What Donald Trump Doesn’t Know about U.S. Trade

National Review ^ | 08/19/2015 | Kevin D. Williamson

[SeekAndFind]

A great deal of Donald Trump’s silly and illiterate trade talk presupposes the gutting or repeal of NAFTA, the trade accord between the United States, Canada, and Mexico that went into effect in 1994, with his dreams of punitive sanctions and blockades. Indeed, NAFTA is a favorite whipping boy for populists Left and Right, a reminder that populist conservatives have much more in common with populist progressives such as Senator Bernie Sanders than they do with the political tendency that connects Adam Smith to F. A. Hayek and Ronald Reagan.

Trump fancies himself an ace negotiator, a skill that he has had some chance to hone in an embarrassing series of corporate bankruptcies, and he proposes to employ those skills to ensure trade that is “fair” by whatever ethical standards occur to this particular serial adulterer/crony capitalist/pathological liar/reality-television grotesque. While Trump himself is fundamentally unserious, the Right has witnessed a destructive reemergence of the old anti-trade populism articulated by Pat Buchanan and Ross Perot.

Perot was the Trump of the 1990s, a billionaire businessman with an absurdly high estimate of his own importance, though Perot at least had the distinction of having made his own fortune. It was Perot who famously warned of the “giant sucking sound” that would accompany U.S. capital shifting south if NAFTA were to pass. And as many election scholars figure it, it was also Perot who ensured the election of Bill Clinton, a previously obscure political figure if a gifted campaigner. Another billionaire megalomaniac ensuring the election of another Clinton would be almost pleasing in its symmetry if it weren’t for the fact that it would do tremendous damage to the country and the world.

Trade is one of those issues about which the strength of people’s opinions tends to be the converse of their level of knowledge. With that in mind, it is worth revisiting a few facts.

U.S. manufacturing has not been undermined by NAFTA. In real (inflation-adjusted) terms, U.S. manufacturing output today is about 68 percent higher than it was before NAFTA came into effect. Real manufacturing output today is nearly twice what it was in 1987, when NAFTA’s predecessor, the Canada–U.S. Free Trade Agreement, was negotiated. Manufacturing output per man-hour has skyrocketed as investments in information technology and automation pay off, which is the main reason a smaller share of the work force is employed in manufacturing even as output continues its steady climb. Fewer people work in our factories today because we’ve gotten better at running them.

The United States does run large trade deficits, though the cause and consequence of these is generally misunderstood. (Daniel Griswold’s 1998 analysis, though inevitably dated, remains an excellent primer.) For many years, nearly half of our trade deficit came from imports of a single product: oil, not Hondas or cheap flip-flops from China. Oil accounted for 40.5 percent of the trade deficit from 2000 to 2012. Thanks to fracking, the United States is today a very substantial petroleum producer, but federal law prohibits most crude-oil exports. A recently negotiated swap of U.S. light crude for Mexican heavy crude required presidential dispensation, which gives an indication of how unfree that market is. What that means is that one-way trade in the commodity that has been an important driver of our trade deficit is not the result of protectionist policies abroad but of protectionist policies at home, a federal ban on oil exports enacted in 1975 to keep our precious fluids out of the hands of wily foreigners.

In fact, there isn’t a great deal of evidence that trade restrictions enacted by foreign countries have a great deal of long-term effect on American producers. Annual U.S. exports have been setting new records for years, and did so again in 2014. The largest share of U.S. exports go to Canada and Mexico, respectively, with the third-largest market for U.S. exports being China. China consumes about twice as much in U.S. exports as does our next-largest overseas market, Japan, and far more than any other country down the list. The United States runs trade surpluses with relatively protectionist countries such as Brazil.

What drives bilateral trade deficits between the United States and other countries is not, for the most part, trade policy, but simple supply and demand. The United States exports a lot of farm commodities and industrial products, along with a great deal of very high-end goods. The effects of that are mainly psychological: We see a lot of goods on the shelves marked “Made in China” but few overseas goods marked “Made in the USA,” because what the United States exports isn’t consumer goods, for the most part. But you’ll find American robotics in German automobile factories and American cotton in Vietnamese textile plants.

