If you don't like President Trump's tariffs give me a better alternative. I've listened to the naysayers, the free marketers, and no one is suggesting China isn't subsidizing their companies to enable them to dump steel and aluminum at below market prices or enabling the theft of technology. But I don't hear them offering any new ideas for enabling American companies to compete and for American workers to regain the quality jobs that go with these industries other than for our companies to compete better. I do have an alternative to tariffs but it probably would not be enacted. But before I get there let me start by poking holes in the arguments of the naysayers, including those who complain that the price of products will rise and consumers will be the losers here.
Let's start with the point on which I believe there is little disagreement. We do need to do something about the trade imbalance and China. China has been waging economic war on the United States since the 1990s. You'll remember the major industrial spying investigation that occurred during the Clinton Administration, during which time I heard members of Congress state that it was well known the Chinese were conducting industrial espionage relentlessly. In this century, with the rise of the internet, the rise of Chinese government sponsored hacking has been well documented.
Previous Administrations of both parties from Clinton, to Bush, to Obama have for years listened to the tariff opponents and engaged in negotiations to try to get China to stop their behavior and compete fairly. But very little action was taken and any agreements that were reached with China have proven largely ineffective as evidenced by the US' continually shrinking industrial base and ever increasing trade deficit with China.
I was listening to Sen. Orrin Hatch on the radio this morning expressing his opposition to tariffs and offering his belief that American companies need to out-compete the Chinese. But if your competition is actively stealing your new technology and their Government supports the theft and then subsidizes the use of that to destroy the competition, how can American companies out compete the Chinese?
The other argument the Senator and others have advanced is that tariffs will make prices go up and consumers will end up footing the bill. Here is my counter argument - if the Chinese Government stops subsidizing their steel and aluminum industries and stop keeping prices artificially low so their companies have to compete fairly doesn't that mean the price of steel and aluminum from China will go up? Won't consumers foot that bill? Tariffs or fair trade - what's the difference when it comes to pricing?
There is some advice I would give President Trump about tariffs. First, it's a means to an end not the end in itself. The goal is to use this to cause China to compete fairly, not to create perpetual revenues for the US Government. Second monitor what the American companies are doing. In the 1980s, the Reagan Administration negotiated temporary limits on Japanese auto imports to try to help American companies but the American automakers squandered that time by getting greedy and increasing prices and profits rather than investing in their infrastructure and preparing themselves to better compete with the Japanese. Thus when the limits ended, American automakers resumed their downward spiral. The Trump Administration should be watching the American steel and aluminum companies and if they are not using this opportunity to position themselves to compete then the President should call them out for it and end the tariffs.
All of that said, I'm not a fan of tariffs. They raise prices and can lead to a trade war for a while until someone blinks. Rather than raise the cost of foreign companies, I'd prefer we find ways to help American companies lower their cost to do business and to compete more effectively. What's one way to lower the cost to do business that just this year has proven amazingly effective? Cutting taxes.
In 2012 Rick Santorum, then a candidate for President, suggested eliminating all taxes on manufacturing. We just reduced the Corporate taxes from the highest in the world to about 21% and the results have been spectacular with companies pledging billions in investments and millions of Americans getting bonuses and improved benefits. What would happen if we did as Senator Santorum suggested and eliminate the taxes on manufacturing?
It's not a tariff so the Chinese would have no basis to retaliate. There would be no case to take to the World Trade Organization. Prices to consumers would decrease, not increase. American companies would have an infusion of cash - something that doesn't happen with tariffs. They could use the money to invest in their infrastructure, their technology, their people or their prices to be more competitive.
The other way to make American companies more effective is a thorough look at current regulations. We need regulations that are clear, easily understood, and specifically tailored to important policy goals like worker safety or minimizing pollution. In this regard the Trump Administration is making headway at cutting regulations and it is an effort that should continue because the less money spent on unnecessary - key word there - regulation is more money that can be spent productively.
