Adam Davidson of the New Yorker has written a profile of Donald Trump’s trade adviser Peter Navarro. Here’s a key excerpt: “Navarro’s views on trade and China are so radical, however, that, even with his assistance, I was unable to find another economist who fully agrees with them.”

That’s the big picture of the trade views of Trump/​Navarro. Now here’s a closer look at a very specific claim in a Trump campaign memo co-authored by Navarro. This kind of claim is, in my view, very enlightening about how this crowd approaches trade policy:

Over the last 25 years, Bill and Hillary Clinton have championed one-way deals like 1993’s NAFTA, China’s 2001 entry into the World Trade Organization, and the 2012 South Korea-US Free Trade Agreement. These poorly negotiated deals benefit the elite corporate interests that finance the Washington politicians even as they impoverish our heartland and destroy the livelihoods and lives of working Americans.

…

Michigan farmers lost out too. U.S. exports to Canada and Mexico of cattle – one of Michigan’s top agricultural products — fell 59 percent in the first 22 years of NAFTA.

What’s nice about this claim about cattle exports is that, unlike many of the vague criticisms people make about trade agreements, this one can be tested: Did these exports actually fall? The authors don’t give a citation for the data, which makes it difficult to double-check, but here’s some data from the U.S. International Trade Commission on exports of “bovine animals” (including cattle and buffalo, but mostly made up of cattle):

It turns out he’s roughly correct in terms of the 22 year trend. So does that mean he has a point about NAFTA? Could lowering Mexican and Canadian tariffs through the NAFTA somehow have hurt U.S. exports, contrary to all logic? The answer is no, for two reasons.

First, take a look at the export trend over time. Notice how the numbers increase for the first ten years or so, then suddenly drop down close to zero. That drop was due to BSE disease being found here in the U.S. So it wasn’t NAFTA that got in the way of U.S. exports, but a disease outbreak. Exports of cattle have improved since then, although they have not reached pre-BSE levels.

Second, there’s also another little trick in their data. When you see the word cattle, you might think of beef, and assume U.S. beef exports fell. But cattle actually means cattle. When’s the last time you bought cattle? I haven’t bought any cattle recently, but I have bought a fair amount of beef. So let’s look at U.S. beef (again, including a small amount of buffalo) exports to Canada and Mexico over the time period he uses:

What you see now is a large increase in U.S. beef exports (almost tripling since the time of NAFTA), with a brief fall during the U.S. BSE scare.

And when you put the figures together in one table, you can see how the beef figures dwarf the cattle figures, and thus how this sector of the U.S. agriculture industry saw trade expand after NAFTA:

Thus, the story here is really about how U.S. beef exports rose after NAFTA. What we have with the Navarro claim is someone cherry-picking data in an effort to support a broader point. But if you go beyond the selective statistics, you get the story you would expect: Lowering Mexican and Canadian tariffs correlates with a big rise in U.S. exports.

In the first presidential debate, Donald Trump said, “We have to stop our companies from leaving the United States and, with it, firing all of their people.… They’re going to Mexico. So many hundreds and hundreds of companies are doing this.” He later added, “The companies are leaving. I could name, I mean, there are thousands of them. They’re leaving, and they’re leaving in bigger numbers than ever.” But Trump didn’t name thousands. He named two: Ford and Carrier.

U.S. companies commonly grow by expanding overseas, often to meet local demand (e.g., McDonald’s and Uber) rather than to export back to the United States. 

The amount invested is recorded as Foreign Direct Investment (FDI) abroad. 

The graph shows the United States’ total direct investments in select countries for 2009 and 2015, valued at historic cost. 

Contrary to Mr. Trump’s excited rhetoric, there has been very little FDI in Mexico, and such investments did not increase significantly from 2009 to 2015. In fact, China is now suffering a capital outflow, with a quarter of U.S. companies reportedly moving out. 

U.S. firms mainly invest in their subsidiaries in Europe and Canada, and do so largely to service those markets more quickly with lower shipping costs. The U.S. runs a large trade deficit with Europe, second only to China, but that is a symptom of Europe’s economic weakness rather than strength. Stagnant economies neither need nor can afford many imports.

U.S. direct investment in Australia and Singapore increased significantly from 2009 to 2015. Far from being a threat, however, the U.S. runs sizable trade surpluses with both countries (and with Canada and Hong Kong), and has a Free Trade Agreement with Singapore.

