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Exporting is Expected to Get Tougher Under a Trump Presidency

Nov 9, 2016Boston Globe, Council in the News

By Jon Chesto

“Christopher Anderson, president of the Massachusetts High Technology Council, said a Trump presidency could bring some positives to the business community that outweigh the concerns about trade constraints. Most notably, Anderson expects Trump and a Republican-led Congress to reduce the federal corporate tax rate and to find ways to curb government regulations.

“I’m less fearful than I am hopeful that there will be some positive correction to economic barriers,” Anderson said.”

Donald Trump’s pledge to build a wall along the Mexican border took center stage in his campaign. But corporate executives worry about a different kind of barrier that the new president-elect would impose, one that could make it more challenging to do business with overseas markets.

Trump repeatedly trashed a Pacific Rim trade deal that’s still in the works, known as the Trans-Pacific Partnership, all but assuring that the deal is now dead. He also threatened to exit or renegotiate NAFTA, the accord established in the mid-1990s with Canada and Mexico. And he opposes the Export-Import Bank, a government agency that helps US manufacturers sell their goods to overseas buyers.

Trump’s election also adds to corporate concerns, highlighted by Britain’s vote in June to leave the European Union, that global trade is now sinking in a quagmire amid a populist backlash.

The implications could be big for Massachusetts, where companies collectively sell at least $25 billion a year in exports, ranging from electronics to medical devices.

“Uncertainty about trade casts a pall over what for Massachusetts is a pretty important part of our economy,” said Christopher Geehern, executive vice president at Associated Industries of Massachusetts. “On a day to day basis, is it going to affect what a company does in Massachusetts overseas? Probably not right away. … [But] obviously, it creates a whole new set of challenges for exporters.”

Withdrawing from the North American Free Trade Agreement won’t be easy politically, although Trump has said he wants to rip it up, or at least renegotiate it. Megan Greene, chief economist at Manulife Asset Management in Boston, distributed a note to clients on Wednesday that raised the possibility of a “trade war,” if Trump were to impose tariffs on China and Mexico. If that happens, the impact would be felt in Massachusetts: Canada is the state’s largest market for exports, and Mexico is in the top five.

The more likely eventuality: the demise of the Trans-Pacific Partnership. The deal’s prospects were already a bit rocky before the election. Hillary Clinton had been a supporter, but switched to being a critic during her primary campaign. It’s hard to imagine any version of that trade deal surviving under Trump.

Michael Goodman, an economist at UMass Dartmouth, said the Pacific Rim trade deal would have made it easier for Massachusetts exporters to do business in Asian markets — markets that have become increasingly important destinations for local exports. The accord, which still needs congressional approval, would slash tariffs among the US and 11 other countries and establish shared intellectual property rights.

The deal wasn’t universally praised among local manufacturers, though. Boston-based New Balance has opposed the deal, saying that the paring back of tariffs on footwear made in Vietnam would make it harder for New Balance factories in New England to compete.

One possible long-term effect: A reworking of how these trade deals are negotiated in the future, ensuring that they’re no longer hammered out in secret, as the Pacific Rim deal was. “The public is disillusioned,” said Barry Bosworth, an economist with the Brookings Institution in Washington. “You can’t jam these things down people’s throats.”

The fate of the Export-Import Bank also remains uncertain. Congress last year reauthorized the agency, which offers credit to overseas buyers to help ease the sale of US-made goods. But the bank’s board lacks a quorum, rendering it unable to make loans of more than $10 million, because the latest appointee has been held up in the Senate. With the Republicans retaining control of the Senate this week, the holdup will likely continue. Trump opposes the Export-Import Bank, portraying it as a giveaway for a handful of companies.

Big companies such as Boeing and Boston-based General Electric benefit from the loans made by the bank. But Geehern said the stalemate also affects smaller firms, including many in Massachusetts, that supply components to the bigger companies. “If you are providing a part for GE engines, you are affected when GE can’t get attractive financing for engines they are putting in planes,” Geehern said. “There’s likely an eventual job hit there in Massachusetts.”

Christopher Anderson, president of the Massachusetts High Technology Council, said a Trump presidency could bring some positives to the business community that outweigh the concerns about trade constraints. Most notably, Anderson expects Trump and a Republican-led Congress to reduce the federal corporate tax rate and to find ways to curb government regulations.

“I’m less fearful than I am hopeful that there will be some positive correction to economic barriers,” Anderson said.

 

Increasingly, the Massachusetts High Technology Council is stepping up to create, execute, and lead critical statewide competitiveness strategies. Fostering a vision for our innovation economy under the MassVision2050 banner, the Council solidifies its position as a thought leader providing valuable insights to navigate emerging technologies, facilitates long-term planning, and reinforces the Council's commitment to excellence and action in the evolving Massachusetts tech-driven economy.

To learn more, contact Council President Chris Anderson.