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free trade & free markets international affairs

The Real Free Trade Problem?

Trump Derangement Syndrome is not a mysterious disease. He triggers people for reasons. Still, there is no excuse for smart folks to fool themselves into misunderstanding his sometimes genius.

Take the subject of yesterday’s Common Sense, trade protectionism. Trump is plain speaking on this issue, and it is all-​too-​obvious that Trump harbors old autarkist notions of trade: it’s as if he resents having to pay foreigners for anything

His apparent resentment of benefiting others — alien others — is what’s so ultra-​right-​wingéd about him, and why leftists instinctively hate him.

And it’s why many free trade economists regard him as a complete and utter moron. His basic attitude appears to be that trade that benefits The Other must hurt us, and that’s just plain wrong.

But sometimes traders do aim to harm us.

This is where Trump’s attacks on trade with China make more sense. For when we deal with China, we don’t just make Chinese workers and businesspeople stronger, we make the Chinese State stronger — most particularly, the Chinese Communist Party. And that organization has set itself as the enemy not only of the United States but also of all competing states … and the very idea of individual freedom.

Free trade is great, because voluntary trades make both sides better off, and all sides are positively advantaged even when many participants are out-​competed and required to re-​tool, re-​group, and re-invent.

Yet, free trade with those who seek to destroy you is quite problematic. And this is not often figured into the elaborate reasoning offered by free-​market advocates.

Trump instinctively knows this, looking warily at those who would use the strength they gain from their people’s trades to transform market power into military power. There exist free traders who think this cannot happen. They are wrong. 

The point is to recognize threats and defend ourselves while also embracing the mutual benefits of trade whenever possible.

This is Common Sense. I’m Paul Jacob.


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free trade & free markets international affairs

The 51st State?!?!

“What I’d like to see?” confessed the president. “Canada become our 51st state.”

Why?

“We give them military protection,” he offered. 

Then things got weird.

“We don’t need them to build our cars,” Donald Trump added. “We don’t need their lumber. We don’t need them for anything.”

Shocking? Yes. But not just for the disrespect shown to our northern neighbors. 

What’s most shocking is our president’s ignorance of economics. While we don’t “need” Canada for any of the things Trump mentioned, we’re better off trading with Canada than not. The sending of “billions of dollars” up north is neither charity nor waste; the gains both sides make are apparent in the voluntary trades themselves. 

It’s as if he thinks if “we” must pay anyone, it should be to ourselves, that is, to our fellow countrymen.

Behind this is that old crank notion, protectionism: “we have big deficits with Canada, like we have with all countries.”

Now, it’s true that Canadians send more raw materials to the U.S. than we send to them, and that we send them more dollars than they send us theirs: that’s what “trade deficit” means. 

But how is this bad for us? 

Trump doesn’t explain. “I look at some of the deals made and I say, ‘Who the hell made these deals?’ They’re so bad.”

Mr. Trump identifies no specific trade rules or agreement; he doesn’t say which are unfair, or why; nor does he say who made them. But the trades that pile up to that overall deficit, each was made by Americans and Canadians who thought the deal best for them.

Trump’s seemingly goofy idea of adding Canadian provinces to the U.S. as new states would have one great benefit: more trades with these good people than ever. This belies Trump’s far, far more troublesome notion that we need nothing from Canada. We need everything. As Canadians do.

That is, freedom.

This is Common Sense. I’m Paul Jacob.


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free trade & free markets international affairs tax policy

Trump’s Tariff Question

If Donald Trump fails to re-​take the White House in November (and then for real in early 2025), his legacy may quickly devolve into a matter for historians, not live politics. After people calm down and the culture war stuff recedes (once again, if allowed by events), what will be left to argue over are a half-​dozen major issues, which include war, mass migration … and tariffs.

Tariffs have long been Mr. Trump’s major hobby horse; he gets excited about 100 percent levies. The whole business about the “bloodbath” quote was his insistence that American auto industry will be destroyed if Trump himself doesn’t get the chance to erect ultra-​high tariffs against automobiles from Mexico.

Trump looks at tariffs on foreign goods as harming foreign nations and helping us, the Americans.

But it is worth noting that economists from Adam Smith and David Ricardo onward have regarded tariffs as chiefly harming consumers within the country that erects them. 

At Reason you can read Veronique de Rugy make the classic free-​trade case, anew, in “No, Trump-​Style Tariffs Do Not Grow the Economy.” If Frédéric Bastiat didn’t convince you, maybe de Rugy will.

But something’s missing. Surrounding Trump’s talk against free trade in general and China in particular there was always another element that neither Bastiat nor de Rugy emphasize: free-​trading with China helps Chinese and Americans, sure; gotcha — but it also helps the Chinese state, and its ruling Communist Party. 

“Trump is an avowed restrictionist on both immigration and trade,” de Rugy writes. But both unchecked immigration and free trade present problems not economic so much as political. It’s about real bloodbaths, actual warfare, not metaphorical ones.

