Thread: Don’t Dismiss Donald Trump’s Trade Gripes As Mere Nonsense

Don’t Dismiss Donald Trump’s Trade Gripes As Mere Nonsense

COMMENTARY by Paul Blustein

March 28, 2016, 12:53 AM EDT

The world had better deal with the currency and China trade issues.

“You know what we sell to the Japanese? Practically nothing!”

It should come as no surprise that the propounder of that assertion was Donald Trump, during a rambling tirade after his Republican presidential primary victory in Florida and other states earlier this month. Perhaps Trump is aware of the fact that Boeing supplies the overwhelming majority of planes used by Japan Airlines and All Nippon Airways, or perhaps he isn’t; in any case, he was characteristically cavalier in his disregard for the truth.

A few seconds of Googling would have revealed that U.S. exports of goods and services to Japan exceeds $100 billion a year, with the top products including aircraft and spacecraft, medical and technical equipment, machinery, electronic equipment and pharmaceuticals. Trump was presumably referring to sales of U.S. cars in Japan, which are indeed minimal, but he did not bother to clarify the point. His “very good brain” functions better without the clutter of such fine distinctions.

This was just one example of the New York tycoon’s capacity for ignorance and outlandishness on economic issues. But amid the balderdash that he routinely spouts on the subject, Trump has put his finger on a couple of problems in the global economic system that merit broad public concern. The international community would be well-advised to address these issues before long; Trump’s bluster about them should serve as a warning that bad consequences may ensue otherwise.

One legitimate worry that Trump often cites is the competitive advantage that some countries get in world markets when the exchange rate of their currency falls against the U.S. dollar. China is the most glaring example of a nation whose exporters benefited in recent years from an artificially low exchange rate, and although the Chinese yuan is now appreciably higher than before, the danger remains of a “currency war” in which depreciation is widely used by countries as a strategy for aiding their domestic manufacturers.

Another justifiable focus of Trump’s rhetoric is how American companies get a raw deal thanks to China’s overall trade practices. Especially since President Xi Jinping took office in late 2012, Beijing has tilted the playing field in its domestic market against foreign firms aiming to sell products to Chinese customers. In a recent survey by the U.S.-China Business Council, which represents more than 200 American corporations doing business in China, 97% of the respondents said they “know or think” their state-owned Chinese competitors receive benefits they do not including “preferential financing, access to government contracts, and preferential licensing.” And nearly 80% said that even private Chinese firms get such benefits. “The clear message is that Chinese companies get preferential treatment over foreign competitors,” the group said.

As is his wont, Trump’s level of sophistication on these matters would rate about a D-minus in a freshman economics class. He likes to claim, for example, that the United States is “losing” several hundreds of billions of dollars a year to China, and somewhat smaller amounts to Japan and Mexico, based on the bilateral trade deficits America is running with those countries.

After all the ink that has been spilled in the trade debate in recent years, it should go without saying that the word “loss” is tortured verbiage for a situation in which imports exceed exports. But Trump, being obsessed with “winning,” evidently applies hand-size reasoning (i.e., the bigger the plus size, the better) to the trade balance, which is nothing more than the sum total of millions of mutually advantageous, consensual international transactions. He therefore pays no heed to the enormous economic benefits the United States reaps when its consumers and companies freely purchase foreign goods that are cheaper and/or better than the domestic alternatives. His political purposes, and his world view, lead him to dwell solely on the factory closings and job losses that are the inevitable result of competition with foreigners, even though countless economic analyses indicate that the upside (including jobs in export industries) outweighs the downside.

The candidate’s harping on bilateral U.S. trade deficits with individual countries, which he attributes to the relative cleverness of their trade negotiators, is particularly silly. Although a large overall trade deficit for a country may be a sign of weakness—it might indicate that the country is living beyond its means—the trade balance between two countries typically reflects such a wide array of factors as to render the figure economically meaningless. The U.S. ran large trade surpluses last year with Brazil, the United Kingdom and the Netherlands—so are their trade negotiators somehow dumber than everyone else’s?

Craziest and most disturbing of all are Trump’s claims that he can resolve America’s biggest trade headaches unilaterally, by imposing a 45% tariff on Chinese goods (or just threatening to do so in the expectation that this alone will force Beijing to offer major concessions). The day is long past when the United States could credibly brandish any such threat. Washington occasionally got away with it a couple of decades ago when China’s economy was a fraction of its present size, but China now accounts for a similarly large chunk of the global economy as the United States (about 16%, as measured by purchasing power parity). Slapping a massive tariff on all Chinese imports would be the economic equivalent of launching a nuclear attack—and at this point, China has the economic equivalent of nukes, too.

For the sake of argument, let’s ignore the fact that the unilateral imposition of trade sanctions in this manner would blatantly violate the rules of the World Trade Organization, which oblige member countries to maintain ceilings on tariffs and apply them in a non-discriminatory fashion. A President Trump would presumably be unafraid of China bringing a complaint to the WTO, because the global trade body’s tribunals move slowly. A year or two would probably pass before the WTO could rule that the U.S. actions were illegal, by which time significant damage would have been wreaked on the Chinese economy.

