Tag: protectionism

Trump’s New Trade Proposals Borrowed from Democrats

Donald Trump’s campaign has undoubtedly given protectionist rhetoric a new energy in American politics.  China, he says, is “killing us on trade” and the Trans-Pacific Partnership is “a rape of our country.”  Early on, he got attention for calling for a 45% tariff on all goods from China and for saying we should impose tariffs of 35% on imports from companies that invest overseas. 

On Tuesday, he delivered a highly publicized trade policy speech where he doubled down on his belligerent, mercantilist rhetoric.  He also offered some more detailed and thought-out policy proposals.  Here are the seven proposals he laid out:

  1. “Withdraw the United States from the Trans-Pacific Partnership.”
  2. “Appoint the toughest and smartest trade negotiators.”
  3. “Identify every violation of trade agreements a foreign country is currently using to harm our workers … [and] use every tool under American and international law to end these abuses.
  4. Renegotiate or withdraw from NAFTA
  5. “Label China a currency manipulator.”
  6. “Bring trade cases against China, both in this country and at the WTO.”
  7. “Use every lawful presidential power to remedy trade disputes, including the application of tariffs consistent with Section 201 and 301 of the Trade Act of 1974 and Section 232 of the Trade Expansion Act of 1962.”

Despite the outlandish nature of Trump’s rhetoric, there’s actually nothing new or radical about these proposals.  They are, in fact, just what trade-skeptic Democrats have been demanding consistently for over a decade.

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America’s Economic Problem Is Regulation, not Trade

Even when Donald Trump seems to get something right, he’s mostly wrong. At least when it comes to economics.

Many Americans are suffering financially. Yet the problem is not trade: Americans have grown wealthy as a trading nation. In contrast, regulation has done much to harm U.S. competitiveness.

The Obama administration is busy writing new rules to turn America into its vision of a good society, irrespective of the impact on liberty or prosperity. Last year Uncle Sam spent $62 billion to run the rest of our lives.

Observed Patrick McLaughlin and Oliver Sherouse of the Mercatus Center: “Over the last 20 years the regulatory budget has more than doubled in real terms while the number of total restrictions has grown by about 220,000—a 25 percent increase.”

The problem is not only the expense of enforcement. Far greater is the cost of the impact on the economy.

Last year Clyde Wayne Crews of the Competitive Enterprise Institute assessed the impact of regulation in his working paper entitled “Tip of the Costberg.” He figured the total price of regulation to be $1.88 trillion.

However, these figures almost certainly are too low. Crews argued: “Too often, regulatory impacts don’t get measured. But further, the disruption of market processes and the derailment of wealth, safety and health creating processes themselves are for the most part wholly neglected.”

Regulatory costs play out in many ways. One aspect is what an individual or company spends to comply with government dictates. Far harder to measure is what does not occur as a result of arbitrary and expensive rules. What products are not launched, what enterprises are not started, what jobs are not created?

Of course, regulations theoretically are promulgated because they yield net benefits after costs. However, agencies have an incentive to inflate the value of what they are doing. That means exaggerating problems and “social costs,” overstating alleged benefits, and discounting compliance costs.

Overall how much have we lost from excessive, unnecessary regulation? A lot, according to economists John W. Dawson and John J. Seater.

They considered the cumulative impact of losing a couple percent of economic growth year in and year out from 1949 through 2005: “That reduction in the growth rate has led to an accumulated reduction in GDP of about $38.8 trillion as of the end of 2011. That is, GDP at the end of 2011 would have been $53.9 trillion instead of $15.1 trillion if regulation had remained at its 1949 level.”

Increased regulation also contributes to increased inequality. In January McLaughlin and Laura Stanley of Mercatus concluded that such rules “skew income toward politically connected producers and away from individual who lack the resources necessary to navigate the legal and regulatory framework.” 

Finally, there is the issue of lost liberty. Crews released a second study last year entitled “Mapping Washington’s Lawlessness 2016.” It reviewed what he termed “regulatory dark matter.”

