaged globally because we know what happens we saw what happened smooth holly when we weren't engaged globally we've got to figure out how to get back again I would just say there's no reason to accept the premise Congress is every every right and some responsibility to take a look at the agreement and have ample time to pass it this year this is one case where I don't mind not having my premise accepted oh not accepted rejected yeah with that let me turn it over to my colleague Dan thank you all for coming thank you for that very very distinguished panel you know we've and thank you all for coming out today at this very critical time for us trade policy you know you probably gathered there's a general pro-trade perspective to this but we actually had some very distinct institutional angles illuminating different facets of trade from professor Irwin we get a really a centuries broad scope of us trade policy and seeing today's trade debate in the context of us policy we've heard from the administration that did a lot to actually negotiate this agreement from a hugely important sector not the only sector in the US economy but a hugely important one manufacturing and then we hear about the cutting edge aspects of this having to do with small and medium size enterprises being more involved in trade and and data and if I were to sum up kind of the theme of all these together you know we hear a lot in this election cycle about the winners and losers of trade and that's fine we should talk about about that we seem to pay a lot of attention to the losers and I don't think we should ignore that but I think a huge message from this today is that there are a lot of winners from trade and they hugely outnumber the losers both in number and in economic weight there's things we can do to help people make the adjustments who lose out from trade so to sum it up trade is not a zero sum game trade is a win-win for America we win as exporters 80% of the world's spending power 95% of the world's people are outside the United States we must sell in those markets for US industry and service providers to thrive in the 21st century but we win as importers consumers not just the middle class but low income consumers and we win as producers who are importing those goods as Professor Irwin reminded us our manufacturers cannot be competitive in global markets unless they can access global supply chains and buy global supplies and inputs at competitive global market prices and of course we win as investors abroad being able to invest in productive facilities abroad US companies sell much more to foreign consumers through their foreign owned affiliates than they do exporting from the United States that's the way we reach customers with US branded products if we start badgering and taxing US companies that invest abroad we're going to lose market share to those who can move into those markets and of course when we win when foreign companies can invest in the United States there are 6 million of our fellow Americans who work in the United States for foreign owned affiliates almost a third of them are in manufacturing I think it's close to 2 million US manufacturing workers are working for foreign owned companies in the United States if we start interfering in the flow of dollars there's going to be fewer dollars coming back to invest in those companies and of course it's a win-win with other nations we win here in the United States other nations win you know trade wouldn't happen if the two parties weren't better off a particular trade doesn't happen unless the two parties are better off and you multiply that by millions and you get the broad win-win benefits of trade we deepen our supply chains and our global integration we've talked about foreign policy wins in terms of knitting nations together being able to be more cooperative you know one of the one of the manifestations of globalization over the last 30 years has been the lifting of hundreds of millions of people out of poverty around the world this is something we should care about as human beings but there's a geostrategic component to that too people who are lifted up from grinding poverty can pay more attention to things like the environment getting more representation in their country we have a growing middle class around the world and that is very much in America's interest and we encourage peace among nations Professor Irwin mentioned the trauma of smooth holly but there were some other bad things that happened around that time too the economic misery and tensions of the 1930s contributed to global tensions on the international stage in terms of war and international relations so our pro-trade initiative after World War II was based on sound economics but it was also foreign policy Secretary of State Cordell Hall understood this very well and wrote about it very very passionately that that was part of keeping the peace and you have to say in terms of the western powers that fought two devastating world wars that has been a successful policy so to sum up and again thank you all for coming out today our post war 70 year bipartisan policy of the United States embracing trade liberalization engaging and leading on the global stage in trade has been a winning policy for the American people including and I think you've gathered the Trans-Pacific Partnership is very much in that bipartisan tradition it would be foolish really beyond belief to turn away from that very successful policy so I want to thank all of you for coming out today all of our speakers and thank you again