Trade war rumors a serious concern
Overblown on not, rumblings of a trade war must be taken seriously in Wisconsin. It's a state that could easily be caught in a dangerous crossfire.
Few states have more to lose than Wisconsin if President Donald Trump's plan to renegotiate major trade deals prompts retaliatory feuds with leading export partners.
From agriculture to manufacturing, and from technology to raw materials, Wisconsin sells much of what it produces outside the nation's borders. With roughly $22 billion per year in exported goods and services, Wisconsin ranks among the nation's leading export states. Tens of thousands of Wisconsin jobs are tied to trade, and many of the state's leading companies have a global footprint.
About half of that annual export total – just over $10.2 billion – is tied to Canada (Wisconsin's No. 1 trade partner) and Mexico (No. 2). Those nations are core to the North American Free Trade Agreement, which Trump has labeled "a terrible deal" and "a total disaster from its inception."
Three other top 10 trade partners for Wisconsin – Japan (No. 5), Australia (No. 8) and South Korea (No. 9) are part of the Trans-Pacific Partnership, from which Trump has withdrawn the United States because he believes it, too, is a bad deal for America.
Never mind that U.S. withdrawal clears the way for China (Wisconsin's No. 3 trade partner) to consummate a rival trade pact that excludes the United States, just as the Trans-Pacific Partnership excluded China.
Meanwhile, the United Kingdom (No. 4) is in the process of divorcing itself from the European Union, which includes Germany (No. 6) and France (No. 10) and three other nations in Wisconsin's top 15 trade partners. Trump backed the so-called "Brexit" vote that put the EU breakup in motion.
In short, almost all of Wisconsin's top trade partners would be hurt by current efforts to unravel trade agreements that were years if not decades in the making. It's only natural to think some of those nations might lash back.
Of course, Trump's tough talk on trade could be all about what he has historically done well – negotiate deals.
He may well push trade relations to the edge believing that, even if he doesn't get all that he wants, he might walk away with a lot more than when he started. After all, virtually all countries value the massive U.S. marketplace at least as much as American companies value them.
The question is: What does Trump hope to accomplish by pushing back so hard against existing or pending trade deals?
Most economists are skeptical that trade pacts such as NAFTA and TPP cost American jobs, although enough Americans believed that was the case to elect Trump in November. While the trade deficit with Mexico has resulted in job losses in some industries – about 700,000 in NAFTA's first 16 years – a 2014 study concluded that 1.9 million American jobs depend on exports to Mexico.
In fact, automation and technology itself are bigger job killers except when companies move operations across borders to produce low-tech products with less skilled workers. That's more likely Trump's goal: Keep American companies at home, not to interrupt the relatively free flow of goods and services.
If so, renegotiating trade pacts may not be the most effective way to accomplish that goal. Access to burgeoning markets, regulatory pressures and corporate taxes are more often cited by companies when they set up shop overseas.
While political transitions can compel office-holders to talk tough on enforcing trade laws or ending agreements, the reality is that fewer barriers and more transparency yield long-term economic results while enhancing U.S. security.
Exports and foreign direct investments are flip sides of the same coin. They represent Wisconsin's ability to build, produce and grow what the world needs – and to attract investment from other markets. Foreign direct investment helps Wisconsin: At last count, there were 1,537 foreign-owned companies in Wisconsin representing 86,440 jobs.
Healthy trade relationships can be political stabilizers in a world that already has more than enough flashpoints. In a state that can't possibly sell all it produces within its borders or even the borders of the United States, nurturing those relationships in a matter of survival.
Tom Still is president of the Wisconsin Technology Council