The regulatory process is essentially lawless, beyond the normal accountability of a democratic system. As Crews explained: “Congress passes and the president signs a few dozen laws every year. Meanwhile, federal departments and agencies issue well over 3,000 rules and regulations of varying significance. A weekday never passes without new regulation. Beyond those rules, however, we lack a clear grasp on the amount and cost of the thousands of executive branch and federal agency proclamations and issuances, including memos, guidance documents, bulletins, circulars, and announcements with practical regulatory effect.”

Americans are suffering. But closing off the economy is no answer to them.

As I pointed out in American Spectator online: “Policymakers should address federal, state, and local governments which are doing so much to prevent American companies from out-competing foreign operations and rewarding Americans accordingly. These are the bad policies to blame for creating today’s economic problems and imposing widespread financial hardship, thereby fueling the populist Trump bandwagon.”

The Continuing Anti-Trade Adventures of Ted Cruz

Ted Cruz’s campaign has produced a new ad targeting Wisconsin voters in the lead up to that state’s primary election tomorrow. As images switch back and forth between farms and factories, Cruz lists off a number of generic demographics and blue collar occupations that his campaign “is for.” He also complains about international trade.


Here’s the substantive part of the ad:

We will repeal Obamacare, peel back the EPA and all the burdensome regulations that are killing small businesses and manufacturing. 

I’m going to stand up for fair trade and bring our jobs back from China. 

We will see wages going up. 

We’ll see opportunity again.

Senator Cruz doesn’t tell us what he means by “fair trade” or promote a specific trade policy. The term “fair trade” is usually used by politicians as a euphemism for “protectionism.” In the past, Cruz has noted that the value-added tax (VAT) he has proposed is “like a tariff” because it imposes a greater burden on imports. Perhaps this is what he means by “fair trade.”

In any event, some simple facts about trade might be helpful to explain the problems with Cruz’s approach. For example, nearly 60% of imports are materials and capital goods used by American companies. So, Cruz’s “fair trade” is a tax on the very same “small businesses and manufacturing” whose burdens he wants to lift. Oh, and reduced employment in America’s thriving manufacturing sector is not due primarily to trade with China.

The biggest difference between Donald Trump and Ted Cruz on trade is that Trump has been more specific. Trump has singled out specific trade deals he opposes and has promised to tax specific companies specific amounts. Also, Trump’s disdain for trade has been apparent from the beginning of his campaign, while Cruz’s rhetoric and positions have been getting gradually worse in response.

While Trump has been getting lots of attention for his anti-trade rhetoric, it’s worth remembering that other candidates are not offering better policy proposals. They are simply less sensational in how they present the same flawed message.

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Former USTR Rob Portman Opposes TPP for the Worst Reasons

Yesterday, Senator Rob Portman (R-OH), a former U.S. Trade Representative during the George W. Bush administration, announced his opposition to the Trans-Pacific Partnership. 

According to Reuters:

Portman, from Ohio, said the Pacific trade deal fails to meet the needs of his state’s workers because it lacks an enforceable provision to fight currency manipulation and because of new, less-stringent country-of-origin rules for auto parts.

“I cannot support the TPP in its current form because it doesn’t provide that level playing field,” Portman said in a statement.

The announcement is significant because passage of the TPP will rely on broad Republican support and because Senator Portman’s credentials (as former USTR and member of the Senate Finance Committee who represents a traditionally trade-skeptic region of the country) have earned him a prominent voice on trade policy in Washington.

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$1,500 Sandwich Illustrates How Exchange Raises Living Standards

What would life be like without exchange or trade? Recently, a man decided to make a sandwich from scratch. He grew the vegetables, gathered salt from seawater, milked a cow, turned the milk into cheese, pickled a cucumber in a jar, ground his own flour from wheat to make the bread, collected his own honey, and personally killed a chicken for its meat. This month, he published the results of his endeavor in an enlightening video: making a sandwich entirely by himself cost him 6 months of his life and set him back $1,500.

(It should be noted that he used air transportation to get to the ocean to gather salt. If he had taken it upon himself to learn to build and fly a plane, then his endeavor would have proved impossible).

The inefficiency of making even something as humble as a sandwich by oneself, without the benefits of market exchange, is simply mind-boggling. There was a time when everyone grew their own food and made their own clothes.  It was a time of unimaginable poverty and labor without rest.