Because of our size (we sometimes forget that we’re the third-most-populous country on Earth and account for 22 percent of the planet’s economy), we tend to run relatively large trade deficits or surpluses as a share of trade with smaller countries, big deficits with Saudi Arabia, and big surpluses with the Netherlands. And we tend to do lots of business with our immediate neighbors and with other large and diverse economies. Among that group, we generally send more exports to richer countries and fewer exports to poorer countries, for the obvious reason that poor people are “undercapitalized” when it comes to buying $50,000 Ford pickup trucks or Boeing jets. The poorer countries do buy a lot of U.S.-produced food: At $152 billion a year, our annual farm exports slightly exceed our automobile imports. And about $30 billion of those farm exports go to China; Beijing may try to game trading terms, but hungry people are hungry people.

For the same reason that the United States tends to excel in high-value exports, foreign companies have often found it amenable to make some high-end goods for the American market, and other markets, in the United States. That is not because we have protectionist policies encouraging that, but because it saves on shipping costs and because we have a highly skilled work force. There aren’t any Chinese companies making $1 plastic water-guns to sell at Wal-Mart in the United States, but Mercedes-Benz makes automobiles here and Leica makes high-end optics here (not the famous cameras, but rifle scopes — know your market!), and not because American labor is cheap. Indeed, the race-to-the-bottom analysis is deeply flawed; with the notable exception of China, where wages have steadily climbed but are relatively low, global investment tends to be concentrated on high-wage countries such as the United States, the United Kingdom, Canada, and the countries of Western Europe. The next time somebody tries to sell you a race-to-the-bottom story, ask why they don’t make the BMW 7-Series in Haiti.

Conversely, because Ford sells the Focus all over the world (it sells twice as many in China as it does in the United States), it has made them in places as different as Michigan, Portugal, Germany, and the Philippines.

Mexico has made great strides in automobile manufacturing — but not because it has pursued a protectionist agenda. The opposite is the case: While the United States pursues the occasional free-trade deal in its sluggish and desultory fashion, Mexico has closed some 45 free-trade accords over the past few decades, which means that builders in Mexico can export duty-free to virtually any significant market in the world except China. Meanwhile, the United States languishes: By most estimates, the United States has a trade environment inferior to Sweden’s, and it has a higher corporate tax rate than Sweden does, too.

NAFTA has had a modest positive impact on the United States economy: positive in that it has increased both output and employment in the United States, modest because there already was a great deal of North American trade absent NAFTA. The treaty is not without its defects. My colleague Jonah Goldberg has written that an ideal free-trade treaty would be one sentence long: “There shall be free trade between . . . ” But NAFTA, like our other trade accords, is more Rube Goldberg than Jonah Goldberg, an overly complex piece of political machinery. But it has, despite its defects, lowered trade barriers, to the benefit of all three parties.

It is very likely that the Trans-Pacific Partnership, which gives so many of our talk-radio friends the willies, will do the same. Some conservatives despise TPP because of the fast-track trade-negotiation authority that has accompanied it — any delegation to the president is tantamount to treason in their view — while others, mainly on the left but some on the right, abominate its intellectual-property standards and other provisions. The analysis that sees TPP as giving the president leverage against Congress is so narrow as to be blind. The real advantage of negotiating a trade deal that requires consensus among such countries as Singapore and Australia is that these countries generally have economic policies that are superior to our own and better suited to the realities of 21st-century markets and economic conditions. Which is to say, it’s an opportunity to leverage Tony Abbott and the ghost of Lee Kuan Yew against Barack Obama on the matter of free markets — a desirable situation for conservatives.

Don’t expect to hear any of that from Donal Trump, who imagines that the global economy is a poker game and is transfixed by the phantasm of the inscrutable Oriental dealing from the bottom of the deck while the sneaky Latin sharpens his machete.

— Kevin D. Williamson is roving correspondent at National Review.

