Making sense of the U.S. president’s trade-deal talk has always been difficult.
What is he really up to?
Most of the time President Trump talks protectionist, like a high-tariff man. Other times, he seems to be demanding reciprocal free trade.
Now, the classic free-market economics position is that unilateral free trade is better than managed, high-tariff trading regimes. But Trump never sounds forthright like an actual free trader.
Instead, he says stuff like “Canada has been ripping us off for years.” Classic protectionist jibber-jabber. When we buy and they sell, and vice versa, barring fraud, it is not a rip-off.
Mr. Trump posted the “rip-off” comment Tuesday. While using the word “reciprocity,” he is talking about government procurement programs, claiming that “what many do not realize is that the Canadian Government, including Canadian Provinces, have banned American Small Businesses and Companies from selling into their Government Procurement Markets. This is the case even though Canada gets broad access into the massive American Government Procurement Market, including those of our States. That is not reciprocity, it is a Canadian Trade Scam. From now on, NO RECIPROCITY — NO ACCESS!”
This was to announce a new retaliatory effort after ongoing trade negotiations broke down, both sides having immediately erected tariff barriers — and worse (the U.S. forbidding one Canadian airplane company from selling in the U.S. at all). “President Donald Trump directed the General Services Administration (GSA) on Tuesday to take steps to remove Canadian-origin products from a Multiple Award Schedule that accounts for more than $50 billion a year in transactions,” The Epoch Times explains.
This is not the reciprocity we were looking for.
This is Common Sense. I’m Paul Jacob.
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One reply on “Reciprocal Rip-Offs?”
While most people fail to grasp the concept and significance of comparative advantage, which makes gains from specialization and trade possible, another major problem is of people being confused about the question of who are to be called “we”.
Trump and others seem to imagine the people of a nation — including the us of America — with would-be sellers given special weight in the counting. If American sellers are denied access to foreign markets, Trump sees this denial as an injury. If American sellers must compete at home with foreign sellers, Trump sees this too as an injury. American buyers count for less in his mind, though he understands that they must be mollified. His ideal would seem to be to pry open foreign markets while closing domestic markets, and his notion of winning a trade war to be getting as close as one might to that ideal.
The same ideas have wide currency through the world, so that indeed the Canadian state has always tried to pry-open the American market while not fully opening its own markets. Just three national governments come fairly close to practicing unilateral free trade: those of Singapore, of Switzerland, and of Hong Kong. Singapore and Hong Kong are tiny nations lacking natural resources, but prospered from their governments’ not conditioning their trade policies. Switzerland too prospered, but began with a richer natural endowment.
A problem of overweighting a class in the counting of us also warps the thinking of those setting financial policy. Greenspan and later Bernanke tried to do what was best for America, but didn’t recognize who we were.