The greater the number of people involved in exchange, the more beneficial the process becomes. This morning, thanks to international trade, I am drinking coffee grown in Latin America, viewing a computer screen with eyeglasses made in Europe, and typing this blog post on a keyboard made in Asia. Fortunately, freedom to trade internationally has improved, on average, around the world. Increased trade has helped raise living standards and decrease global poverty.

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The Trans-Pacific Partnership Takes Center Stage

The long process featured hyperbole, demagoguery, fallacy, posturing, horse trading, unexpected tactics, strange political alliances, and several reversals of momentum.  But congressional passage of the Trade Promotion Authority bill was only the warm-up act.  The Trans-Pacific Partnership (TPP) is the headliner, and the process of concluding, ratifying, and implementing it promises more drama.

The TPP is a prospective trade agreement between the United States and 11 other nations, which has been under negotiation for 6 years. The Obama administration made the TPP the economic centerpiece of its “pivot to Asia,” encouraged the participation of other countries, and expanded the scope of the negotiations.  Beyond reducing tariffs and other border barriers, the TPP will include rules governing labor and environmental standards, government procurement, intellectual property protection, investment, supply chains, state-owned enterprises, and much more. The scope of the deal is so broad that the final agreement will likely include 29 separate chapters.

For the better part of a year, the word from TPP negotiators has been that a deal was close and that the main obstacle to its completion was the absence of TPA.  Logically, U.S. trade negotiating partners would be unwilling to put their best offers on the table unless the president could guarantee them that the deal was final and would not be picked apart and amended by Congress.  With TPA now secure, that impediment is gone – and the credibility of those “TPP-near-completion” claims is about to be tested. Just last week, Australia’s Trade Minister Andrew Robb said the TPP was “literally one week of negotiation away from completing.” In about 8 days, that will be proven too rosy a promise.

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Roger Milliken’s Company Joins the Global Economy

Roger Milliken, head of the South Carolina textile firm Milliken & Co. for more than 50 years, was one of the most important benefactors of modern conservatism. He was active in the Goldwater campaign, and was a founder and funder of National Review and the Heritage Foundation. He dabbled in libertarianism, too. He was a board member of the Foundation for Economic Education and supported the legendary anarchist-libertarian speaker Robert LeFevre, sending his executives to LeFevre’s classes.

But he parted company with his free-market friends on one issue: free trade. Starting in the 1980s, when Americans started buying a lot of textile imports, he hated it. As the Wall Street Journal reports today,

Milliken & Co., one of the largest U.S. textile makers, has been on the front lines of nearly every recent battle to defeat free-trade legislation. It has financed activists, backed like-minded lawmakers and helped build a coalition of right and left-wing opponents of free trade….

“Roger Milliken was likely the largest single investor in the anti-trade movement for many years—as though no amount of money was too much,” said former Clinton administration U.S. Trade Representative Charlene Barshefsky, who battled with him and his allies….

Mr. Milliken, a Republican, invited anti-free-trade activists of all stripes to dinners on Capitol Hill. The coalition was secretive about their meetings, dubbing themselves the No-Name Coalition.

Several people who attended the dinners, which continued through the mid-2000s, recall how International Ladies’ Garment Workers Union lobbyist Evelyn Dubrow, a firebrand four years younger than the elderly Mr. Milliken, would greet the textile boss, who fought to keep unions out of his factories, with a kiss on the cheek.

“He had this uncanny convening power,” says Lori Wallach, an anti-free-trade activist who works for Public Citizen, a group that lobbies on consumer issues. “He could assemble people who would otherwise turn into salt if they were in the same room.”…

“He was just about the only genuinely big money that was active in funding trade-policy critics,” says Alan Tonelson, a former senior researcher at the educational arm of the U.S. Business and Industry Council, a group that opposed trade pacts.

But the world has changed, and so has Milliken & Co. Roger Milliken died in 2010, at age 95 still the chairman of the company his grandfather founded. His chosen successor, Joseph Salley, wants Milliken to be part of the global economy. He has ended the company’s support for protectionism and slashed its lobbying budget. And as the Journal reports, Milliken’s executives are urging Congress to support fast-track authority for President Obama.

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