[mac_truck]

Actually, I don’t see anything hateful in his article.

Really? Here's the set up paragraph...

Trump fancies himself an ace negotiator, a skill that he has had some chance to hone in an embarrassing series of corporate bankruptcies, and he proposes to employ those skills to ensure trade that is “fair” by whatever ethical standards occur to this particular serial adulterer/crony capitalist/pathological liar/reality-television grotesque. While Trump himself is fundamentally unserious, the Right has witnessed a destructive reemergence of the old anti-trade populism articulated by Pat Buchanan and Ross Perot.

[SeekAndFind]

Where’s the “hate” in the above paragraph?

All it is for me is an attack on his trade policies.

Now, you might disagree with the author and believe he is wrong and Trump is right. well and good, let’s debate the issue.

But that statement does not tell me that the author “hates” Trump.

Here’s how hate would look like -— TRUMP WANTS TO THROW GRANDMA OFF THE CLIFF ( what the Dems did to Paul Ryan ), or TRUMP WANTS HIS EMPLOYEE TO DIE OF CANCER WITHOUT TREATMENT ( what the Dems did to Mitt Romney ).

Show me someone writing stuff like that and I’ll agree that it’s hate.

[freedomfiter2]

The idiot says that trade restrictions that other countries put on American goods has little negative effect but it would be a disaster for the US to reciprocate.

[mac_truck]

Lol..so Trump’s marriage history is a trade related issue?

Your parsing reminds me of another ‘serial adulterer’...

[GoneSalt]

Trump fancies himself an ace negotiator, a skill that he has had some chance to hone in an embarrassing series of corporate bankruptcies, and he proposes to employ those skills to ensure trade that is “fair” by whatever ethical standards occur to this particular serial adulterer/crony capitalist/pathological liar/reality-television grotesque. While Trump himself is fundamentally unserious, the Right has witnessed a destructive reemergence of the old anti-trade populism articulated by Pat Buchanan and Ross Perot.

That's not urine. It's rain. /s

[Catsrus]

Ross Perot had a personal vendetta against GHW Bush. I read the background and it had something to do with Reagain putting him in charge of POWs and MIAs and then Bush did something to stab him in the back. The only thing I remember about Ross Perot was him making the sucking sound of American jobs if NAFTA went through. He wasn’t wrong about that.

[bert]

Unless I have strong evidence to the contrary, I will continue to believe the reason Trump has it in for China is because they repeatedly got the better of him trying to make deals.

[miss marmelstein]

Wow. This guy is factually illiterate. Who is his target audience? Krauthammer and George Will?

[miss marmelstein]

Yeah, that’s pretty hateful! Good point.

[Arm_Bears]

What does Obama know about US trade that Trump doesn’t, Mr. Williamson?

[Helicondelta]

“Trump fancies himself an ace negotiator, a skill that he has had some chance to hone in an embarrassing series of corporate bankruptcies”

LMAO. Who the hell is Kevin D. Williamson? Trump is worth billions and owns property all over the world. By any reasonable standard he is a very successful negotiator.

I checked the numbers and last year the US ran a $343 billion deficit with China, a $53 billion deficit with Mexico, and a $67 billion deficit with Japan. Trump’s position is that the trade deals with these countries need to be renegotiated so that they become more balanced. Does Kevin D. Williamson disagree?

Trump says that he is in favor of free trade. What Kevin D. Williamson doesn’t get is that in the real world, trade deals need to be negotiated. The numbers don’t lie. The politicians made bad deals with China, Mexico and Japan. Trump is right. Kevin D. Williamson is wrong.

[Yosemitest]

"While Trump himself is fundamentally unserious,
the Right has witnessed a destructive reemergence of the old anti-trade populism articulated by Pat Buchanan and Ross Perot."

WRONG on both examples !

Source:

" ...the obvious question:
How can an impolitic New York billionaire, who openly touts his ubiquitous past
of greasing the palms of politicians of all stripes in order to amass a king’s fortune in business,
possibly become a populist hero of the average citizen out there,
and in particular many conservative Republicans?

