When the government reported that the U.S. had a huge trade deficit in the first quarter, Donald Trump didn’t hesitate to pounce.
The presumptive Republican nominee tweeted out the news that the current account deficit had risen to $125 billion, the highest since the financial crisis, and blamed the deficit on the “horrible trade policies Clinton supports,” referring to likely Democratic opponent Hillary Clinton.
Throughout the primaries and into the beginning of the general election, Trump has made criticizing U.S. trade policies his calling card. He has railed against trade deals such as the Trans-Pacific Partnership being weighed by Congress, blamed China and Japan for costing the U.S. jobs and lamented the quarterly current account deficit.
But the flipside of the current account deficit, which measures the balance of trade including net income from abroad, is that the U.S. receives foreign direct investment, a record $350 billion worth of investments in the U.S. from abroad in 2016.
That means it’s not just multinationals that export to China that stand to lose from the anti-trade campaign rhetoric. U.S. businesses that receive funding from abroad are worried about the populist turn against globalism that could cut off their spending.
“We need to spend more time sort of unpacking global investment and trade in the U.S. so that not just elected officials, but the public understands better,” said Nancy McLernon, CEO of the Organization for International Investment, a trade group that represents the U.S. subsidiaries of multinational companies. “Right now, the global economy is being vilified. It feels like it’s become a scapegoat.”
Trump presents one major concern, but so does the general populist tilt away from support for global trade. Clinton, who once lobbied for the Trans-Pacific Partnership as secretary of state, has spurned it on the campaign trail, partly because she has faced a challenge from the left from Sen. Bernie Sanders, a vocal opponent of free-trade deals.
For business groups worried about the anti-trade sentiment rising on the campaign trail, President Obama appears to be a reliable ally.
“The president has been good in recent times about trying to get trade deals,” said Thomas Donohue, the head of the U.S. Chamber of Commerce, which has lobbied hard for the passage of the 12-nation Pacific trade deal. For candidates, Donohue said in an appearance on Fox Business, bashing trade is an “easy way to cover up your other shortcomings — blame it on someone else.”
To defend foreign direct investment from campaign trail criticism, the Organization for International Investment issued a report in June detailing the benefits of foreign investment for the U.S.
For every Carrier — the air conditioning company that announced it was moving operations to Mexico, eliciting criticism from Trump — there is a Bulleit Bourbon or Gold Bond supported by foreign investment.
Tallying up those jobs, the group found 24 million jobs they say are supported by foreign investment. That includes 6 million at companies owned by foreign owners and 18 million jobs in the supply chains for those companies or that can be chalked up to the economic activity generated by the paychecks and contracts handed out by the companies. In summary, that’s one of every seven jobs in the U.S.
McLernon pointed out that foreign investment jobs tend to be the kinds of jobs that trade skeptics say have been lost to trade or outsourcing. The typical job at a foreign-owned company pays nearly $80,000 a year, well above average. Many, they claim 4 million, are in manufacturing companies owned by investors outside the country or in manufacturers in the supply chain for foreign-owned companies.
The hope is that statistics like those could sway voters tempted to vote against pro-trade measures and the candidates seeking to capitalize on that vote.
The presidential candidates, as well as many congressional candidates, can pose difficulties in terms of crafting a message. But governors, McLernon said, have been receptive. “They understand the benefits,” she said, mentioning Virginia’s Terry McCauliffe, Indiana’s Mike Pence, Texas’ Greg Abbott and Colorado’s John Hickenlooper in particular.
Not that Clinton or Trump present an insurmountable obstacle to a pro-foreign investment agenda. Clinton, in the past, has opposed trade deals on the campaign trail, only to support them in office.
Obama, too, once skeptical of trade deals on the campaign trail, has transformed into a top ally of business in terms of trade and foreign investment. “I don’t mind being America’s pitchman,” he said last week at a summit convened last week in Washington hosted by the government to promote foreign investment.
And even Trump may harbor hidden pro-trade sympathies. Arthur Laffer, the former Ronald Reagan economic adviser and supply-side economist, suggested as much to reporters last week. Despite Trump’s criticism of trade deals, he said, “He clearly understands foreign investments, foreign locations, foreign businesses.”
In his conversations with Trump, Laffer said, he’s found that “he intuitively grasps the need for globalization.”
