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Donald Trump's Policies - Part Three, US-China Trade Reform

Donald Trump seems to be against war, and on the face of it that is a great foreign policy to have. But does he really believe that he can be against war, and still maintain the rhetoric he has against countries like China? Warmongers have often pointed to China as a threat in some sort of Cato fashioned stance that we must destroy them before they destroy us. Donald Trump’s position is some sort of hybrid of that stance.

He opens his position statement concerning China with the 2000 WTO deal that then President Bill Clinton promised would be a good deal for both nations. I agree with President Clinton, Free Trade (if it’s truly free) is good for both, or all, nations involved. But Donald Trump  believes that this agreement has only hurt the American worker. Perhaps it has.  But let’s rethink how the situation works.

The United States Government has harmfully regulated American businesses through oversight, wage control, and high taxes to such an extent that any Business owner who wants to remain afloat must look for alternatives. When that owner sees that he can dramatically reduce his overhead, while increasing his profit margin, then if that owner is intelligent he will logically choose to move his business operations elsewhere. Is it the fault of the country to which the business moved that the business chose to move operations?

Further, is it necessarily a bad thing that the business moved in the first place? In the long run the company can now save money, reinvest it, and eventually produce a better product at a lower cost to the benefit of all. This is what economists call absolute or comparative advantage depending upon the situation’s details. In the long run, the consumer can now purchase that better as well as cheaper product, thus saving money and being more satisfied. All consumers want to find the best value for their dollar, and sometimes the best value is from another country. This being the case, a company moving to China possibly at the expense of  the American worker can and usually is a win/win situation. It’s a win for the company and the consumer.

But what about the worker who lost his job? Certainly that is a bad thing in the short term. No one likes to lose a job. But the American workforce is a highly specialized group offering many opportunities. America employs the majority of the world’s elite jobs, and those jobs account for the vast majority of the world’s wealth. Returning to the idea of Absolute Advantage, the American workforce can produce more sheep than New Zealanders, but New Zealanders cannot produce more cars than her American counterpart. That being the case, it would be foolish for New Zealand to focus on automobile manufacturing. Indeed, New Zealand is a world leader in sheep production, so the American worker can be freed to focus on producing something else that perhaps New Zealand can’t produce like cars. Those nations then trade, and they both benefit. That being the case, if an American shepherd lost his job, he has other, better choices for a more prosperous career.

Trump’s plan seems to miss the economic point. Donald Trump’s economy is one based in winners and losers. He would want to crush the New Zealand shepherd in order to aid the American shepherd. But such a mentality only hurts in the long run. The price of mutton would rise globally. More Americans would earn less money while being tied to the pasture than could be earned manufacturing automobiles. Fewer jobs would be created, because less wealth would flow into the country from trade. Companies would go out of business because they could not find the specialized labor force necessary to compete in the global automobile industry. More jobs would be lost. (Trump knows all about this, which is why he manufactures his popular clothing line in China).

Trump’s economy just doesn’t work logically or practically. Trade and Economy works best when it is free and supranational. That is, we all benefit when the government is left out of protecting or regulating either trade or economics. There are only winners in the laissez-faire situation.

Aside from all of this, what is Trump’s plan with China?

The stated goal is to fight for American Businesses and Workers. That is a brilliant piece of political rhetoric. How can a politician go wrong saying that he’s going to fight for you? It seems like he has your best interest at heart. I don’t deny that Trump, or any other politician, might have our best interest in mind, that’s not the point. Saying it is easy. Keeping their hands off is not. (I don’t think any politician can have everybody’s best interest at heart. There are 320million of those interests in the United States alone, and therefore an exponential impossibility to serve everyone’s individual best interest).

Trump claims that trade between China and the US is not fair. This is naïve at best. If he’s correct in that Chinese businesses are taking advantage of their American counterpart, then the issue is not with the government, it’s with foolish businessmen who make bad trades. No one enters into trade unless it in some way benefits the parties willing to trade. If there is no benefit to be had, then the trade does not, or should not occur. Bad trading over time will put a firm out of business. This happens, but it’s not the government of China’s fault, nor is it the American government’s fault. It is the foolish businessman’s fault. The best thing that can and often does happen is the bad business exits the market.

