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No More Excuses on Trade
Trump was in rare form Saturday at the G-7 press conference. It’s hard to argue with his thesis that free trade should be a two-way street. Trade concessions from our friends and adversaries alike must come, and I think they will come. I am a free trader. I believe a free exchange of goods leads to prosperity on the national and international level. I read Adam Smith and David Ricardo. Comparative advantage is a magical thing. But free trade has to be a two-way street. Let all countries reciprocate the free market access that we extend to them. I call for an equitable reduction in tariff and non-tariff barriers that benefits all countries.
When libertarians say that other countries’ tariff rates are none of our business, that’s a load of nonsense. Does this policy extend to all aspects of foreign policy? It’s none of our business when other countries block sea lanes? It’s none of our business when they invade and occupy their neighbors? Is it our business when countries sell nuclear and chemical weapons all over the world?
This is not a serious position. It is what I would like to call “the one-way street” approach to free trade. The idea that since free trade is beneficial it should be undertaken without reciprocation is extremely flawed. This approach may be the optimal one if you are a small country like Chile with no international market power. However, the US economy represents 22 percent of global GDP. That is power.
Of course, neither I nor President Trump intends to use this power to hurt other countries on trade. Proof of this is the fact that at the G7 meeting, our supposedly “protectionist” President floated Larry Kudlow’s idea for a tariff-free G-7. Yes, you read that correctly: Trump offered to eliminate all US tariffs on goods from G-7 countries if G-7 countries agree to reciprocate! Did you hear that? That was the sound of our mealy mouthed allies running out of excuses for continuing their unfair trade practices. It’s time for our allies to put up or shut up.
European sophisticates love to lecture Trump and his supporters on multilateralism and politeness, but they should practice what they preach. The German schoolmarm Angela Merkel, pictured above lecturing our President, needs to explain why the winner of WWII has to pay the loser four times the tariff rate on car imports. If our trading partners want free trade, it should be free trade that benefits everyone. No more protection of favored business interests. No more byzantine regulatory excuses. No more!
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Make sure you run Jeb!
Which party again, would that be the Arizona Democratic Party?
That’s how you self identify remember?
Like this better?
How about this one?
I doubt you are interested but Conservative Tree House has a nice piece today on trade.
https://theconservativetreehouse.com/2018/06/10/big-picture-bottom-line-justin-and-chrystia-decided-to-play-left-wing-politics-with-the-canadian-economy/
You have to have an open mind sometimes
“The win was needed for domestic political consumption; “
Why? Why did the Liberals need that “win”?
Rest of article is just the same old nationalist garbage economics.
POTUS is either lying to the public or ignorant of basic facts:
I’d like to see definitions of some of those measures.
I’d also like to know how communist countries like China rank so low on “state aid measure” and “investment measure”.
I also suspect this is something along the lines of the argument about executive orders comparing W. Bush and Obama – it’s not the number of orders that matters, it’s the content.
Yes indeed. It’s not 1947 and we don’t need the Marshall Plan anymore. Our European allies along with the Mexicans and Canadians are like that good friend that has been coming to your house for years eating and drinking your food and beer, but always showing up empty handed himself. When, on that rare occasion, he invites you over to his house to watch a game, he asks you to stop and pick up a six pack and some chips on the way over.
Isn’t that the truth! That’s why the TPP was a bad deal…it was so complex that only the green eye shades could understand it. Even one of our very bright commenters here at Ricochet stated that he had read the TPP. Oohs and aahs poured out all around. Except for one small thing–he admitted he didn’t read any of the details of the tariff percentages that each country was charging. So he read all the flowery language but none of the drab details where the devils hides its ugly head. That is why you are exactly correct. A simple deal is the best deal. No tariffs is as simple as it gets. Otherwise we will never have “free” trade.
Not really. I read it (I didn’t read the tariff schedules which made up 95% of the bulk of the bill) and it wasn’t that hard to understand.
@jamielockett
Heres the globe and mail on why the industry is in crisis.
https://www.theglobeandmail.com/report-on-business/rob-commentary/canadas-supply-management-system-for-dairy-is-no-longer-defensible/article36029788/
A friend of mine is a local entrepreneur. He used to be in the chicken business. Before Grey Cup weekend (CFL Superbowl) his chain of chicken restaurants wanted to buy a bunch of fresh chicken. Something like 60000. He was told he could only get 20000. Because of the quota. And if he used it for that weekend, he would not be able to get anymore fresh chickens for the rest of the MONTH!
If he wants to order a bunch of chickens, and there are farmers willing to sell him chickens, why cant he buy the chickens? Because the cartel has quotas limiting the supply and jacking up the price.
So your the free trader. You explain how that is a cool system. Because what I think violates the Code of Conduct.
Right supply management is just another form of protectionism. The real picture vis a vie US Trade in the dairy industry is…complicated:
https://www.realagriculture.com/2018/02/u-s-dairy-subsidies-equal-73-percent-of-producer-returns-says-new-report/
‘Number of tariffs’ doesn’t tell you that much. You can have a lot of tariffs with low rates. This is misleading.
I agree, get rid of supply management and all the trade barriers on that graph you posted. No more crony capitalism; not in the US, not in Canada, not in Europe; no more excuses.
