U.S. Trade Politics is its Own Weird Form of Internal Trade War

U.S. industry in general has been strongly supportive of trade liberalization. There are, of course, a few exceptions, like steel, textiles and footwear, and a few select agricultural products. And I do mean a few. One Ag expert once told my trade class that if it’s white, it’s protected: sugar, cotton, milk, and rice. Everything else is on its own. However, for the most part, U.S. industry understands the modern global economy and America’s role in developing a global marketplace in which American industry can thrive. Consequently, Republicans in Congress and the White House historically have been extremely supportive of globalization, multilateralism, and trade liberalization.

Labor union leaders and certain public interest and environmental groups have opposed trade liberalization with varying degrees of intensity. For them, its about losing jobs to foreigners and harm to the environment. As a result, Democrats in Congress and the Oval Office have sat in opposition to trade agreements, or are at least been deeply reluctant.

In contrast, according to a series of Pew Research surveys over the past half-decade, nearly twice as many Americans see trade as a good thing as those who see it as a bad thing. Middle class, and the college educated respondents are the most supportive. Ironically, Democrats have for many years been more supportive of trade than Republicans. In fact, both Republicans and Democrats across the nation are much more supportive of trade and support trade agreements, like the Trans-Pacific Partnership (TPP) and NAFTA, than their representatives in Washington. The long-term disconnect between the American people and their representatives on international trade is disturbing.

Not surprisingly, things got even more disjointed in the last election. Thanks to Trump’s relentless attacks on trade, Republican support for multilateralism and trade liberalization plummeted. It fell from well above 50% supportive to below 30% during the campaign. The good news is that it has now climbed back to about 43%.

A silver lining in the dark cloud Trump has created over trade is that Democrats increased their support for trade, even though their representatives in Congress have not. More tellingly, the percentage of Democrats who view trade agreements as “bad for the U.S.” has dropped by half over the past 6 years.

If ‘the enemy of my enemy is my friend,’ perhaps Democrats in Washington can now embrace trade agreements because Trump hates them. It would at least get them more in line with their many constituents, at least those who are not Labor Union Leaders.

To compound this disruption, we now also have the spectacle of the Republicans in Washington at war with themselves over trade. There is every indication that this war will heat up dramatically heading toward the November election given Trump’s growing animosity toward our most important trading partners and Congressional Republicans’ apparent willingness to take him on.

It is clear that a large majority of Americans recognize the dynamic nature of global competition and the remarkable success of our own economy in it. Americans seem to recognize that trade agreements are about creating an open, rules-based trading system that is a key source of economic growth and prosperity for Americans.

American business excels because it faces competition on a global scale. Manufacturing in the U.S. is growing rapidly, especially innovative ‘smart manufacturing.’ Even faster export growth comes from Services and U.S. agricultural—its own remarkable story of advanced technology. (For just one small example, did you know that in 1950, the average dairy cow produced about 5,300 pounds of milk? As a result of improved bovine genetics, feed formula, and farm management practices, a single cow today can produce 22,000 pounds.)

The exploding Asian middle-class offers a vast new market for America’s products. Effective trade strategy should to break down barriers between those consumers and American businesses. Dropping out of the Trans-Pacific Partnership—now re-forming without the U.S– will not help. The current discombobulated economic diplomacy, driven by inter-party warfare, intra-party warfare, and intra-Executive Office warfare at the highest levels, is a poor strategy.

Members of Congress and the White House regularly express their deep concern for their constituents but work in concert against them. Washington today seems incapable of producing a coherent trade policy that will further open Asia’s rapidly growing markets, strengthen American global leadership, and build effective strategic partnerships with our North American neighbors and European allies. Perhaps for starters, Washington should seriously re-connect with its constituents.

Robert A. Rogowsky is Professor and Program Co-chair of the Masters in International Trade & Economic Diplomacy at the Middlebury Institute of International Studies in Monterey, CA and Adjunct Professor of Trade & Diplomacy at Georgetown University’s Masters School of Foreign Service.
These essays are the opinions strictly of the author. They do not necessarily reflect the views of the Institute or any officials of the Institute.

 

Trade Wars Are Weird

A trade war is a weird kind of war. We think of war as sending warriors and ordinance somewhere else to destroy a lot of people and stuff “over there,” to fight until finally someone gives up. Trade “war” is different because the weapons are different: trade barriers are imposed aggressively against another trading partner to stop ourselves from buying their stuff. They, in turn, will retaliate by not buying our stuff until someone “surrenders.” The war ends so trade can flow even more freely than before the “war.”