The answer is simple.
He knows the BEAST.
He’s familiar with its moves, its tactics, its weaknesses and vulnerabilities,
and therefore he’s one of the most qualified to kill it --
or at least to bridle and saddle it,
then ride it and bring it to heel.

Indeed, for generations many well-intentioned patriots have attempted to assault the dragon’s lair on the Potomac.
Unfortunately, their Mr. Smith-caliber zeal and integrity alone weren’t the proper weapons of St. George needed to fight
the sharp teeth and talons of entrenched bureaucracy,
nor the fiery breath of a complicit media and entertainment industrial complex.
Who knows,
perhaps Trump’s charred and gnawed bones will join the pile of carnage at the cave’s entrance
like so many who have tried before him.
That remains to be seen.
Nevertheless, if someone were ultimately to prevail against the Leviathan of Government,
whether that is Trump or anyone else,
the true people’s champion would have to be someone of independent financial means.
That is, he or she would need to be able to fight without ever becoming beholden to the faceless financiers and donors
who ONY give IN ORDER TO RECEIVE (and control).
He must therefore be INCORRUPTIBLE,
otherwise, we’re right back to where we are now.

He or she would also need to be PROVEN in terms of demonstrable organizational success on the world stage,
NOT a member of the FAILED professional political class, or a PONTIFICATING academic,
or God forbid, a malignant narcissist community organizer with ZERO experience in the real world.
Although, being a narcissist isn’t necessarily a showstopper
IF this leader can TRULY GET THE JOB DONE.
Saving the country won’t be judged on STYLE points, just results.
Certainly modesty isn’t one of Mr. Trump’s virtues.
But as they say,
it ain’t bragging IF YOU CAN DO IT.

... Trump’s supporters ... They are indeed protesting, ... coming forth FROM BOTH major parties ALONG WITH independents,
sorely aggrieved at a dysfunctional government
guilty of far more than 95 transgressions.
They arise together IN FURY BECAUSE
our once great government has clearly BECOME DESTRUCTIVE of operating BY THE CONSENT OF THE GOVERNED,
and it is therefore the right of the people TO ALTER OR TO ABOLISH IT,
and to institute NEW government. "

[Yosemitest]

Limbaugh Compares Trump To Perot In 1992

Here's another explanation on WHY Donald Trump is NOT another "Ross Perot" .

Carly on Hillary, Rather on Trump -- and Dr. Carson on What Ails America
August 14, 2015

...
RUSH: ... CNN last night, Don Lemon speaking with host of the TV show called The Big Interview.
This would be Dan Rather, about the presidential race.
Don Lemon said,
"Have you ever seen anything like this Trump stuff?
You ever seen anything like this in all of your years covering politics?"

RATHER: I have not.
I'm fond of saying I've been to goat-ropings and space shots and been covering presidential campaigns a long time.
I've never seen anything like this...
Many Republicans fear...
He's definitely tapped into something.
And I know that the other Republican candidates see him as sort of a sun-powered, perpetual motion, all-American bull-shine machine,
but a large section of his party doesn't see him that way.

RUSH: Right. So Dan Rather thinks he's in for the long haul.
"You ever heard of goat roping?
Can't say that I have, either.
But Dan Rather... (interruption) He been to one.
And... (interruption)
"I'm fond of saying I've been to goat-ropings and space shots
and been covering presidential campaigns a long time.
I've never seen anything like this."
He was around when the Perot phenomenon was happening.
Would he not...?
How many of you people think that the Perot think is vastly different from what's happening now?

How many of you think it's much the same thing?
I mean, Perot?
Can anybody say third party?
There was no pledge from Perot.
I mean, Perot...
You know, you look at the differences in Perot and Trump.
Snerdley, off the top of your head can you cite any?
I know it's an unfair question because there are some things. (interruption)
Well, yeah, Perot didn't brag about how rich he was, but he did in his own way, and others did it for him.
He didn't do it exactly as Trump does, but I'll give you an example.

