The main points in this article:
- The Wall Street Journal published an article opposing Trump’s trade policy.
- The U.S. has long suffered under free trade deals with China that didn’t involve customs taxes.
- Trump is not aiming for protective trade; he is aiming for just trade.
The Wall Street Journal published an article entitled “Trump’s Antitrade Warriors” on the 16th of January in anticipation of Trump’s inauguration.
The then nominees for U.S. Secretary of Commerce, Wilbur Louis Ross Jr., Director of the National Trade Council, Peter Navarro, and U.S. Trade Representative, Robert Lighthizer, were described in the article as advocating protective trade policies. The Wall Street Journal criticized the Trump administration by suggesting that it lacked advocates for free trade. It also said that Republicans must keep an eye on this ‘protectionist triumvirate’ so they don’t ruin the Trump administration.
The Wall Street Journal criticised Ross for not believing that trade brings mutual gains and seeing it as a “zero-sum game”. It also expressed scepticism for Navarro by suggesting he is using the U.S. to stop China’s mercantile policies.
Free Trade and Protectionist Trade
People around the world are becoming fearful that Trump will throw the world economy into chaos by bringing an end to free trade and replacing it with protective trade policies. In this article, we discuss what “free trade” really is, what Trump’s protectionist trade approach entails, and where Trump is going with his new trade policy.
First, what is this ‘free trade’ concept that the media is talking about?
Free trade means to do business between different countries without a customs tax being imposed. A customs tax, or tariff, is a tax that must be paid to a country when goods are imported or exported. The idea is that, if customs tax is reduced to 0%, both seller and buyer will attain maximum profit.
Trump, on the other hand, is determined to place a 45% customs tax on Chinese imports. If this happens, the cost of Chinese imports will increase, which means they will be less competitive with American products, and American businesses will become more profitable. That is why the press label Trump a “protectionist”.
Is Free Trade Good?
Seen in this light, it seems as though protective trade is a selfish policy that only benefits one’s own country. However, there is a bigger problem lurking in the shadows: China’s extremely cheap labour costs and products.
Let’s take, for instance, the steel industry. The U.S. and Japanese steel industries have suffered huge blows because China has been dumping vast amounts of steel at unduly low prices in those markets.
Navarro’s video clip “Death By China” accurately illustrates how many companies have moved their production facilities to China. When the Boeing Company began constructing its aircraft in China, not only did it cause the latest American technology to leak, it also reduced American employment.
Just as the clip title says, China is about to bring death upon the U.S. through free trade.
It therefore becomes clear that Trump not aiming for protective trade per se, but for “just” trade. It is not a matter of free trade versus protective trade; what is important is for politicians to think about what is best for the prosperity of their country.
Free Trade and Neoliberalism
Neoliberalism is an economic philosophy that champions the freedom and economic value of the individual. It spread in the 1970s and 80s primarily in Anglo-Saxon regions such as the U.S. and U.K.
Freedom is of course very important, but neoliberalism has one big flaw: in their bid to protect their ideology, there is a tendency to ignore the nation as an entity, and praise globalism.
The main reason for this is that neoliberalism lacks patriotic spirit. Neoliberalism, which began with Milton Friedman, tends to think of the nation as a means to the freedom and economic value of the individual.
But this makes it seem as though people are born to pursue materialistic values such as money. The germ of this idea can be seen in the philosophies of Friedman and his predecessors John Locke and Adam Smith.
Contradictions in Neoliberalism
German philosopher G.W.F. Hegel discovered this problem and left a sharp criticism:
“The nature of [the state] is such that unless each of its parts is brought into identity with the others, unless each of them is prevented from achieving autonomy, the whole must perish.”
In other words, neoliberalism cannot justify the importance of protecting one’s country.
But in reality the individual’s ‘passion for creating a fantastic nation’ is also part of the concept of true freedom. Hegel placed the freedom of being able to create a community above the supremacy of economic values.
Patriotism Is a Natural Thing
Patriotism, or the spirit of supporting one’s nation, is one expression of love for the community and it is a natural thing for human beings. Hegel said that patriotism “is the sentiment which, in the relationships of our daily life and under ordinary conditions, habitually recognizes that the community is one’s substantive groundwork and end.”
Of course, this is different to the forced patriotism of China and North Korea where each person is deprived of freedom. Aristotle, a philosopher from Ancient Greece the birthplace of democracy, stated that patriotism was innate and “Anyone who either cannot lead the common life or is so self-sufficient as not to need to, and therefore does not partake of society, is either a beast or a god.”
The polis is Greek for ‘state’. He went on to say that those who are unable to create a community are not people but animals.
From Globalism to Totalitarianism
Austrian economist Friedrich Hayek’s thinking can help us better understand President Trump’s ideas. Hayek was a liberalist, but his stance is slightly different to that of Friedman.
Hayek was opposed to the EU having a common currency, and kept pressing for the preservation of the right for each country to issue their own currency. He thought that an international establishment such as the EU should have no right to command individual states.
The EU was an organisation created upon the idea of losing country borders and unifying the currency. At first sight, the resulting community seems ideal, with the freedom to cross borders and free trade. But look at the situation now: since the EU holds all rights to issue currencies, individual countries are unable to employ financial policies that fit the changing conditions, and many – like Greece – are experiencing major financial crises.
When globalism goes too far, it ends up becoming like a totalitarian enforcement of the same values on each country. But this makes it impossible for the people of each country to adopt a patriotic spirit to desire to create an ideal future. We can say that Hayek understood this.
We are now entering a time where we need to regain the sort of liberalism that incorporates the idea of the ‘state’.