In shining a spotlight on governmental manipulation of international trade, is President Donald Trump pointing at China, or is he peering at his own reflection in the mirror? In an historic show of trade hypocrisy, he is engaging in the United States in many of the same distortions of free markets that he is quite rightly denouncing in China.
The president is correct in trying to quell the recent trend in China away from several decades of commercial and general opening to the wider world and back toward a mistaken and ultimately self-defeating reliance on a resurgence of state control of the economy.
Central to this Chinese statism is managing trade to restrict imports, discriminating against foreign investors, subsidizing and otherwise favoring uncompetitive state-owned enterprises and thus distorting what would otherwise be the outcomes of free decisions in a free market.
President TrumpDonald TrumpTrump goes after Cassidy after saying he wouldn't support him for president in 2024 Jan. 6 panel lays out criminal contempt case against Bannon Hillicon Valley — Presented by Xerox — Agencies sound alarm over ransomware targeting agriculture groups MORE’s chosen means for dealing with China are suspect, legally, economically and geopolitically. But his professed aim of securing a restructuring of the Chinese economy to produce free-market outcomes is not.
The introduction of considerably more leeway by the Chinese government for enabling and allowing market outcomes would be highly beneficial to China and to all of China’s trading partners, including the United States.
The statism in China in trade and in all else vastly exceeds our own. Yet while President Trump and his administration are rightly assailing managed trade in China, they are engaging in more and more of it themselves in the United States.
In addition to the Chinese tariffs, the steel and aluminum tariffs and the threatened tariffs on automobile imports that may soon come next, think of all the other ways in which Trump and his team are using the government to try to manipulate trade.
Consider his dictates of what he has pronounced should be the results of specific private commercial transactions. Recall the tweeted threats he has made against U.S. companies and CEOs that deign to make market decisions about where to invest and trade.
Witness the continued outpouring of “dumping” and other often rigged trade remedies that protect uncompetitive businesses and industries from foreign competition at the expense of American industries that can compete and at the cost of untold lost opportunities for Americans in the new arenas of the 21st-century global economy.
Managed trade in China is mainly an instrument for maintaining unchallenged political power for the ruling Communist Party. Managed trade in the United States is mostly a manifestation of crony capitalism (leavened by the prickly and capricious ego of our current president).
Politically-connected firms and industries seek shelter from fair foreign competition in exchange for their financial and other political support. The arbitrary decisions of Trump and his anointed acolytes in support of these special pleaders and against the overall public interest are political substitutes for free-market decisions.
The few are favored at the expense of the many, and the long-term result is a loss of economic growth and the new jobs and new products that come with it.
In the latest instance of Trump’s manipulation of trade, U.S. Trade Representative Robert LighthizerBob LighthizerBiden moves to undo Trump trade legacy with EU deal Whiskey, workers and friends caught in the trade dispute crossfire GOP senator warns quick vote on new NAFTA would be 'huge mistake' MORE has promised that if the current trade talks with China fail, American companies will be able to request exemptions from more of Trump’s Chinese tariffs.
If that happens, thousands of U.S. firms will be lining up to beseech federal bureaucrats to favor them with exemptions.
This next prospective private-sector parade of companies begging the president and his enablers to smile on them with lower tariffs on their imports of Chinese products will only add to the lengthening queue of American businesses that have been compelled to genuflect before a looming and intruding Leviathan of governmental authority in what we can only hope is the aberrational age of Trump.
In addition to the tariffs the president has levied so far on Chinese imports, he has also applied tariffs on most imports of steel and aluminum.
While we await verdicts from the judges at the World Trade Organization on the doubtful legality of these unilateral Trump tariffs under international law, American businesses that depend on imports of steel and aluminum have been lining up to request exemptions.
Thus far, there have been about 57,000 requests for exclusions from the steel tariffs and nearly 8,000 requests for exemptions from the aluminum tariffs. Roughly 14,000 requests have been granted for steel and nearly 1,000 for aluminum.
The nonpartisan General Accounting Office has accepted a bipartisan request from Sen. Pat ToomeyPatrick (Pat) Joseph ToomeyBlack women look to build upon gains in coming elections Watch live: GOP senators present new infrastructure proposal Sasse rebuked by Nebraska Republican Party over impeachment vote MORE (R-Penn.), Sen. Tom CarperThomas (Tom) Richard CarperIs the Biden administration afraid of trade? Congress sends 30-day highway funding patch to Biden after infrastructure stalls Senate to try to pass 30-day highway bill Saturday after GOP objection MORE (D-Del.) and Sen. Doug Jones (D-Ala.) to investigate what they see as a lack of transparency and certainty in the exclusion process. At best, the governmental criteria for granting exclusions are opaque. At worst, those criteria are utterly arbitrary.
Managing trade through arbitrary government intervention undermines the unending struggle to make and maintain free and open societies — including through free trade. Such second-guessing by politicians of the marketplace undermines the free private enterprise that is the source of prosperity.
Moreover, managing trade does not work. It distorts market decisions and, in doing so, prevents the market innovations that are indispensable to attaining more prosperity. The short-term and long-term costs of managed trade vastly exceed any of what may appear to be its ephemeral benefits.
Certainly, we must continue to seek an enforceable agreement with China that will make the Chinese economy more open to foreign trade and investment and more reliant on the free market, for the sake of the Chinese people as well as our own.
But we must also put an end to the hypocrisy of opposing managed trade in China while increasingly imposing it in the United States. Free markets do not just happen, and they are not self-sustaining. We must be ever-diligent in creating them and ever-vigilant in defending them here at home and throughout the world.
Former Rep. James Bacchus (D-Fla.) is a former chief judge for the World Trade Organization. He is an adjunct scholar at the Cato Institute and professor of global affairs at the University of Central Florida. His new book is "The Willing World: Shaping and Sharing a Sustainable Global Prosperity" (Cambridge), named by the Financial Times as one of the “Best Books of the Year” for 2018.