Regardless of the approach, I agree with the President that the efforts of the past have not been sufficient and something more needs to be done. America's national defense would be compromised if our steel and aluminum industries dwindled and we were left reliant on manufacturing facilities controlled by a Communist Chinese Government whose values are so very different than ours and who has been aggressively pursuing dominance over American companies by inappropriate means.
Let's start with the point on which I believe there is little disagreement. We do need to do something about the trade imbalance and China. China has been waging economic war on the United States since the 1990s. You'll remember the major industrial spying investigation that occurred during the Clinton Administration, during which time I heard members of Congress state that it was well known the Chinese were conducting industrial espionage relentlessly. In this century, with the rise of the internet, the rise of Chinese government sponsored hacking has been well documented.
Previous Administrations of both parties from Clinton, to Bush, to Obama have for years listened to the tariff opponents and engaged in negotiations to try to get China to stop their behavior and compete fairly. But very little action was taken and any agreements that were reached with China have proven largely ineffective as evidenced by the US' continually shrinking industrial base and ever increasing trade deficit with China.
I was listening to Sen. Orrin Hatch on the radio this morning expressing his opposition to tariffs and offering his belief that American companies need to out-compete the Chinese. But if your competition is actively stealing your new technology and their Government supports the theft and then subsidizes the use of that to destroy the competition, how can American companies out compete the Chinese?
The other argument the Senator and others have advanced is that tariffs will make prices go up and consumers will end up footing the bill. Here is my counter argument - if the Chinese Government stops subsidizing their steel and aluminum industries and stop keeping prices artificially low so their companies have to compete fairly doesn't that mean the price of steel and aluminum from China will go up? Won't consumers foot that bill? Tariffs or fair trade - what's the difference when it comes to pricing?
There is some advice I would give President Trump about tariffs. First, it's a means to an end not the end in itself. The goal is to use this to cause China to compete fairly, not to create perpetual revenues for the US Government. Second monitor what the American companies are doing. In the 1980s, the Reagan Administration negotiated temporary limits on Japanese auto imports to try to help American companies but the American automakers squandered that time by getting greedy and increasing prices and profits rather than investing in their infrastructure and preparing themselves to better compete with the Japanese. Thus when the limits ended, American automakers resumed their downward spiral. The Trump Administration should be watching the American steel and aluminum companies and if they are not using this opportunity to position themselves to compete then the President should call them out for it and end the tariffs.
All of that said, I'm not a fan of tariffs. They raise prices and can lead to a trade war for a while until someone blinks. Rather than raise the cost of foreign companies, I'd prefer we find ways to help American companies lower their cost to do business and to compete more effectively. What's one way to lower the cost to do business that just this year has proven amazingly effective? Cutting taxes.
In 2012 Rick Santorum, then a candidate for President, suggested eliminating all taxes on manufacturing. We just reduced the Corporate taxes from the highest in the world to about 21% and the results have been spectacular with companies pledging billions in investments and millions of Americans getting bonuses and improved benefits. What would happen if we did as Senator Santorum suggested and eliminate the taxes on manufacturing?
It's not a tariff so the Chinese would have no basis to retaliate. There would be no case to take to the World Trade Organization. Prices to consumers would decrease, not increase. American companies would have an infusion of cash - something that doesn't happen with tariffs. They could use the money to invest in their infrastructure, their technology, their people or their prices to be more competitive.
The other way to make American companies more effective is a thorough look at current regulations. We need regulations that are clear, easily understood, and specifically tailored to important policy goals like worker safety or minimizing pollution. In this regard the Trump Administration is making headway at cutting regulations and it is an effort that should continue because the less money spent on unnecessary - key word there - regulation is more money that can be spent productively.
Regardless of the approach, I agree with the President that the efforts of the past have not been sufficient and something more needs to be done. America's national defense would be compromised if our steel and aluminum industries dwindled and we were left reliant on manufacturing facilities controlled by a Communist Chinese Government whose values are so very different than ours and who has been aggressively pursuing dominance over American companies by inappropriate means.
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