Donald Trump always sounded just like a Bernie Sanders Democrat when talking about international trade. “We have one issue that’s very similar,” he said, “and that’s trade.” That Trump-Sanders hostility to trade liberalization, in turn, is identical to that of the AFL-CIO and the Economic Policy Institute, a leftist think tank created and largely financed by labor unions.

It should be no surprise that Donald Trump’s most influential adviser and spokesman on international trade, Peter Navarro, is a former unsuccessful Democrat politician who seems closer to an old-style Bernie Sanders leftist Democrat than to a Bill Clinton “New Democrat.”

The only academic among Trump 13 economic advisers, Navarro returned to being an economics professor at U.C. Irvine, after losing San Diego mayoral election to Republican Susan Golding. In 1993 Navarro wrote the book, Bill Clinton’s Agenda for America.

With one caveat, the book was full of glowing praise for everything Clinton promised to do – notably lots more federal spending (which, ironically, fell substantially).

Navarro’s doubts about Clinton concerned NAFTA, which Bush created but Clinton promised to change. “I thought the NAFTA agreement ought to have been more properly called ‘SHAFTA,’” says Navarro. But he notes that “candidate Clinton later acknowledged the problems of the environment and lost jobs raised by NAFTA, and called for wage safeguards and stricter environmental regulations. It remains to be seen whether this was merely rhetoric, or a serious concern that will have policy follow-through.”

Putting NAFTA aside, giving Clinton the benefit of doubt, Navarro concluded, “if Clinton and Gore carry through with their agenda … we will become more globally competitive, our educational system will improve, better protection will emerge for our environment, our cities will be rebuilt, and, most important of all, hundreds of thousands of jobs will be created.”

Navarro dismissed Reagan’s seven years of 4.4% annual GDP growth as “The Failure of Reaganomics” and the “Trickle Down Rip-Off.” He thought Reagan spent far too much on Defense. Maybe so, but that helped dissolve the USSR which later made it easy for President Clinton to spend much less.

Navarro was almost as fearful of Japanese industrial dominance in 1993 as he now is of China. For some reason (perhaps the United Auto Workers), he even worried Japan would “locate many of their plants within U.S. borders to avoid the certain protectionism they saw coming.”

The way to beat such winners, he argued, was for the U.S. to become more protectionist and dirigiste. “Countries like Japan, Germany, France and Taiwan have very sophisticated industrial policies,” wrote Navarro, while “Reagan and Bush Administrations… [were] clinging to a free-trade philosophy.” Without a protectionist industrial policy and generous grants and subsidies the U.S. couldn’t possibly compete, since “Japan and Germany were devoting over 10 times what the U.S. was spending on public infrastructure and new technologies.”

“The essence of a national industrial policy,” Navarro explained, “is a full partnership between government and business… [T]he role of government is to help a nation’s businesses compete by providing technological assistance, subsidies and protectionist measure such as tariffs and quotas.” In other words, Crony Capitalism — an open invitation to mass corruption.

Industrial policy advocate Peter Navarro may now seem a peculiar choice to advise a Republican presidential contender, but such peculiarity is not unprecedented.

John McCain’s adviser was the loyal Democrat, Mark Zandi. He’s the so-called “independent expert” mentioned by Hillary Clinton in the first debate, and he’s the loyal hyper-Keynesian Democrat who predicted wondrous results from Obama’s “stimulus” scheme. Zandi is also the nameless “leading private forecasting firm” who’s most responsible for the Obama team’s infamously wrong Romer-Bernstein forecast of January 2009. 

McCain didn’t do so well by turning to a Democrat ideologue for economic advice. That lesson was apparently lost on Mr. Trump.

I stumbled on this 1997 talk abut NAFTA by my old friend Roberto Salinas-Leon, making a case for Hillary’s Wikileak dream of Hemispheric free trade (but not for her other dream of “open borders” if that really meant unhindered migration). 

I may be biased, but the following heretofore lost quote from me still seems relevant, but for the U.S. too, not just Mexico. Trump adviser Peter Navarro thinks the dollar is 45% too strong against the Chinese yuan, which supposedly excuses Trump’s threat of a 45% tariff. (I’m more in the “strong dollar is good for America” camp, though strong doesn’t mean continually rising.) 

