How the Trump administration’s vision of “economic security” could make us less secure
The Trump administration’s statement this week on national security strategy correctly reaffirms many of the traditional pillars of U.S. policy, such as peace through strength, building alliances, promoting U.S. values of human rights and democracy, and maintaining a robust domestic economy.
Where the document strays from tradition is how it defines the “economic security” that it says is the basis for national security. If fully implemented, the Trump administration’s vision for a more secure economy could undermine the goal of a more secure nation.
One major theme of the national security document is the threat posed by the “economic aggression” by China and other major trading nations. “Over decades, American factories, companies, and jobs moved overseas,” it states. It also cites the U.S. trade deficit, which “grew as a result of several factors, including unfair trading practices.”
The report fails to cite any evidence that U.S. trade with China or any other nation has weakened the overall U.S. economy. In fact, just about all economic analysis has concluded that trade has boosted U.S. economic growth and the real wages of the large majority of American workers. Yes, we would be better off if other nations reduced their barriers to trade further, but that is also true of the significant barriers our own government maintains against imports.
As for companies and jobs going overseas, the net flow of investment has actually been in the opposite direction in recent years. In recent years, the United States has been a net recipient of foreign direct investment (FDI) in manufacturing. From 2011 to 2015, the amount of manufacturing FDI flowing into the United States on average each year exceeded the amount flowing out by $50 billion. More than 2 million U.S. manufacturing workers are employed by foreign-owned affiliates in the United States.
As for the trade deficit, the national strategy document draws no connection between the deficit and national security. Causes of the deficit are rooted in broad macroeconomic factors such as our national rate of savings and investment. “Unfair trading practices” by other nations can have a limited impact on bilateral balances, but have no effect on the overall size of the U.S. trade deficit. This is merely an example of the administration trying to wrap its bad thinking on trade in the mantle of national security.
The national security statement also takes a swipe at immigration as part of the problem. Obviously, the government needs to take the necessary steps to keep dangerous people out of our country. But here the document goes much further, proposing a drastic reduction in family-based immigration without providing any evidence that this is a particular security problem. The vast majority of family-based immigration comes from countries that are not sources for international terrorism.
The national security strategy report cites the need to maintain America’s technological edge, but fails to acknowledge the critical role that high-skilled immigrants play in promoting innovation and growth. In fact, while immigrants account for about 17 percent of the U.S. workforce, they have filed about a third of the patents in the United States. Immigrants have founded or co-founded some of our most successful high-technology companies.
Without a steady inflow of high-skilled immigrants, U.S. companies would soon need to relocate their productive activities abroad to access the workers they need. Yet the Trump national security document warns darkly that the United States must do more to restrict the inflow of foreign-born science, technology, engineering, and math students out of fear that they might take security secrets back to their home countries. Such short-sighted thinking will only blunt America’s economic leadership in the world.
To advance its vision, the Trump administration’s security document says the United States will “pursue bilateral trade and investment agreements with countries that commit to fair and reciprocal trade and will modernize existing agreements to ensure they are consistent with those principles. Agreements must adhere to high standards in intellectual property, digital trade, agriculture, labor, and the environment.”
The irony here is that the United States is already party to a number of trade agreements that meet those very standards. A 2016 study by the U.S. International Trade Commission determined that existing U.S. bilateral, regional, and multilateral agreements have boosted U.S. GDP growth, raised real wages for American workers, and allowed U.S. companies to collect an extra $10 billion in annual payments for intellectual property.
Yet in its first week in office, the Trump administration withdrew the United States from the Trans-Pacific Partnership, a free-trade agreement with 11 other nations in the Pacific Rim. The agreement would have eliminated 18,000 tariffs against U.S. exports, provided cutting-edge protection for U.S. intellectual property and data flows, and extended U.S. commercial standards in the world’s most dynamic economic region. Instead, the U.S. walked away, ceding leadership in those areas to the other regional power, Mainland China.
If the Trump administration wants to promote U.S. leadership in building a more peaceful and prosperous world, it should embrace policies that open markets at home and abroad and that welcome productive immigrants to the United States.