Trade Policy Likely to be Key Issue in Presidential Election – with Potentially Large Impact for US Manufacturers

As is common during almost any slow economy, the issue of trade policy and lost jobs due to “offshoring” is once again being elevated, exacerbated by this being a presidential election year and an undeniable acceleration in recent years of companies moving production from the US to China or other low cost countries.

Not since Ross Perot memorably described the “great sucking sound” he anticipated from the then proposed NAFTA accord during the 1992 presidential race has trade policy had such a high profile.

It is unclear exactly how US policies might be changed under an Obama administration, but the impact potentially could be significant for US manufacturers in any number of ways:

• Changes to existing trade policies that will make it more costly to source product from low-cost countries, making some moves offshore impossible or a poor financial decision. That might keep some jobs in the US, but increase costs for business and consumers.
• Protection in part for some US manufacturers from global competition.
• Potential retaliatory moves by US trading partners that might put a crimp on currently surging US export volumes and, according to some, lower overall world GDP growth.

In general, Republican John McCain is for continuing existing free trade policies. Democrat Obama has been critical of arrangements such as the North American Free Trade Agreement (NAFTA), saying it needs to be amended to be more supportive of US interests – but offering little additional specifics on what changes he would propose. One Obama economic advisor reportedly told Canadian officials this spring that the NAFTA talk was just political rhetoric, and wouldn’t result in significant policy changes in practice.

Obama has said he would extend the Trade Adjustment Assistance program – which right now only provides assistance to manufacturing workers that lose jobs due to trade policies, to service workers, such as IT personnel that lose jobs when computer work is sent offshore. He has also said he would end tax breaks and other subsidies to companies that send jobs overseas, and take unclear action, such as tariffs, in cases where foreign governments provide subsidies to their manufacturers, enabling them to sell at lower prices or make more investments.

Source by scdigest.com