As Alan Reynolds has recently explained, “the explicit goal of devaluation is to worsen the terms of trade”-for instance, to make Mexico trade more exports for fewer imports. Reynolds continues: “…even if Mexico wanted to impoverish itself in this way, it does not work. When the peso was devalued at the end of 1994 that did not result in Mexican oil or beer being one cent cheaper in terms of U.S. dollars. After a devaluation, interest rates soar, real tax receipts collapse, and the foreign debt burden increases. This causes a squeeze on the government’s budget, and on the budgets of families, farms and firms. This is no way to make a country “competitive.” Economic growth depends on more and better labor and capital, neither of which are encouraged by a currency of unpredictable value. A weak currency has never produced a strong economy.”

To be sure, concerns surrounding currency revaluation are closely mixed with the fear of generating a substantial trade deficit. Reynolds again explains the misdiagnosis of increased imports as a sign of bad times: “current account deficits have nothing to do with ‘competitiveness.’ They are caused by a gap between investment and domestic savings that is filled by foreign investment (which is good) or loans (which are not so good). To the extent that a devaluation might “fix” such a gap, it does so by slashing investment, not raising savings.”

Until the last few minutes of last night’s debate, Donald Trump had been the only candidate to talk about trade policy during the debates. At the first presidential debate, Clinton studiously avoided the topic even as Trump used Clinton’s past support for NAFTA and her flip-flop on the TPP to blame her for all the economic troubles he thinks trade has caused. At the vice-presidential debate, neither Mike Pence nor Tim Kaine offered any substantive remarks about trade policy. 

Most of the second presidential debate followed the same pattern. Trump continued to complain unchallenged that America is losing because of our trade deficit and that Clinton is responsible because of NAFTA and the TPP.

But then in the second to last question of the debate, Trump finally evoked a response from Clinton when he stumbled into some remarks about China and the U.S. steel industry during a longer diatribe about coal and environmental regulations:

We have to bring back our workers. You take a look at what’s happening to steel and the cost of steel and China dumping vast amounts steel all over the United States, which essentially is killing our steelworkers and steel companies.

When it was Clinton’s turn to respond, here’s what she had to say:

First of all, China is illegally dumping steel in the United States and Donald Trump is buying it to build his buildings, putting steelworkers and American steel plants out of business. That’s something that I fought against as a senator and something I would have a trade prosecutor to make sure we don’t get taken advantage of by China on steel or anything else.

You’ll note that Clinton didn’t disagree with Donald Trump’s assessment or criticize his simplistic, zero-sum view of trade. Instead, she accused Trump of hypocrisy and complicity with the problem and highlighted her own record and promises to protect the steel industry. 

I’ve written before about how Clinton’s own protectionist positions have made it impossible for her to refute Trump’s trade rhetoric. When confined to specifics, Trump’s trade policy proposals are very similar to what Clinton and other Democrats have been advocating for years.

Just like Trump’s efforts to tie Clinton to NAFTA, Clinton’s remarks about Trump and Chinese steel are likely meant to convince labor unions and Rust Belt voters that she will be a more sincere protectionist than her opponent.

Clinton’s plan to create a special “trade prosecutor” position is a curious proposal she has advocated for a long time. It was one of her trade policy talking points in 2008 and she’s mentioned it a number of times during this election cycle. It’s not clear to me what exactly a “trade prosecutor” would do. Bringing dispute settlement cases against foreign countries at the WTO is already a responsibility of the Office of the U.S. Trade Representative. She may want to bring more cases, but she hasn’t said why USTR would not be up to the task.

It’s also confusing that she connects the trade prosecutor proposal to “dumping” which is currently handled through a sophisticated legal process at the Department of Commerce, U.S. International Trade Commission, and federal courts. Cato scholars have written a lot about the myriad problems with America’s antidumping laws. To say the least, more antidumping duties are not going to help the U.S. economy.

If you’d like to learn more about the problem of global steel overcapacity and what the best U.S. response would be, I recommend reading this recent Free Trade Bulletin written by my colleague Dan Pearson or watching this Cato Policy Forum from last week. Spoiler: We don’t need more antidumping duties.

Peter Navarro, a Professor at U.C. Irvine, is Donald Trump’s most influential adviser/​spokesman on international trade, and the only academic among his 13 economic advisers. 