China would therefore dispense with WTO niceties too—and it would be perfectly justified in doing so in the event that Washington showed such flagrant contempt for international law. Without waiting for the trade body’s approval, Beijing would surely take punitive action of its own against U.S. goods, which would inflict severe damage on many leading American corporations. The prospect of full-blown trade war between the world’s two biggest economies would cause a collapse in financial markets that could make the Lehman Brothers shock of 2008 look like a mere “correction” by comparison. Both sides would suffer, but counting on China to back down would be foolish; no Chinese leader could survive in office after cravenly submitting to American bullying, after all.

An enlightened Trumpkin could respond to the above points as follows: OK, Wise Guy, what should we do about the problems of Chinese trade practices and the cheapening of currencies? Isn’t the basic perception of a fair global trading system at risk if one of the biggest players is violating the spirit of the rules, and if major central banks like Japan’s are taking actions that cause substantial depreciation of their currency’s exchange rate? Is the United States supposed to sit by and pretend that the free market is working just dandy, regardless of the effect on American companies and workers?

Fair questions—and the answer is that action is definitely desirable, provided it takes place at the multilateral level. This means exercising U.S. leadership in the WTO, the International Monetary Fund, and the Group of 20 major economies. Such an approach may be far less exciting than Trump-style unilateralism, but it holds far greater promise of delivering effective results.

The WTO in particular desperately needs revitalization if it is going to perform its role over the long term of keeping global trade relatively free and fair. Not since the Uruguay Round of trade negotiations was finalized in 1994 have international trade rules been overhauled. And although China underwent major market-opening reforms to gain WTO membership in 2001, deeper liberalization is clearly necessary to rid the Chinese economy of its most protectionist features.

For those reasons, the WTO ought to embark on a new round, aimed at addressing issues posed by China’s growing influence on the system. The very idea may evoke hoots of derision in some quarters—the last such effort at revamping WTO rules, known as the Doha Round, ground to a halt after years of talks, as I chronicled in a book, and it was all but officially pronounced dead in December. But a “Beijing Round” could provide the trade body with a newfound raison d’être. China would be pressed to ensure more transparency and fairness in its market; in exchange, Beijing’s trading partners would offer safeguards against measures that threaten Chinese economic security.

In a similar spirit, the IMF and G-20 (perhaps in conjunction with the WTO) should strive to devise a set of rules regarding currencies. No less an authority than Raghuram Rajan, the IMF’s former chief economist who currently heads India’s central bank, has recently argued for an international agreement to govern what the world’s major governments can and can’t do in the monetary arena. Rajan recognizes, of course, that central banks must retain the right to radically pump up their countries’ money supplies when their economies face deflationary threats, as the Bank of Japan, Federal Reserve Board and European Central Bank have all done. He also acknowledges that it is very difficult to distinguish between “good” policies aimed at stimulating domestic demand and “bad” policies that drive down exchange rates.

Here again, the last effort by the IMF at devising rules went awry, as I chronicled in another book. But just because a venture in international cooperation fails, that doesn’t necessarily mean that the countries involved are completely incapable of working together on the issue in question in a mutually beneficial way. It may mean that they need to try again, only harder.

Let’s hope they do. More vividly than ever, thanks to Trump, international economic policymakers can envision what sort of catastrophe may arise if they shrink from the task.

Paul Blustein, a journalist and author, is a senior fellow at the Centre for International Governance Innovation. He spent most of his career at the Wall Street Journal and Washington Post.

http://fortune.com/2016/03/28/donald-trump-trade-china/

See, this is where the disconnect begins and ends between Americans and the Elites. Everything Trump says is true, absolutely true. But even when these Elites agree with him because they have do, they want to find ways to make themselves appear superior, like taking a statement that Trump makes at a rally, not an in-depth presentation at some economic institute, and says quite correctly what do we sell to them "practically nothing".

Sooooo, lets see .... since you Paul Blustein, chose not to provide the numbers either, I'll do it for you. You brag about $100 billion in exports, which were actually $116 billion, but don't give the imports which were were $173 billion. You then yap about the "top products" in an attempt to discredit Trump and make him while you say he's right, look wrong and dishonest:

A few seconds of Googling would have revealed that U.S. exports of goods and services to Japan exceeds $100 billion a year, with the top products including aircraft and spacecraft, medical and technical equipment, machinery, electronic equipment and pharmaceuticals. Trump was presumably referring to sales of U.S. cars in Japan, which are indeed minimal, but he did not bother to clarify the point. His “very good brain” functions better without the clutter of such fine distinctions.

The fact is his very good brain knew there was no point to the "fine distinctions" which you knew as well or you would have added up the numbers and reported them. Since you didn't, I will:

Japan was the United States' 4th largest goods export market in 2013.

U.S. goods exports to Japan in 2013 were $65.1 billion, down 6.9% ($4.8 billion) from 2012, but up 25% from 2003. U.S. exports to Japan accounted for 4.1% of overall U.S. exports in 2013.

