March 6, 2018

MY CORNER by Boyd Cathey

Tariffs, Trade, Trump and Conservatism

Friends,

Perhaps you will recall the television ad from a couple of years back, the one with an instructor in some Chinese university? The scene is set in the not-too-distant future, and the speaker is talking about the fact that China now basically controls—“owns”— most of major American business—Chinese exports to the United States have basically destroyed native American industry—the tag “Made in China” dominates everything, from textiles to steel imports to everyday household products. The fact is, implies the grinning instructor, “now we own them [us].”

And the immediate question that the viewer is encouraged to ask is this: can any nation that cannot control its borders, but also has seen its own native industries and major businesses disappear—can any nation that depends almost entirely on foreign imports that undercut and eventually destroy its own industrial and commercial infrastructure—can any such nation actually be counted sovereign, free and independent?

This question swirled around official Washington—and Wall Street—this past weekend, spilling over onto the Sunday talk shows, as President Donald Trump announced the imposition of steep tariffs on imported steel and aluminum. In the halls of Congress stalwart so-called “free trade” Republicans like Senators Ben Sasse, Lindsey Graham, and Jeff Flake railed against the president and his plans. “Please reconsider…you’re making a huge mistake,” thundered Graham. The silver-tongued Sasse echoed Graham by asserting that the president’s action “violated conservative principles.”

Curious: all three of these GOP solons had been and—in large measure—continue to be NeverTrumpers. Graham, although more positive about the president now than during the Republican primary season (where he presented his own candidacy, but, embarrassingly could barely garner 1% of the vote), continues to have major—critical—differences with Donald Trump on a variety of issues, including essentially “open borders” and extreme foreign interventionism: Graham has, it seems, never seen an overseas conflict that he doesn’t want the US to get involved in and see American boys die in. “Bloodthirsty globalist” as a term of opprobrium really doesn’t do him justice.

Flake’s flamboyant and unrestrained hatred for the president is well-known, having been demonstrated in recent months, both on the air, and in print (he has a book out titled, Conscience of a Conservative—a title plagiarized from the late Senator Barry Goldwater, who must be turning over in his grave to be so “honored”). His announced decision to exit the US Senate can only be welcomed with “huzzahs” and the hope that such an insufferably small-minded faux “conservative” should find work elsewhere—perhaps pressing clothes in Chinese laundry someplace?

The photogenic Sasse from Nebraska has been a staunch and bitter opponent of the president since almost the beginning. Here is a portion of his “letter to constituents” on his Facebook page, February 28, 2016:

“I cannot support Donald Trump. I am a movement conservative…who I would support in a hypothetical match-up between Mr. Trump and Mrs. Clinton is: Neither of them. But if Donald Trump ends up as the GOP nominee conservatives will need to find a third option.”[Italics mine] [https://www.facebook.com/sassefornebraska/posts/561073597391141]

He added that he would not support Trump because he was “dividing the nation” and “tearing down rather than building up,” and “he refuses to condemn the KKK.” And, he repeated his vow: “I will vote for some third candidate.”

Sasse is someone to watch: young and energetic, but woefully ignorant and obtuse when it comes to the history of what is termed “American conservatism” or, for that matter, the history of the Republican Party, he has been touted as a future presidential candidate. He claims not to be a member of the political Establishment—just like my elder cocker spaniel Robert pretends he hasn’t just soiled the carpet, but I know for a fact that he just has.

And like Flake, Sasse boasts continuously of his “conservatism.” Yet, as Phyllis Schlafly noted in her endorsement of Trump during the primary season in her posthumously published book The Conservative Case for Trump (2016), it was Donald Trump who far better incarnated traditional American conservatism—in trading policies (e.g., TPP, NAFTA, GATT, etc.), in foreign policy, in immigration proposals, in climate policy, and in domestic positions. Indeed, if Sasse (or Flake) would simply go back and familiarize himself with some of the significant traditional conservative writers, political leaders and historians of the past—think here of Dr. Russell Kirk or Senator Robert Taft—he might possibly understand the intellectual weakness of his position. But that probably is asking too much. [A history and time line of GOP trade policy is found at: https://criminalsandliars.wordpress.com/2018/03/03/protectionism-is-a-good-thing-and-has-been-the-historic-position-of-the-republican-party/]