I once talked to a businessman in Canada. He made bridges for a living. I was asking him about the outrageous hydro bills in Canada, and he responded. “Do you know how much I could get per liter of gas if I moved my operation to China?” I said something like 50 cents. It was about half the $1 we were paying. “They will give me 6 cents a liter. Do you know why I dont move my operation to China? Who would want to live there.”
We talk about tariffs and subsides but we really arent playing at the level our opponents are. Sure under Free Trade we supposedly ultimately benefit from the Chinese subsidies if we play ‘fair’ and dont respond in kind. But seriously when your domestic manufacturing is gone because the other side is willing to play the long term and your not. You better hope that you live in a nicer place than the other guy.
I also think most of that chart above is talking about your defense industry. Since we know only Russia aspires to compete at that level, there is the hidden cost. That and the bailouts.
I have relatives in the dairy industry, and my former workplace operates a research dairy farm, but I must admit that I did not know that the United States had cut its dairy subsidies/price supports in recent years. Why has this good news never been a discussion topic on Ricochet?
As for the refutations of the reasons given for Canada’s “supply management” program, they sound almost word for word like my comments from the audience when the president of the Michigan Milk Producers association was defending a dairy herd “buy back” program in the 1980s.
I see. Sorry to waste your time with information.
More pictures at this link:
https://petapixel.com/2018/06/11/trump-at-g7-how-photos-of-the-same-scene-can-tell-different-stories/
Something like that should probably be done for just about every news photograph ever published.
I’m usually a fan of Ben Shapiro, but he keeps arguing that if we put tarrifs on imported goods, then we’re only hurting ourselves. This doesn’t make sense to me. If it were as simple as that then all the countries which put tariffs on our goods are being irrational and self-destructive. I just don’t believe that is true.
What I suspect is that in some circumstances there is indeed a real benefit to protectionism, but Ben is just measuring benefit differently
The only purpose of tarrifs is to raise revenue and protect local production.
Both of these are achieved by making consumers inside the country pay more for a product than an absolutely open market would require them to, and thereby limiting their choices. So consumers lose.
It benefits local producers by that mechanism. So producers gain.
And of course we’re mostly both consumers and producers in the marketplace, so the cost/benefit isn’t completely one sided for many individuals.
They’re protecting their producers at a cost to their consumers. Which isn’t necessarily irrational or self-destructive. Though sometimes it is?
It shelters fledgeling industries from competition, allowing them to establish themselves. That’s what happened in India after Independence. Otoh this can mean local industries never become truly competitive because they don’t need to be. That also happened – they didn’t become competitive until the country started to open up and they had to be. But if they’d never established themselves they wouldn’t have had that chance to succeed. Which many of them have. So far so good, but it was paid for by some of the poorest people in the world – the Indian consumer – and that also had a significant human cost.
It can be used as a way of maintaining employment of people who would otherwise not be employable – iow propping up an uncompetitive industry for ever. (That’s agriculture in a lot of Western Europe and Japan. I’m surprised it includes steel production in the West.) There are benefits to this in terms of social peace, but again there’s a (sort of hidden) cost borne by consumers. Would a straight up subsidy be cleaner, albeit less politically feasible?
I just cannot believe that in all cases, all the time, letting the other nation protect their industry at the expense of my own is always, and ever, in my nation’s best strategic interest. If their trade practices let them drive my industry out of business, then what happens to my citizens if that nation, now it has a monopoly, jacks up prices? Or, what happens if I go to war with that nation?
Furthermore, what good does it do me if things are cheaper but I don’t have a job?
Good explanation, Zafar. Over the years, tariffs and protectionism, while begun as an innocent assistance to ones country, can end up creating mistrust and inequity amongst numerous countries. Free trade can only really mean zero tariffs and zero subsidies…total level playing field. That is something rarely, if ever seen. As it is, there is really only one way to even have a significant discussion with a country exacting unfair tariffs or supports against another–war or reciprocal tariffs. Hopefully it starts with the tariffs. But if fairness is the end game, all tariffs should end.
I’d be all for this. But it is not going to happen. The whole world protects itself against our food to protect their farmers.
Well then…goose and gander…don’t you think? Why does everyone get to charge tariffs but us? So it is always going to be a delicate balance for the central planners. Charge just enough tariffs to punish our trading partners who are taxing us, without costing our own consumers too much money. I personally do not trust those bureaucrats to get that right. But whatever that is, it is not FREE trade.
There is another reason. We have driven all our industries that make things out of business or offshore. Not all, but enough so that if the financial basis of the world economy should collapse, we would be in desperate straits. It is a little bit like the survivalist movement of the 70s when it looked like things could collapse. We were in much better shape then.
The debt pyramid will not stand for ever.
This has always been my view of tarriffs.
They are good and necessary for building new or shoring up weakened industries, but once they are robust, you need to weaken the protections to compete globally (if your aim is global dominance in an industry).
I agree. Raising import tariffs is just higher taxes on American consumers and businesses (those businesses that import materials to run their business) dressed up in the language of “nationalism” or “economic patriotism.”
Trump was right when he signed the tax cuts into law. Trump is wrong when, by executive order, he raises taxes on Americans via higher import tariffs.