As most of you know, I have worked in international trade for 21 plus years. Last year, I wrote posts in March and September on the importance of international trade because of anti-trade rhetoric I was hearing.
Despite “alternative facts,” real facts prove what international trade does. It increases jobs, increases income and reduces prices.
I attended the Transpacific Maritime Conference (TPM) in Long Beach. Leading industry economist Dr. Nariman Behravesh talked about the U.S. and global economies. One thing that stood out was the potential for the U.S. unemployment rate to reach 3 percent, which would be quite amazing. His caveat: If we don’t enter into a trade war.
Enter Trump’s tariffs on aluminum and steel. A few questions to ask yourself. What percentage of aluminum and steel imports come from China? The answer? Not a lot. There are other countries that one could argue dump more of these products than China, so how does this really impact China? The answer. Not much.
Since the tariff announcement, I have attended a few other trade-related conferences. I would like to share some highlights from those conferences. To sum it up: Nobody has ever won a trade war.
Enter China’s response. Those tariffs will impact farmers, some in Washington state. This is one of the reasons I never understood farmers voting for Trump (and part of the reason I could never fully get behind Bernie Sanders). They heard his anti-trade rhetoric, yet they voted for him. Trump promises to “make it up for farmers.” But his policy has the potential to cause China to look for other sources for their agricultural needs.
Trump has promised more tariffs and China will respond in kind. These tactics are not the right approach. They will escalate, and the big losers will be everyday people in both countries. Hopefully in the end sanity will prevail, and we will make progress on NAFTA and TPP.
Now is there a China problem in terms of intellectual property rights? Of course, but that problem needs to be solved with a world-wide effort. In fact, the administration could have addressed it in a more productive manner if the U.S. had stayed in TPP. But alas, the administration decided to pull us out, which only helped to decrease U.S. influence. I wonder if the administration thought the world would stop if the U.S. pulled out. As predicted by myself and others, the world went on without us (as they should), and America is left at a disadvantage.
It takes years to build relationships. Tariffs will make American goods more expensive, and you can believe that delegations from other countries are already marketing for their products to fill the gap. We are not the only country in the Northern Hemisphere that grows apples, soybeans, wheat, etc., so there is a fallacy in the belief that China needs our products. China and other countries can look for other sources, and once that business is lost, it’s hard to get it back.
China (and Asia in general) is where the middle class is growing. It would be a shame to have trade policies in place that would price American goods out of those markets. The U.S. and China have the largest economies of the world. In the end, the health of both countries would be better with cooperation. Trade relations are complex. Agreements (or disagreements) between two countries have a ripple impact on the rest of the world.
It is important that people who understand the importance of international trade tell the story. People need to know what erecting trade barriers does and what eliminating trade barriers does. The majority (85 percent) of manufacturing job losses have been lost to automation not globalization. Putting up trade barriers is not going to bring the jobs back. Decisions need to be made by people who understand the bigger picture and can look at trade from a holistic viewpoint.
As a person living in Washington state, I understand all too well what can be lost and what can be gained in terms of international trade. For example, Mexico is the largest market for Washington apples. NAFTA opened those doors. Whether TPP or NAFTA or trade wars, it is important to not put agriculture at risk because it is always the first area targeted. Trade wars are nothing to celebrate or boast about. Nobody wins.