Since the adoption of our current “trade” pacts and policies, the job creation and wage growth from balanced trade was replaced by a U.S. trade deficit of a size unprecedented in U.S. history. Decades of huge annual deficits represent the loss of millions of U.S. middle-class jobs and fueled growing U.S. income inequality.
Before the establishment of the Fast-Track trade process, and the trade agreements it enabled or Congress’s approval of China’s admission into the World Trade Organization (WTO), the United States enjoyed balanced trade and rising living standards for most Americans. In fact, in 1973, the year before Fast-Track was first enacted, the United States had a slight trade surplus, as it did in nearly every year between World War II and 1975. But in every year since, the United States has run a trade deficit. And since establishment of NAFTA and the WTO in the mid-1990s, and the 2000 Congressional approval of China’s WTO admission, the U.S. trade deficit jumped exponentially from under $100 billion to over $700 billion. The deficit was more than five percent of the Gross Domestic Product (GDP) before falling due to the 2008-09 financial crisis. It is on the rise again today, including a trade deficit in goods of almost $900 billion. Even with this offset somewhat by a positive trade balance in services, the overall 2018 trade deficit was nearly $600 billion. Over half of the trade deficit is a result of the expanding U.S. trade deficit with China that has hit record highs under the Trump administration. The establishment of the extraordinary Fast Track trade procedure coincided with President Nixon’s decision to abandon managed exchange rates – the so-called gold standard – that had helped to ensure balanced trade over time. In the new economy that would emerge from these policy shifts, companies that produce abroad (or produce nothing at all, in the case of finance) would replace domestic employment and rising wages as the driving force of economic policy. Many economists believe that this huge trade deficit is unsustainable: unless the United States implements policies to shrink it, the U.S. and global economies are exposed to risk of crisis, shock and instability.