I can’t think of trade wars without recalling the scene from Mel Brooks’ iconic movie Blazing Saddles. The small, all white western town of Rock Ridge anxiously awaits its sheriff. A black man (Cleavon Little) shows up dressed in gold. Realizing their intense hostility to a black man parading himself as sheriff, he draws his gun, puts it to his own head, and takes himself hostage. The town, befuddled by the cognitive dissonance of a black stranger taking their sheriff hostage, lets him drag himself to the safety of the sheriff’s office. Catastrophe avoided; life, weird and confused, goes on because, well, life has to go on even in the face of life’s various dissonances.

Trade wars are a lot like this: nation’s taking themselves hostage to inflict pain on someone else. That is why there are always winners and losers in a trade war, just as there are always winners and losers in a trade peace. In fact, commercial activity and economic progress always means there are winners and losers. Recall the long-gone and little lamented buggy whip manufacturers.

One trade scholar described trade theory as the study of whose hand is in whose pocket, and trade policy as who will be pulling it out first. When we restrict imports, it punishes both domestic interests and our trading https://ixquick-proxy.com/do/spg/show_picture.pl?l=english&rais=1&oiu=http%3A%2F%2Fspencemunsinger.com%2Fwp-content%2Fuploads%2F2013%2F02%2FblazingSaddles.jpg&https://ixquick-proxy.com/do/spg/show_picture.pl?l=english&rais=1&oiu=http%3A%2F%2Fspencemunsinger.com%2Fwp-content%2Fuploads%2F2013%2F02%2FblazingSaddles.jpg&sp=643fd38774d6b67d0a8731b9c85f1a96sp=643fd38774d6b67d0a8731b9c85f1a96partners (reminder: these are not enemies, they are allies and partners in our economic progress who buy our stuff and sell us their stuff). Because we have punished them, they must retaliate. When they do, we counter-retaliate. Hence, war.

The problem, again, is the weapon. We block our purchases of their products, which some of us want. We shoot them in the foot, but through our own foot, or calf or thigh, depending on how recalcitrant our retaliating trading partners feel compelled to be. We hope that enough blood spatters on them to force surrender.

When George W. Bush imposed steel tariffs in 2002, retaliation was focused on Florida oranges, cars produced in Michigan, and other products in key swing states. The United States withdrew the tariffs on December 4. When the EU refused to let U.S. beef into European stores, the U.S. retaliated with tariffs on beef and pork products, goose pâté, Roquefort cheese, truffles, onions, carrots, preserved tomatoes, soups, yarn, Dijon mustard, juices, chicory, toasted breads, French chocolate, and jams, as well as agricultural-based byproducts, such as glue and wool grease. The list targeted especially France, Germany, Italy, and Denmark, Products from the United Kingdom were excluded because they had indicated support for lifting the ban.

The hard part with this weapon is to find goods for which trade will hurt the enemy more than yourself. In our trade skirmishes with the Japanese over autos under President Reagan, tariffs on luxury Japanese cars were initially thought strategically sound because rich U.S. consumers could afford it. Unfortunately, they were both unwilling and politically connected. That weapon was quickly withdrawn.

Trump’s trade war (sorry Mr. Kudlow, I mean “discussion”) has, of course, spurred retaliation. Canada, for instance, released a strategic swing state response targeting Mr. Ryan’s home state of Wisconsin—dairy, Harley-Davidson motorcycles, and his own district’s big cucumber and gherkin industry. Also making the list is Mitch McConnell’s Kentucky bourbon, Bernie Sander’s Vermont maple syrup, Pennsylvania’s Hershey chocolate, and Florida’s fresh orange juice, along with beer kegs, mineral water and soy sauce, mayonnaise, salad dressing, automatic dishwasher detergents and certain types of plywood.

The weapons for a trade war are crude and Pyrrhic.  They must be used carefully and strategically with an eye to the political pressure points that will make the ‘enemy’ blink before your own wounded make you blink. Fair warning Messrs Ryan, McConnell, Sanders, and of course Trump as we head into the November referendum. Some very carefully devised punishments will force selected domestic sectors to pay for the special subsidies given to steel and aluminum. The question is how they will make you pay?

Robert A. Rogowsky is Professor and Program Co-chair of the Masters in International Trade & Economic Diplomacy at the Middlebury Institute of International Studies in Monterey, CA and Adjunct Professor of Trade & Diplomacy at Georgetown University’s Masters School of Foreign Service.
These essays are the opinions strictly of the author. They do not necessarily reflect the views of the Institute or any officials of the Institute.