As reported in the above-linked article, the Trump administration continues to pursue more trade deals, with Britain, the European Union and now Kenya. With his background in wheeling and dealing on real estate, Trump sees deal-making as the way to dig the U.S. out of the deep trade deficit pit it has fallen into. Yes, I know, “digging” isn’t the way to escape from a hole. It only makes the hole deeper. That’s kind of the point I’m trying to make. Trade deals are what got us into our trade mess in the first place, including the worst deal of all – the deal with the rest of the world to set up the World Trade Organization to oversee the whole process.
The whole point of a trade deal is to coerce another country into concessions (things they don’t like), using concessions of our own (things we don’t like) as the motivation. Then what happens? Being the global “nice guys,” we live up to our promises – the concessions we made – while the other side doesn’t. We cajole them about their failures to live up to their side of the bargain. They promise to re-double their efforts. Months go by. Still nothing happens. Months turn into years. The trade deal that was initially hailed as a “big win for American workers” instead yields a massive, persistent trade deficit and the dismantling of the manufacturing sector of our economy.
Why do we need trade deals? Just tell us what you have for sale. We’ll then decide if we want to buy it and how much we’ll buy. We’ll reciprocate. Here’s what we have for sale and here’s the price. Buy it if you want. But if you don’t buy from us as much as we buy from you, we’ll use tariffs to assure that a balance is maintained.
You want to sell us avocados? Or coffee? Fine. We won’t put any tariff on them because we’re not able to grow them ourselves. But you want to sell us a car? We already have companies making and selling cars – more than we know what to do with. So we’ll put a high tariff on your cars, unless you’re able to buy just as many from us. That kind of seems pointless though, doesn’t it?
And we certainly don’t need a “World Trade Organization” setting rules to advance their own agenda. The Trump administration is pushing the WTO to reform and end its practice of protecting developing countries like China at the expense of the U.S., and stubbornly insisting on “free” trade with other developed countries like those of the EU – countries whose gross overpopulation assures a trade deficit for the U.S. – even after decades of proof that a massive, destabilizing trade imbalance is inevitable. Why bother? We don’t need the WTO. What can they do if they don’t like our tariffs? They can authorize other countries to raise tariffs of their own, which is what they may or may not do anyway, regardless of whether or not the WTO even exists. So the WTO really serves no purpose whatsoever, other than to suck funding from the American economy to support its endless meetings – meetings whose only purpose is to invent new ways to divide up the American market for the benefit of other countries.
Case in point: Trump was having great success in cutting our trade deficit with China through the use of tariffs until he signed the “Phase 1” trade deal with them last month – a deal that had essentially been in place for months already, just awaiting the formality of the signing. As a result, all of the momentum toward restoring a balance of trade with China has been lost. The trade deficit status quo with China has been restored, albeit at a slightly lower level, and for what? Chinese promises – the same promises they’ve reneged on for years. We’ve once again ceded control of the trade situation to China.
Another example: the “USMCA” agreement with Mexico and Canada – supposedly an improvement over the NAFTA deal that devastated American manufacturing almost as badly as our trade situation with China. What’s been the result? Since Trump was elected, our trade deficit with Mexico continues to spiral out of control, and it’ll be years before anyone can say definitively that the USMCA agreement didn’t work. (Anything less than a balance of trade with Mexico is a failure.) The USMCA agreement eliminated the threat of tariffs on Mexico and put Mexico back in the driver’s seat of the trade relationship.
Throughout all of this deal-making for the past three years, the trade deficit declined slightly in 2019, and that decline was thanks to tariffs and not any deals. The trade deficit remains enormous, leaving the manufacturing sector on life support and leaving us more vulnerable to recession and supply disruptions, something that’s becoming painfully obvious as the coronavirus problem worsens and we discover that we’re dependent on China for our supply of protective clothing and for pharmaceuticals to combat it.
President Trump, please, no more trade deals. Kiss the WTO goodbye and put the U.S. Trade Representative’s office to work setting an managing tariffs.