Home Month and Year October 2016 Some Perspectives on the U.S. Election

Some Perspectives on the U.S. Election

Frank Atkins

As an economist, I have always found politics to be very strange. This is because many economic ideas are politically unpalatable. In these situations, politicians resort to distortions and half-truths, if not outright rejection of some economic ideas. The gains from free trade are clearly laid out in any first-year economic textbook. Countries should exploit what economists call their comparative advantage. That is, we should produce what we are good at in a low-cost efficient manner. Other counties do the same, and then trade takes place where goods are traded at lower prices and higher quality than in the absence of free trade. Of course, the free part of free trade refers to the absence of trade barriers such as tariffs. However, next comes the political distortion. What politicians do not tell the voters is that moving to free trade will involve winners and losers. The winners will be the regions of countries that produce traded goods efficiently. The losers will be the regions that produce certain goods inefficiently. These regions will necessarily experience a decrease in employment. This is one of the reasons why left-leaning politicians do not support free trade. Unions back the socialist parties, and unions do not like any workers losing jobs anywhere.

In order to experience the full gains from trade, the workers who lose their jobs should move to where there are increased employment opportunities. Politicians almost never mention this in their speeches. It would be political suicide to go into a region during an election and state you support free trade, but you people in this region will lose your jobs. Further, politicians actually make the situation even worse by developing programs that encourage unemployed workers to stay in the depressed region.

This has come up in the U.S. election campaign in terms of economic and political discussion of free trade. Donald Trump is exploiting this regional employment loss in another cynical political move. Mr. Trump is going into regions of the U.S. which have high unemployment and stating that he will rip up the free trade agreements. Unemployed workers must just love hearing this, and clearly Mr. Trump knows this. In a very strange U.S. election, this is yet another strange event, a multimillionaire businessman who opposes free trade.

There is ample evidence the North American Free Trade Agreement (NAFTA) has benefited the Canadian economy. Therefore, from this economic perspective, Canadians should hope Mr. Trump does not get elected. However, at various times in her career, Hillary Clinton has also opposed free trade, although she does not appear to be as vocal about this lately.

In contrast to the above, there is a reason why Albertans should hope for a Trump victory (this is in spite of the fact he exhibits what might politely be called an erratic personality). Mr. Trump seems to support pipelines in general and the Keystone XL pipeline in particular. In contrast, it is fairly clear Ms. Clinton is a strident opponent of the Keystone XL pipeline. Getting our oil to markets in pipelines would clearly benefit the Alberta economy at the moment, and in the future. Interestingly, this is something our own prime minister does not seem to understand.

Frank Atkins is a Calgary economist.