Deregulation is Trump’s great contribution to the US economy beside the just-passed tax bill. But his administration’s trade policy threatens both the economy and US security strategy.
The lead editorial of the Dec. 12, 2017 Wall Street Journal notes that
Reagan used his electoral victory in 1984 — he won every state exempt Mondale’s Minnesota — to cut taxes and deregulate.
“Amid the debate over tweets and tax reform, perhaps the most significant change brought by the first year of the Trump Presidency has been overlooked: reining in and rolling back the regulatory state at a pace faster than even Ronald Reagan. This is a major reason for the acceleration of animal spirits and faster economic growth in the past year.”
While the administration’s trade actions against China for its state-controlled markets are fully justifiable and the policy has strong support from US allies, the US has been simultaneously pursuing antagonistic trade policies towards these very allies and abandoning the key multilateral trade pacts, such as the Transpacific Partnership (TPP) that they are most interested in pursuing. The result is that the allies have been solidifying key multilateral trade pacts without the US and ignoring the inferior (to them) US offers of bilateral trade pacts. This may force some of the Asian countries to become reliant on trade pacts in which China will be the dominant member, damaging US security.
Our trade correspondent L.C. writes that while the administration boasts, in the US National Security Strategy [NSS], of its economic deregulation successes and the need to end ‘significant government intrusion in the economy [that] slowed growth and job creation,’ the Administration does not count trade barriers as economy-crimping regulations. Still, the NSS does not emphasize trade enforcement except in the case of China.
The NSS states, correctly
“China and Russia challenge American power, influence, and interests, attempting to erode American security and prosperity. They are determined to make economies less free and less fair, to grow their militaries, and to control information and data to repress their societies and expand their influence…. Competitors such as China steal US intellectual property…. China expanded its power at the expense of the sovereignty of others…. China and Russia want to shape a world antithetical to US values and interests. China seeks to displace the US in the Indo-Pacific region, expand the reaches of its state-driven economic model, and reorder the region in its favor,” though, “The intentions of both nations are not necessarily fixed…. Part of China’s military modernization and economic expansion is due to its access to the US innovation economy, including America’s world-class universities…. China is gaining a strategic foothold in Europe by expanding its unfair trade practices and investing in key industries, sensitive technologies, and infrastructure.”
Hence,
“We will work with our partners to contest China’s unfair trade and economic practices and restrict its acquisition of sensitive technologies.”
But instead of “working with our partners,” the US has walked away from two multilateral trade pact negotiations that US allies cared greatly about — one in the Pacific, the TPP, and the other concerning Atlantic countries. US actions, in short, are out of sync with the words of the NSS.
CS-100 overhead bins open 5″ lower to make loading easier. The enlarged bins accept oversize carry-on luggage
A case in point is the US’s highly punitive trade action, on behalf of Boeing, against Canada’s Bombardier and its C-Series midsize aircraft that Delta is considering buying for around $5 bn. The Bombardier-linked UK and European Union economies will also be hurt.
The Canadians argue that the C-Series is smaller than any plane being made by Boeing so it presents no competition for it. (Boeing has said it would compete with its slightly larger model.) Canadian Foreign Minister Chrystia Freeland released a statement making this point: “It is beyond all reason that Boeing could be threatened with injury in a market segment it exited over a decade ago.” Bombardier backed this up with its own statement saying, “Boeing did not compete in the Delta campaign [for the Delta order]. It has not made a plane sized to Delta’s needs for many years, since it stopped producing the 717 and 737-600. Moreover, Boeing has acknowledged that it has oversold its 737 production capabilities and has a backlog of more than 4,300 aircraft orders that stretches years into the future,” and thus the Commerce final determinations, and presumably the preliminary ITC injury vote, are “divorced from reality.”
In other trade cases before the Commerce Department, some US manufacturers seek protection, but the consumers of the imported products, fearing the higher prices that will inevitably ensue if protection is granted, protest and oppose the protection.
In the case of the NAFTA-integrated auto industry, car manufacturers in all three NAFTA countries (US, Canada, Mexico) are denouncing the Trump administration’s proposal that cars must have 50% US content. So this is a case where the US manufacturers don’t even want protection, but it’s being forced on them by the administration. If the domestic content requirement is implemented, auto manufacturers say, NAFTA cars will become more expensive to US consumers and uncompetitive in foreign markets, just the kind of “help” the manufacturers don’t need. And this would most affect Trump’s important base in the Midwest. It also turned out that during negotiations with the Canadians, the Commerce Department hadn’t even done an impact analysis to see who would get hurt and how badly.
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