Even if Trump misdiagnosed the domestic economy, he saw problems with China perhaps more clearly than anyone else.

This is Common Sense. I’m Paul Jacob.


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general freedom

Catching Something

Our civilization depends on our ability to move about and trade. 

Which is based, in part, on trust and reciprocity and mind-​your-​own-​business. The basic ‘deal’ is ‘I won’t hurt you if you don’t hurt me.’

But it’s not just manners and morality. When we fear that being around others, especially strangers, could lead to catching a severe or even life-​threatening illness, the normal business of commerce breaks down.

Which becomes clear, now that a new disease in China threatens to break out worldwide.

Called the ‘2019 Novel Coronavirus,’ the illness has become widespread there, leading the government to quarantine the city of Wuhan, said to be the epicenter of the contagion.

“The lockdown follows fears that the respiratory disease could become a global epidemic,” writes Isabel van Brugen in The Epoch Times, “and as the United States this week became the fifth country outside of China — and the first outside Asia — to confirm a case of infection.”

“The closures,” said the municipal government, “will continue until further announcement.”

Pestilence and war are the two major reasons for this kind of collapse in normal commerce. But contagion may be less controllable even than war, so learning the lesson Wuhan’s inhabitants are now learning is something we can eagerly import from China right now.*

The lesson? 

Have food on hand, in case a pandemic bars you from going to market for days or weeks on end.

Wuhan folk are scrambling for supplies now.

Take it as a cue to shop for staples: stock up on bottled water, beans, sterno cans, and, say — with a tip of the hat to the beset Chinese — rice.

This is Common Sense. I’m Paul Jacob.


* Since my first draft, two more cities have been closed to travel, and six countries outside of China have experienced cases of infection. And questions have been raised about how transparent totalitarian China will be.

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national politics & policies Popular responsibility U.S. Constitution

Congress’s King

Politics today reveals a troubling dialectic.

Thesis: President Trump boasts that he is going to unilaterally “do something” as if he were Emperor, not President. 

Antithesis: Then comes pushback from political opponents and the media, castigating our current commander-​in-​chief for imagining himself a lawless dictator. 

Synthesis: This is soon followed, however, by the discovery that the president does have such awesome power. 

Legally.

In our constitutional system, can a president can just wake up one day and slap tariffs on imports? Well, numbskulls in Congress passed a law handing the president that specific power.

When President Trump declared an emergency to re-​direct money, appropriated by Congress for different purposes, toward building the Wall, many argued that the president cannot usurp Congress’s undisputed power of the purse. True, but irrelevant. Congress had indeed delegated all these undefined and largely unchecked “emergency” powers to the prez.

Last week, as the trade war with China was coming to a boil, Mr. Trump tweeted, “Our great American companies are hereby ordered to immediately start looking for an alternative to China, including bringing … your companies HOME and making your products in the USA.”*

I thought, “Does Trump really think he has the legal authority to order all U.S. businesses to leave China?”

Yes … and apparently he does. It’s called The International Emergency Economic Powers Act.

“One of the enduring phenomena of the Trump era,” University of Texas law professor Stephen Vladeck told CNN, “is going to be the list of statutes that give far too much power to the President, but that many didn’t used to worry about — assuming there’d be political safeguards.”

Or that “the right person” would always be in office.

This is Common Sense. I’m Paul Jacob.


* Note that Mr. Trump did not order the companies to leave, but did assert his “absolute right” to do so.

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Common Sense free trade & free markets government transparency insider corruption local leaders media and media people national politics & policies too much government

Never Trust a Politician

One of my more persistent critics on this site asked, last week, why I might believe anything the current president says — considering all the lies.

For reasons of decorum I won’t repeat his exact wording.

The odd thing about the comment was not the vulgarity, though (unfortunately). It was the idea that I was relying upon belief in Donald Trump’s veracity. The whole point of my commentary regarding Trump’s handling of trade and foreign policy was to read between some lines.

I try never to believe anything … er, everything … any politician says.

In Donald Trump’s case, though, there are lies and there are fictions and there are exaggerations. And corkers … and “negotiating gambits.” Separating the wheat from the chaff from the grindstone is not always easy.

Based not only on some of what he says, but also on results-​thus-​far from the EU negotiations, Trump’s idea of “fair trade” appears to be multilateral free trade. But he has chosen a bizarre method to get there: the threat of high-​tariff protectionism — which in the past has led to multilateral protectionism, not free trade.

Trump sees everything as a contest. Trade isn’t a contest as such. It’s win-​win. But trade negotiations are contests. And Trump’s game of chicken is dangerous.

Regarding foreign policy generally, though, he seems to be playing a more familiar game: we can outspend everybody. The recent increase in Pentagon spending is bigger than Russia’s annual military budget!

So, who pays? Americans in

  1. higher taxes and 
  2. the consequences of massive debt, as well as in
  3. the higher prices from his tariffs.

That’s awfully daring of him. For us.

This is Common Sense. I’m Paul Jacob.

 


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