On the note of protectionism. There has never been a time in the history of the world that protectionism and high tariffs have benefited a nation. Consider the infamous Smoot-Hawley tariff of 1930, which severely hampered an already depressed American economy. After it was passed, American industry dropped off the proverbial cliff. It was only when protectionism was lifted and government regulation was removed that the American economy exploded into life in 1946. If China is being protectionist, (and they might be, they are a Communist nation after all) then they’re only  hurting themselves.

Trump then outlines 4 steps to fix what he perceives the China problem to be.

1.       Declare China to be a currency manipulator. This is somewhat akin to the pot calling the kettle black. The world economy is still based upon the US dollar, and it is that dollar which has been manipulated by the Federal Reserve more than any other world currency since 1913. The United States government is more guilty of currency manipulation than any other nation. We need to fix the mote that is in our own eye before fixing the beam that is in China’s.
2.       I’m not a lawyer, and I don’t know where I fall concerning IP laws. There are net-benefits to both sides of the argument. (I’d err on the side upholding private property in case anyone wonders). But forcing another nation to adhere to your nation’s laws is hubristic. China does not have to follow the US Constitution if it doesn’t want to. This point is one that could potentially start a war.
3.       Point Three seems to be a moral high ground. True, Communist and Socialist nations lead the world in pollution.  They are irresponsible. It’s a governmental problem at heart, not a business problem. The second part of this point is also a governmental issue. The Communist Chinese Government has chosen to pull money from its economy and set it aside for trade subsidies. That is, the government gives them money to encourage trade. I might be a tad naïve here, but how is that any different than the US Government taking tax payer money, and awarding it to xyz company, say like an automobile bailout or green energy start-ups? The final part of this point is the sweatshop. Perhaps one can argue against the sweatshop in modern “advanced” civilization. But historically, children have worked in farms and factories for millennia. It has only been since free market trade made societies wealthier that children have had the freedom to go to school or play at parks. Many areas in the rest of the world are not so prosperous, which means that children still have to work in order to live. Sweatshops, as bad as they can be, are better than widespread death by starvation, which is a certain possibility for children in China under Trump’s plan. If one wants to remove sweatshops, then the best way to do that is to open free-trade. The wealth flowing into a nation from such trade elevates standards of living across the board, thus making such undesired situations vanish.
4.       This point is the worst of the plan, and seems to beg for war. Trump wants to lower the corporate tax rate. This is a start. It’d be better to abolish the tax altogether, and leave that hard earned money in business’s pockets so they can hire more people and do better research and development to produce better goods. Attacking the federal government’s debt is what every politician says. The only way to do it is by raising taxes or ending spending they tell us, but neither choice is politically conducive to winning elections. That’s beside the point. None of this is China’s fault; however, any more than it would be Wal-Mart’s fault that I spent more money than I budgeted for weekly groceries. You want to end budget deficits, then stop spending more than you’re taking in through taxes. (That’s at the very least). The final comment is the worst of the entire plan. Trump wants to send troops into the East and South China seas. For what purpose? What interest does the United States have a region 10,000 miles away across the Pacific Ocean? It’d be like China sending an army to the Bahamas to protect Chinese interests in the Caribbean. All such a move on either part could do is raise tension to a boiling point. Sure, Trump may say he’s anti-war, but this move is anything but anti-war. And war is not a help to any economy or individual.

Trump details each point a little more in addenda sections below the initial bullet points, but they do not serve to strengthen or illustrate his case. The bottom line is that Trump’s stance against war is undermined by his trade and economic policies with China. This is not a defense of Communism, that system has dire economic issues beyond the scope of this article. This is an article against similar economic foolishness that would at the very least hurt American business and thus American workers, but at the most, send this nation into a needless war with a slighted China.

This post first appeared on Clio's Lessons, please read the originial post: here

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Donald Trump's Policies - Part Three, US-China Trade Reform


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