Sasse, Graham, Flake—plus Neoconservative pundits on Fox and the Neocon scribblers at The Weekly Standard and National Review—all have something in common. In addition to having been Never (or at least Quasi-Never) Trumpers, they are inveterate “free traders,” who believe that protecting our native industries and commerce against unrestricted foreign imports and eventual control is wrong, economically and philosophically. For them tariffs—any tariffs—represent an infringement on globalism and international capitalism: if we can get cheap (and many times inferior) textile products from China and that destroys the American textile industry in North Carolina and results in the loss of hundreds of thousands of irreplaceable jobs, then that is just fine. If those textile workers—most with families to feed and educate and bills to pay—must lose $20 an hour jobs and be forced to flip burgers at Hardee’s for less than $8 per hour, that’s too bad, that’s the way globalist capitalism, usually subsidized by foreign governments, works.

During the 2016 campaign Donald Trump announced that his “Make America Great Again” campaign would attempt to redress the extreme imbalances in trade, the huge trade (and financial) deficit—nearly a trillion dollars with China alone—that our country is running, and, yes, save American jobs—bring jobs back from Mexico and China, and at least give some support to hard-working American workers. And his promises, repeated throughout the campaign, were significant reasons why he won in states like Pennsylvania, Michigan, Ohio and Wisconsin…and thus won the election.

Because a defense of American industry and American jobs is, in fact, a defense of America, itself. No nation that cannot control its own industry and commerce, no nation where its industrial infrastructure has been ravaged—raped—by foreign competition and placed under foreign control can claim to be sovereign and in possession of its own future and its own destiny.

The argument given against the president’s plans—that placing tariffs on steel and aluminum will increase prices that American citizens will have to pay for such items as cars or cans of beer—is basically specious. Of course, there may be some slight initial increases, but those will be offset by the gains in the income and employment of millions of taxpaying and job-secure workers and employees—like those textile workers—whose income and ability to purchase and pay taxes will compensate for those increases.

And more, we need to remember that President Trump is the master of “the art of the deal.” This gambit is, no doubt, the opening shot across the bow at our grasping trade “partners” in Europe, Asia and Latin America who have taken advantage of this situation and this hollowing out of America for years; it is a bold invitation, if you will, to sit down at the negotiating table and reaching a just accommodation concerning tariffs and imports and exports.

So, all those extreme free traders just need to sit still and be quiet and wait and listen. This is Donald Trump’s opening salvo in negotiating better and fairer deals for those folks who voted for him—after all, President Trump is the president and leader of American citizens. He has the solemn duty to protect their welfare, and not the welfare of the citizens in Nanking or Guadalajara or Dusseldorf…or their ruling elites.

That is why he was elected. And it is in reality the true manifestation of traditional American conservatism and policy for much of this nation’s history. Although it is true that the South and the Southern Confederacy were once supporters of “free trade,” the reasons for that are clear: the South was not at that time an industrial region, a region with business that needed protection—it depended on foreign imports. But most of American history has been characterized by the goal of “fair trade”: providing some protection for some of our native industries (and to those employed in those industries), while opening the door to imports—a balancing act which aimed at finding an agreeable means of preserving our own industry while insuring the importation of foreign goods at a reasonable price.

I fully recognize that there are anarcho-libertarians and some free traders who will strongly disagree with me, just as they disagree with the president. These disagreements are indeed fundamental differences not just about economics and trade policy, but about the kind of America we desire for us and for our children. This is about a free and economically independent country that has control over its own industry and commerce, which is not subinfeudated to international big bosses sitting in a boardroom in Beijing (with virtual slave labor responsible for the price differential) who have more in common with financiers in Geneva or Zurich than the steelworker in Pittsburgh or the coal miner in West Virginia. This about whether we are indeed a sovereign nation, or not.

Popular—“populist”—conservatism? You better damn well believe it: that’s what Donald Trump ran on and promised, and that’s what he’s proposing.

My long-time friend Pat Buchanan has, over the years, been a staunch defender of American sovereignty and “fair trade,” even if that meant that tariffs needed to be placed on certain imports to protect our native industries from rapacious, foreign government-supported competition. Back in 1998 he authored a superb statement of that belief, his book The Great Betrayal: How American Sovereignty and Social Justice Are Being Sacrificed to the Gods of the Global Economy. It remains an indispensable primer on the subject discussed currently.  And more recently, Pat has authored a column on that topic, which I pass along today.