After a losing campaign to become mayor of San Diego as an anti-NAFTA Democrat running against Republican Susan Golding, Navarro wrote a 1993 book, Bill Clinton’s Agenda for America. It provides intriguing clues about the sort of policy advice he now offers Mr. Trump.

Navarro begins by saying, “if Clinton and Gore carry through with their agenda … we will become more globally competitive, our educational system will improve, better protection will emerge for our environment, our cities will be rebuilt, and, most important of all, hundreds of thousands of jobs will be created.”

He goes on to write of “The Failure of Reaganomics” and the “Trickle Down Rip-Off.” The complaint is mainly about the U.S. spending too much on defense, with Japan financing the resulting budget deficits and aiming to “locate many of their plants within U.S. borders to avoid the certain protectionism they saw coming.”

“Countries like Japan, Germany, France and Taiwan have very sophisticated industrial policies,” wrote Navarro, while “Reagan and Bush Administrations… [were] clinging to a free-trade philosophy.” Without a protectionist industrial policy the U.S. couldn’t possibly compete, particularly since “Japan and Germany were devoting over 10 times what the U.S. was spending on public infrastructure and new technologies.”

“The essence of a national industrial policy,” Navarro explained, “is a full partnership between government and business… [T]he role of government is to help a nation’s businesses compete by providing technological assistance, subsidies and protectionist measure such as tariffs and quotas.”

In September, the UK government gave the green light for the construction of the Hinkley Point power plant through a French-Chinese consortium. The project—which has received wide international attention after being very nearly relegated to the protectionist dustbin—has been agreed to after much hemming and hawing. It has been mired in controversy mainly over security concerns related to foreign ownership, viewed by some as smacking of protectionism.

It is no secret that there has been a worrying trend toward protectionism in the global markets. The appetite for international trade agreements and foreign investment has been consistently listless. In the United States, and globally, some politicians have been banking on this by flaunting protectionist rhetoric in an effort to garner support. But while protectionism may win votes in the short-term, domestic economic growth will lose out in the long-term. Ultimately, politicizing the global economic rut will only make matters worse.

A Global Trade Alert by the independent London-based think-tank, the Centre for Economic Policy Research, shows that between January 1 and October 31 2015 a total of 539 governmental measures adopted worldwide “harmed foreign traders, investors, workers, or owners of intellectual property” followed by a sobering observation that “in no previous year have we found so many trade distortions so quickly.”

According to the study, the three countries subjected most often to foreign protectionism have been China, the European Union and the United States, in order of ranking. Settling in to this new protectionist normal, however, will have dire economic consequences for all countries and not just developed ones.

Protectionism and an over-reliance on quantitative easing (QE) measures are key contributing factors toward the “new mediocre” which has set hold of the global economy. In this “new mediocre”, global growth is stuck at barely 3 percent a year, with the United States, the European Union, and Japan as the poorest performers. Relying on QE as a long-term solution as opposed to a short-term “fix” following the Financial Crisis of 2008 has had a hampering effect, lengthening rather than stemming the impact of the Financial Crisis – especially for countries that combined QE with austerity measures. Likewise, governments are exacerbating the situation by raising roadblocks on trade and investment opportunities.

The global economic outlook and mood has been gloomy. However the passage of the Hinkley Point deal, once security concerns were addressed, offers a light at the end of this clogged-up tunnel. In the post-Brexit world, the UK government’s decisions on investment and trade will come up against the current popular sentiment towards protectionism. The Hinkley Point deal bucks this protectionist trend, possibly signaling a shift in attitudes towards trade and investment.

Prime Minister May has announced that she would like to turn Britain into a “global leader in free trade,” even though barriers against doing so are going up. In the United States, both presidential candidates seem to be putting up the barriers themselves, shunning trade and investment opportunities and riding the wave of popular protectionist rhetoric instead. President Obama, in a new piece penned for The Economist, instead argues that trade helped the U.S. economy much more than hurt it. There is a choice, he continues: “retreat into old, closed-off economies or press forward, acknowledging the inequality that can come with globalization while committing ourselves to making the global economy work better for all people.”

Regardless of who takes office in the White House come January 2017, economic growth should not be held up or held back by congressional impasse or politicized protectionism. Jump-starting the global economy will require less reliance on federally enacted economic measures and more restraint from protectionist and nationalist tendencies instead. Only then can domestic and global economies stand the best chance of awakening from this prolonged slumber of stagnation.