Wednesday, April 11, 2018

A Reality of Trade

Trump is tweeting, to gin up support, how "stupid" the inequity in tariffs are, within a allegedly free trade environment.   Its such an easy mark he is aiming for, its an idea and tag line that has been working since trade began.   Some echo this with a lament about us losing all the time.

Its not that simple, and Trump ought to prove his point, because he's bringing it up and because although he won the office, he still has an obligation to explain himself --  Why or what is stupid?

At this point, I realize most Trumpers aren't with me, but that is o.k.  This is bigger than Trump.

Lets recognize first of all where we stand in the world. 
We have the number one market in the world,  attained dramatically once we "put our mind" to it, and enduring for over 100 years. 

We've spent the last 70 years intentionally sharing and exporting our system with the world, and the world has been getting on board, and we've continued to grow.

Nothing about that sounds like losing or being stupid.

Maybe something else, not widely recognized, but rational and smart, has been taking place.   I'll share the big stupid conspiracy with you right now,  and by all means look it up!

In the global free trade environment, the one we've spent trillions building world wide, every participant is expected to contribute something, and that something often exploits a natural advantage.  A natural advantage is a positive factor one nation has over another.

For the United States of America it is not the American laborer, but the American farmer who reaps our gains from our natural advantage of lots of farmland.

Its not hard to understand,  we know the phrase "bread basket of the world" has meaning. It has and should continue, if wiser heads prevail. 

Its our natural advantage -- farmland.  As such it has been what we have also protected because it's a pretty darn good natural advantage to have.

So when China proposes to place tariffs on farmers in retaliation for Trump's proposal to tax Chinese imports, that's solid proof that our agriculture export has some sort of trade advantage at stake, a stake worth preserving, and the yin to the yang.   Maybe their phones come here advantageously, but our food goes there cheaply in return.

Many years ago, before anyone reading this was born, smart federal economists, as patriotic as any man, directed our diplomats to prioritize our agriculture over our industry, and much to our benefit, our diplomats listened.

Even 100 years ago, economist understood that labor can be commoditized, get or gotten cheaper.  Land, however is hard to come by.  Arable land even harder 

They were not stupid, and are not currently stupid,  as IT IS a continuing academic and applicable field.

Consider our example.   China gains entry in the World Trade Organization(WTO), the international trade group that we championed since the end of WWII, and wants to do trade. (An organization, GATT, preceded the WTO) 

OK and this is where it gets complicated, and the answer to the question why does a free trade agreement have so many pages if its all about being rid of tariffs?  Because life is messy, and some nations need help, need incentive to turn their rifles into plowshares.  Some have vested interest in certain industries that precedes the new direction free trade would carry them.

Whatever the event maybe,  we are open to some negotiations.


Because first, not only is gathering everyone together in trade a hedge against everyone fighting each other, its less expensive than war of course, and secondly it is our system that we are pushing, the one we are winning....

We agree with China that they can tax imports in an market area they want to protect, and we push on them our agriculture.

It can get complicated, of course.   I contend that our patriotic leaders of the past understood their fleeting time as stewards of this great nation and understood how wise it would be to guard our American farmer at the expense of our laborer.

The problem is not the tariffs, its the failure to transit the American laborer into industry or services that  we can win at, with the other natural advantages we may have.   Technology, for example.   Or Financial Services.

Clearly, the U.S. is not winning everything, but it was understood from a long time ago that cars replace buggies, and television replaces radio.  Sometimes Japan replaces the U.S.,  and  then China replaces Japan in cheap labor.

As for the intention of the tariffs to reduce our trade deficit.  That's the easiest part,  just don't buy foreign made goods.  Deficit solved!  Get on board with it and there would be no tit for tat trade war.   Unless attitudes change, Trump has put our farmers in the cross hairs --  they have much to lose, while the rest of us pay more.  All for the gamble that we'd get jobs back that may not even be here anyways once robots and Artificial Intelligence move in.

Some contend we can sell our food to Africa.  Who says we aren't already, and why should our farmers take a haircut because the President is evidently running things off the cuff --  he waited over a year to 'fulfill his promise'  which gave the Chinese time to find other arrangements.

What other arrangements has he been at work on?

As for the tariffs paying off our national debt?   Not realistic.

How else do I know we aren't losing?  We still have the money to buy things, and a growing economy.

The fact that Trump says things are stupid, does not make it so.  I'd like some proof, although I certainly concede his power to shake up the board and something good may come of it, but nevertheless his characterization of our winning tradition is uninspiring and ignorant at best, dishonest as a matter of course for him.

At some time it is reasoned that robots and artificial intelligence will replace human labor.  Does Trump have a plan for that?  If he doesn't, then that is stupid.    He's gonna cost our farmers markets while gaining jobs in industries that may ultimately go away (again)?   Yeah,  not smart.

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