Jeffrey R. Carter is one of my favorite bloggers. His posts at his site Points and Figures are always thought-provoking and well-written.
Usually I agree just about 100% with him – we’re very aligned in our perspectives on business, society and politics.
For his post this morning, “Bull$%^& Numbers,” things weren’t much different. I did feel, though, that he missed some important considerations.
I agree with him that the trade deficit is a pretty useless figure. In fact, the only discernible use I’ve ever witnessed it having is as a cudgel to beat up Republican presidents. No matter how awful the figure, if a Democrat hold the highest office in the land, you pretty much won’t hear about it. That’s fair proof that most economists and politicians also think it’s useless except as a political weapon.
I also agree wholeheartedly with Jeffrey’s point on this: “The only thing it tells me is that American consumers are getting a better deal by purchasing imported goods.” And he touches on the government subsidies and theft of intellectual property that are endemic in our trade with China. (Both of these factors, by the way, demolish the free trade argument others are making – because trade is only free if there are consistent rules for each side, which has certainly not been the case in our business with China in forever. People who are screaming about us igniting a trade war are either obtuse or willfully misleading; we’ve been in a decades-long trade war with China, one that they declared and in which we’ve almost universally disarmed ourselves – until now.)
But the very important point I think is missing from Jeffrey’s post is the obvious question: WHY are people getting a better deal by purchasing imported goods, and specifically those from China?
Now, I’m a big believer in Ricardo’s law of comparative advantage – if China is a better manufacturer of something than we are domestically, both we and they benefit if we buy that something from them. Where I get heartburn over that is when China’s advantage is either because of overweening regulation of our domestic manufacturers (which is a very real and very serious problem) or because of their totalitarian government stealing from people to prop up their manufacturers, or forcing people to work as virtual slaves, so that their manufacturing costs are artificially lowered. I’ve spent my whole career in manufacturing, so to see us hollow out our domestic production because of stupid laws on our end or communist-inflicted misery on theirs really galls me.
And we HAVE hollowed out American manufacturing. Some of that was “own goals” – steelmakers and the car companies, for example, were their own worst enemies for a long time. But a lot of it was done TO our manufacturers. Come spend a day with me and I’ll teach you about the thicket of safety and environmental regulations (for example) we domestic manufacturers have to navigate, which I’m 100% certain our Chinese competitors don’t. “Flyover country” was a lot more vibrant before our elites on either coast decided our government bureaucrats could make their own laws.
I’m heartened by President Trump’s efforts to slow down the regulatory Leviathan. I hope it’s the start of an honest look at how we rebuild our heartland communities that have been devastated by “free trade” that isn’t anything like free.
Jeffrey, you’re right. Tariffs are stupid. And they may well blow up in our face. But disadvantaging hardworking Americans just to kowtow to the Chinese is stupider still, so I sincerely hope we’re going to put a stop to that.