Trump Is Right About U.S. Trade Deals -- and They're Even Worse for the Environment

Have trade deals such as the North American Free Trade Agreement and China and other emerging market countries joining the World Trade Organization accelerated the effects of global warming? In my view, yes, they have.

I agree with Donald Trump that trade agreements have been bad for U.S. workers and our economy. These deals have been very good for employers with unions who were then able to shutter their U.S. plants and replace production with facilities in Mexico, China, India and other emerging markets, where labor laws and pollution control are almost non-existent. Consumers of steel, aluminum and copper have benefited from metals production moving to emerging markets.

However, I have not heard of any of these deals resulting in a trade surplus for the U.S. When I worked for the United States Agency for International Development, it appeared to me that trade agreements were a part of our foreign aid program, in addition to allowing manufacturing companies to increase offshore production.

I'm surprised that Trump has not talked about the terrible toll that trade deals have had on the ecology and people of China, as well as other emerging markets. All of these countries are exempt from the Kyoto Protocol and as a result are not burdened by pollution standards. Between 10% and 20% of the air pollution on the U.S. West Coast comes from China.

There is a massive amount of pollution in China coming from many sources. It's in the air, in the water, and even in the soil now. Some experts say that millions of people are at risk of an early death because of China's unbridled push to take over so much of the manufacturing of the industrialized world.

The graph below shows the increase in the global mean surface temperature; it is clear that the temperature started to climb around the time Nafta became the law of the land -- and then really took off once China entered the WTO in December 2001. George H.W. Bush was president then, but the Clinton administration negotiated the agreements allowing China to enter the WTO. Many people at the time complained that the trade deals would cause job losses, as well as pollution.

Source: Wikipedia

I contend that one of effects of carbon taxes in industrialized countries has been to increase the problem of global greenhouse gas emissions. Efforts by Europe and other industrialized nations have been like clapping with one hand. Industrialized countries forcing heavy industries to flee to the emerging world made matters much worse.

Instead of levying carbon taxes on themselves, industrialized countries should impose them on imports from the real emitters of greenhouse gases and pollution. It was not just cheap labor that attracted the multinationals to use China for manufacturing -- it was also the ability to avoid pollution controls. It is true that some multinationals insisted that their plants be up to date on pollution controls, but companies that just outsourced commodities or production had little control over the environmental standards at the manufacturing facility.

It appears that the Clinton administration did not prepare a useful environmental impact analysis before proposing Nafta and letting China into the WTO. Had this been done, the administration might have figured out that when you take more than half a billion people out of poverty who had almost no carbon footprint, global-warming gases are sure to increase substantially.

The shutting down of vast amounts of industrial capacity by industrialized countries did not offset the massive increase of greenhouse emissions in China and India. It is interesting that China was still using coal-fired locomotives when they entered the WTO. In fact, China did not stop manufacturing coal-fired locomotives until 2002. The "mother's milk" of manufacturing is electricity and, to this day, India and China power their electric grids with coal. This alone has caused massive pollution in both countries and contributed to tremendously to global warming as more and more coal-fired generating plants were needed to produce all the goods previously manufactured in the industrialized world.

The Clinton administration touted the great benefits of so-called free trade with emerging markets. It told us we were going to become a post-industrial society and that the markets that would benefit from the transfer of manufacturing would buy our high-tech and agricultural products, our construction equipment and our intellectual property in the entertainment industry.

You would be surprised by how much influence the U.S. agricultural sector has in trade negotiations. Many times it is mostly about opening markets for U.S. products and manufacturing takes a back seat along with protecting U.S. jobs.

Most pundits, economists and academics said the U.S. population would go to college and become employees in banking and other service industries. I do not think they thought about the impact of the Internet -- and they certainly did not realize what would happen when over 500 million people in China and India alone moved from subsistence farming to living and working in cities with a very much larger carbon footprint.

I remember the TV news reports showing how people rode bicycles around Beijing and how quaint China was. At the beginning of the massive push for growth in China, many workers lived in dormitories and went home once or twice a year. Cities needed housing stock before the Chinese would permit a worker to move to his new workplace.

Eventually, China had a massive building boom and now hundreds of workers have urbanized themselves and require a huge amounts of energy to support them both at work and at home. Then the bicycles started to disappear and motorcycles and autos began to replace them.

Auto sales in China topped 24 million units in 2015 -- the most in the world. As we all know, automobiles with internal combustion engines emit a very large amount of greenhouse gases. The growing Chinese middle class now travels on cruises and takes flights all over the world. Bringing people out of poverty makes global warming worse. I am not saying that's a bad thing, but there needs to be a plan not to destroy the environment while bringing a better life to hundreds of millions of people.

Right now, the industrialized world is giving emerging economies the money to remedy emissions that their own policies have created or made worse, while the former industrial economies are clueless as to what to do about the situation. A chart showing the increase in the world's billionaires would probably look a lot like a graph of the rising world's temperature.

Editor's Note: This article was originally published at 12 p.m. EST on Real Money on March 7.

Matt Horween is a certified public accountant and served as a commissioned U.S. foreign service officer for the U.S. Agency for International Development from March 1981 to March 1998. He served in Burkina Faso, Senegal, Egypt, Honduras and Barbados, spending about 15 years overseas. He ended his career stationed in Washington, D.C. as the financial controller for the bureau that controlled the foreign aid program for Europe, including all of Eastern Europe and the former Soviet Union and its former satellite countries. Horween also worked as an auditor for Price Waterhouse & Company in New York City and held various financial management positions for several publically listed corporations. Early in his career, he served as a radio intercept analyst for the U.S. Air Force Security Service and was stationed in Greece.

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