2018: The Year of Trade

Daily “news” consumption is increasingly deemed an unnecessary waste of highly partisan time. I vehemently disagree. Entrenched news organizations such as The New York Times, The Washington Post and The Wall Street Journal attack each major topic of the day/week/month with such ferocity that it is impossible to not learn an enormous amount about any given topic, in a very short period of time, by *simply* paying close attention (i.e. reading, thinking, and writing). Given the seemingly unorthodox (read: highly independent, pragmatic and transactional) policies of the Trump Administration, and the absolutely unorthodox ways of President Trump, the ferocity of the coverage over the last 12+ months has (likely) been unprecedented. For probably $50 to $100 of monthly newspaper subscriptions, one could have self-generated perhaps 1-3 years of formal education. It has been incredible.

One of the key areas of education for me has been on the trade policy front. I am still getting up to speed on the ins and outs, but will be ramping up big time over the next couple of months as we head into 2018, as once tax reform is done the big focus on next year is more than likely TRADE (per Axios).

* * *

My utterly uneducated opinion has been that free trade is and has been a net benefit for American living standards over time, even for those directly affected by factories shutting down. We live in a highly mobile, free society, and there is simply not a great excuse to remain in a former factory town wallowing in the misery of job loss. While not even remotely dismissing the need for a robust social safety net to help those directly affected transition (i.e. unemployment insurance, education assistance and job training), to date my attitude has been to pick yourself up by your bootstraps and figure out how to make yourself valuable for another segment of the economy. Lamenting the days of yore and raging against “the man” to fight back is not productive. As such, Trump’s seemingly anti-trade rhetoric has been one of the least attractive features of his administration, along with unnecessarily tight immigration policies, in my opinion. (That said, I have been very, very comforted by Wilbur Ross’s seat at the table, leading me to believe that whatever trade restructuring does occur will be part of an overall highly business friendly, economic growth-oriented economic agenda.)

However, the more I dive into the effect China’s state-driven, protectionist trade practices have had on the global trading system since entering the WTO in 2000, the more concerned I am that my uneducated pro-free trade at virtually any cost stance was/is wildly off base. In the Axios article cited above, this quote caught my attention, to say the least (my emphasis in bold):

“Lighthizer — in front of the whole economic team including Cohn, Mnuchin, Commerce Secretary Wilbur Ross, and Agriculture Secretary Sonny Perdue — described the U.S.-China economic relationship as ‘bullshit.’ Lighthizer laid out the history of the last 25 years of U.S.-China relations. He went through what each “dialogue” was called under presidents Clinton, Bush, and Obama. His point: every administration comes up with a new catchword and strategic framework to describe the U.S.-China relationship, but the trade deficit with China just keeps ballooning by the billions.

“I’m told many in the group — which includes officials like Cohn who often disagree with Lighthizer philosophically — found Lighthizer’s presentation compelling.

“Avowed free-traders in the administration didn’t even push back against this narrative when I reached out to them.”

The fact that “Globalist Gary” and other staunch free-trade-at-virtually-any-costers are not pushing back on this narrative tells me Lighthizer is on to something…especially with Ross at the table. As Trump likes to say, it is time to “watch trade.”

Now, I hate the myopic focus on bilateral trade deficits as evidence of unfair trade practices. It defies mathematical logic, and I wish the administration would focus on more specific metrics. But my guess is the nitty gritty of bilateral trade policy – such as the aggregate statistics of China’s oppressive tariffs – is perhaps generally captured in the trade deficit figure(s) for general messaging purposes. Still, as a daily consumer of relatively complex financial statistics, I want the nitty gritty.

* * *

Confirming my suspicion that Trump is not nearly as far off base with his seemingly anti-trade rhetoric as I previously assumed, and major global newspapers would lead you to believe, an article in this week’s Financial Times outlined well how negatively influential China’s highly manipulative trade policies have been on the European Union.

What is utterly hilarious is the author’s claim that it is vital for the European Union to resist China in order to uphold the rules-based global free trading system that the United States is “retrenching” from. Really amazing stuff. The United States is leading the global charge to restructure a trading system that China has taken advantage of for the last two decades, with one of the most business-friendly, free market capitalism-oriented cabinets in modern American history. A truly incredible claim.

“Europe is centre stage in this drama: both as the holder of the global trade system (given the current US protectionist retrenchment on trade) and as a growing target of Beijing’s investment might.”

2 thoughts on “2018: The Year of Trade

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