He's out there describing how the federal government wastes money. (impression)
"Hell! Hell, Larry!
You know, they're running around and they're buying all these 737s and 757s.
Hell, I don't need all that!
I have two of 'em myself.
What you need to do is get a bunch of Lear 55s.
You can save about $150 billion and get rid of..."
Well, how does he know that?
So it was subtle (chuckles), but it was the same thing.
I think there was a...
How many of you in this audience...?

Let me just ask you.
I know I can't see your hands raise,
but how many of you think that Trump is in this to win it.?
That's the big question.
Snerdley, you think Trump's in this to win it? (interruption)
Snerdley says he don't know.
Dawn, you think Trump's in this to win it?
Dawn thinks he is.
Brian?
No? Don't know, or don't think he's in to win it?
Brian doesn't know, and I can tell by the way he's saying it, he doesn't care.
So how many of you think Trump's in it to win it?

I can tell you Perot was never in it to win it, and that was a huge factor.
That was important to me.
How do I know that?
How did I know that, do you mean ... ?
Because it was borne out to be true.
He quit when it looked like he was gonna win!
I knew... (interruption)
I predicted he would get out.
I predicted IF it looked like he was gonna win, he would get out 'cause he didn't WANT to win.
I mean, what was that thing?
He didn't go somewhere,
somebody didn't go to his event 'cause some daughter was getting married or some such thing.

I happened to find out WHAT Ross Perot's REASON for getting into the race was, and it was PERSONAL.
I have a lot of respect for Ross Perot.
You can't take his achievement away from him. You can't.
He's a unique, genuine American in a whole lot of ways, but I knew he did NOT WANT to win the presidency.
That first speech he gave at the National Press Club that got all this attention...
I'll never forget Christopher Hitchens, the late Christopher Hitchens was on C-SPAN the next day.

There was some authors hour or some such thing, and Perot the previous day, they televised a speech he had given the National Press Club
where he just railed against the irresponsibility of Washington and the spending and HOW he would fix it.
"They're flying around in 737s, Larry, and 757s!
Get rid of all that.
Get some Lear 55s.
That's all the people running our government need.
They don't need to stand up in there.
Got room to sit, that's fine, fine for everybody.
Nobody else stands up in airplanes; why should they?"

All right, fine,
the next day on C-SPAN, when it was time to take calls, every call to Christopher Hitchens was about Ross Perot
and he had no idea what had happened.
So he's getting all these question from C-SPAN viewers who had seen Perot the day before
or maybe a couple days before and about 30 or 45 minutes into this Hitchens said,
"I'm very much uninformed here.
There's something happening that I'm totally unaware of."
He was there to talk about his book and nobody cared about that.
They wanted to talk about what they'd seen Perot do.
But Perot didn't do that speech to win the ...
he didn't even .... wasn't even thinking about running at that point,
and he I know that he didn't INTEND to win.

I don't know that ABOUT Trump.

So Rush DID NOT SAY that Trump was NOT in it to WIN.
Rush has an entirely different thought about Trump.

[Helicondelta]

Great post!

[VideoDoctor]

I must say... Mr Trump has them "pissing" their pants.

Rock On Monsieur Trump!

[stephenjohnbanker]

” That liberal RINO-puke Kevin Williamson appears to be suffering from either an overdose or no dose of whatever meds he ought to be on. His hateful spew would never have been tolerated by William F. Buckley. WFB would have bounced his ass right out the door.”

If WFB would return alive today, he would sell or close NR immediately. It is now a POS magazine.

[x]

+1

[DoodleDawg]

Trump’s position is that the trade deals with these countries need to be renegotiated so that they become more balanced.

In order to to that he needs to either force U.S. consumers to buy less or Chinese consumer to buy more. How will he do that?

[ELS]

I wish people who post on this thread would argue against the author’s reasoning instead of attacking the man himself.

Right back at ya: The author himself employed an ad hominem attack on Trump in the second paragraph. That is not arguing against Trump's reasoning.

[Daffynition]

Time to drink?