Why Is the GOP Terrified of Tariffs?

http://buchanan.org/blog/gop-terrified-tariffs-128840

By Patrick J. Buchanan   Tuesday - March 6, 2018

From Lincoln to William McKinley to Theodore Roosevelt, and from Warren Harding through Calvin Coolidge, the Republican Party erected the most awesome manufacturing machine the world had ever seen. And, as the party of high tariffs through those seven decades, the GOP was rewarded by becoming America's Party.

Thirteen Republican presidents served from 1860 to 1930, and only two Democrats. And Grover Cleveland and Woodrow Wilson were elected only because the Republicans had split.

Why, then, this terror of tariffs that grips the GOP?

Consider. On hearing that President Trump might impose tariffs on aluminum and steel, Sen. Lindsey Graham was beside himself: "Please reconsider," he implored the president, "you're making a huge mistake." Twenty-four hours earlier, Graham had confidently assured us that war with a nuclear-armed North Korea is "worth it." "All the damage that would come from a war would be worth it in terms of long-term stability and national security," said Graham.

A steel tariff terrifies Graham. A new Korean war does not?

"Trade wars are not won, only lost," warns Sen. Jeff Flake.

But this is ahistorical nonsense.

The U.S. relied on tariffs to convert from an agricultural economy in 1800 to the mightiest manufacturing power on earth by 1900. Bismarck's Germany, born in 1871, followed the U.S. example, and swept past free trade Britain before World War I.

Does Senator Flake think Japan rose to post-war preeminence through free trade, as Tokyo kept U.S. products out, while dumping cars, radios, TVs and motorcycles here to kill the industries of the nation that was defending them. Both Nixon and Reagan had to devalue the dollar to counter the predatory trade policies of Japan.

Since Bush I, we have run $12 trillion in trade deficits, and, in the first decade in this century, we lost 55,000 factories and 6,000,000 manufacturing jobs.
Does Flake see no correlation between America's decline, China's rise, and the $4 trillion in trade surpluses Beijing has run up at the expense of his own country?

The hysteria that greeted Trump's idea of a 25 percent tariff on steel and 10 percent tariff on aluminum suggest that restoring this nation's economic independence is going to be a rocky road. In 2017, the U.S. ran a trade deficit in goods of almost $800 billion, $375 billion of that with China, a trade surplus that easily covered Xi Jinping's entire defense budget.

If we are to turn our $800 billion trade deficit in goods into an $800 billion surplus, and stop the looting of America's industrial base and the gutting of our cities and towns, sacrifices will have to be made. But if we are not up to it, we will lose our independence, as the countries of the EU have lost theirs.

Specifically, we need to shift taxes off goods produced in the USA, and impose taxes on goods imported into the USA. As we import nearly $2.5 trillion in goods, a tariff on imported goods, rising gradually to 20 percent, would initially produce $500 billion in revenue.

All that tariff revenue could be used to eliminate and replace all taxes on production inside the USA. As the price of foreign goods rose, U.S. products would replace foreign-made products. There's nothing in the world that we cannot produce here. And if it can be made in America, it should be made in America.

Consider. Assume a Lexus cost $50,000 in the U.S., and a 20 percent tariff were imposed, raising the price to $60,000. What would the Japanese producers of Lexus do? They could accept the loss in sales in the world's greatest market, the USA. They could cut their prices to hold their U.S. market share. Or they could shift production to the United States, building their cars here and keeping their market.

How have EU nations run up endless trade surpluses with America? By imposing a value-added tax, or VAT, on imports from the U.S., while rebating the VAT on exports to the USA. Works just like a tariff. The principles behind a policy of economic nationalism, to turn our trade deficits, which subtract from GDP, into trade surpluses, which add to GDP, are these:

Production comes before consumption. Who consumes the apples is less important than who owns the orchard. We should depend more upon each other and less upon foreign lands.

We should tax foreign-made goods and use the revenue, dollar for dollar, to cut taxes on domestic production. The idea is not to keep foreign goods out, but to induce foreign companies to move production here.

We have a strategic asset no one else can match. We control access to the largest richest market on earth, the USA. And just as states charge higher tuition on out-of state students at their top universities, we should charge a price of admission for foreign producers to get into America's markets.

And — someone get a hold of Sen. Graham — it's called a tariff.