The top export categories (2-digit HS) in 2013 were: Optic and Medical Instruments ($8.0 billion), Aircraft ($7.1 billion), Machinery ($5.8 billion), Electrical Machinery ($4.9 billion), and Meat (pork and beef) ($3.3 billion).

U.S. exports of agricultural products to Japan totaled $12.1 billion in 2013, our 4th largest export market. Leading categories include: pork and pork products ($1.9 billion), corn ($1.8 billion), beef and beef products ($1.4 billion), and wheat ($1.0 billion).

U.S. exports of private commercial services* (i.e., excluding military and government) to Japan were an estimated $46.5 billion in 2012 (latest data available), 4.8% ($2.1 billion) more than 2011 and 55% greater than 2002 levels. Other private services (business, professional, and technical services - management consulting and public relations services, legal services, and computer and information services), travel, and the royalties and license fees categories accounted for most of U.S. services exports to Japan.

https://ustr.gov/countries-regions/j...rea-apec/japan

So if you add up the good stuff:

Optic and Medical 8, aircraft 7.1, machinery 5.8, electrical machinery 4.9, we export manufactured goods in the categories you mentioned that total sales value of $25.8 billion a year.

The rest is agricultural products and private business services.

So what do we import from Japan:

Japan was the United States' 4th largest supplier of goods imports in 2013.

U.S. goods imports from Japan totaled $138.5 billion in 2013, a 5.4% decrease ($7.9 billion) from 2012, but up 17.4% from 2003. U.S. imports from Japan accounted for 6.1% of overall U.S. imports in 2013.

The five largest import categories in 2013 were: Vehicles ($49.8 billion), Machinery ($30.5 billion), Electrical Machinery ($18.4 billion), Optic and Medical Instruments ($6.6 billion), and Aircraft ($3.8 billion).

U.S. imports of agricultural products from Japan totaled $572 million in 2013. Leading categories include: wine and beer ($52 million), snack foods (including chocolate) ($47 million), and other vegetable oils ($41 million).

U.S. imports of private commercial services* (i.e., excluding military and government) were an estimated $26.9 billion in 2012 (latest data available), up 8.3% ($2.1 billion) from 2011, and up 65% from the 2002 level. The royalties and license fees, other transportation (freight services), and the other private services (business, professional and technical services - research and development and testing services and management consulting and public relations services) categories accounted for most of U.S. services imports from Japan.

So if you add up their good stuff:

Vehicles 49.8, Machinery 30.8, Electrical Machinery 18.4, Optic and Medical 6.6 and Aircraft 3.8, we have $109.4 billion compared to our $25.8 billion, which means we import more than 4x the good stuff as we export to Japan.

The rest is food, beverage and services. Their vehicle exports to the US alone are 2x our entire good stuff goods exports to them.

THIS IS WHY DONALD TRUMP SAYS "practically nothing", because that's the truth.

Shame on you Fortune magazine. Shame on you Paul Blustein. You're making the really childish mistake of believing your own bull crap. You think Trump Supporters are ignorant, low information, low level educated people. We're not. We're actually the opposite of what you think we are and that will prove a fatal mistake for your Anti-Trump shtick, because that shtick won't fly here and if it doesn't fly here, it won't fly anywhere.

Also, many of US were raised during the Cold War and well-taught and educated about misinformation propaganda. That's why we spot your propaganda right away. We were also taught to research the facts before we take a position, and most of US have done that and done it well for years. So when you want to talk the talk about immigration and trade, your shtick won't pass GO let alone collect your $200. Even Bernie Sanders young crowd of supporters understand the problem with trade. So, between Trump Supporters and Bernie Supporters on the trade issue, you've just written an article exposing you're a traitor. We'd say stupid, but we know you "googled" and you found the information, because you didn't already know it before writing your article, because you said so in your article. Therefore, we know you found the same information that everyone else almost knows by heart without having to look it up, which means you knew when you wrote you article that it was a constructed lie to deceive and demean without merit or facts.

Shame On You, you filthy globalist pond scum. Why anyone would waste their time reading one of your books, let alone paying good money for one, is beyond me.

And if you think we give a tinker's hoot about "trade wars" or "global financial crisis", then you don't understand the American Market at all. We don't care about "trade wars". Why would we? We can make all of our own stuff or go without. We can outlast these other countries who want to rape and bankrupt our country longer than they can. We either play fair in a manner that benefits our country or we don't play at all. Why would we? Why would Americans engage in any act that costs US our economic foundation, that leaves our workers in the dust, that robs our money supply, that drains our wealth it took generations to build, and bankrupts our government?

Why would any sensible loyal American do anything at all ever that would contribute to such a disaster?

Well, we wouldn't. So we're going stop you ignorant self-centered traitors from doing it against our will.

It's very simple. We're going to elect Donald Trump President of the United States and he's going to fix our country. So the sooner you adjust to that reality, the better off you'll be.

You all need to remember a great line from a great song:

"Freedom is just another word for nothing left to lose."