A free-market is a market with a standard set of laws, rules, and regulations where the government imposes very little interference. Trade between nations (foreign trade) is not free-market because there are different laws, rules, and regulations between countries. While “free-market-economics” may include trade between nations when describing the world market, this type of trade is not implicitly “free-market.” There are separate and unique markets between governments, and foreign-trade takes place between these distinct markets. It is essential to make this distinction to eliminate confusion.
In theory, free-trade is beneficial to everyone in the long-term due to the various laws surrounding free-market-economics. This theory works if countries do not have ulterior motives and try to game or manipulate the system. But free-trade can cause significant economic pain as new countries with different values, and living standards begin to participate. If national security is an issue, and it always is, then truly free-markets between nations can never be achieved.
`There will always be a willingness to prop up those industries that allow a country to maintain its independence and sovereignty. There is nothing wrong with broad-based tariffs to protect the economy; a nation gaming the foreign trade system is using its economy as a weapon to attack us. This type of attack begs to be countered. As well a problem for presidential administrations, Congress’s concern has always been their inability to react to economic attacks quickly.
My perspective on foreign trade is based on three metrics: market equilibrium, economic pain, and national security. Due to differing laws and different living standards, governments can impose handicaps or advantages on the domestic industry by implementing trade between nations. Handicaps or advantages can unduly affect reaching a natural market equilibrium.
Markets are not in equilibrium when standards of living and laws, rules, and regulations differ significantly. When needs are not in equilibrium, Americans experience economic pain. Sometimes, it is easy to meet market equilibrium quickly, so economic pain is minimized. Other times, it may either be impossible or take a very long time to realize market equilibrium. In such cases, America loses jobs and industries to foreign competition.
When America first opened its market to Japan, American automakers were put at a disadvantage because the standard of living was so different from America to Japan. Japanese auto workers, at one time, made much less money than American auto workers. Low labor costs in Japan caused American auto workers much economic pain until the markets reached equilibrium. When the Japanese standard of living became equal to that of the United States, we met market equilibrium. Japan no-longer had a standard of living advantage over the United States. Many Japanese cars are now made in the United States.
The Japanese now have similar rights and similar freedoms as Americans. Japan also has a much smaller population than America. It is easy to see that it would not take long to meet economic equilibrium with America. It is not so easy with other countries to see a path to doing business that is beneficial to America.
China, for instance, is a communist nation with ambitions to dominate the marketplace through market manipulation and a much lower standard of living for a large percentage of it’s people. Non-tariffed trade with China can, has, and will continue to cause significant economic pain to American workers and American industry. It is doubtful due to their population’s size and their aggressive manipulation of markets that we will ever meet economic equilibrium with them.
We will inevitably continue to observe a net negative with open-trade with China.
The argument is that China produces cheap products, allowing Americans to keep more money in their pockets. The problem with that logic is if China is making the products, Americans are not. Americans who are not working cost those who do work by taking American tax dollars needed to support social welfare programs. Since China is the low-cost leader, Americans buy more and more low-cost Chinese products. They are sending more and more jobs to China, causing more Americans to look for social assistance. This is truly a biblical moment: to beware of strangers bearing gifts. These low-cost products produced by a communist country are the means they use to undermine our freedoms and expand Americans’ dependence on the Federal government. This is the expansion of an America more willing to accept socialism and communism. It shows us how China has been winning.
Capitalism is not broken and free-market-economics still works. Congress is broken and so is their foreign trade policy. Changing our Congressional leaders can restore both capitalism and a free market economy.
Reciprocal tariffs are broad-based tariffs that are applied to any negative trade imbalance with the United States. They help to correct (reduce economic pain) and are unbiased. A country like China that tries to manipulate the market to gain market-share would have a broad-based tariff placed on all their goods. The U.S. Department of Commerce would moderate this tariff to close the trade imbalance gap. As the gap lessens, the tariff lessens. This type of reciprocal tariff would almost certainly force China to allow American companies greater penetration into their markets. As the trade imbalance narrows, tariffs are reduced. When imports are at, or near equal, tariffs are automatically discontinued.
America has built a precious marketplace that we developed over two centuries. We have every right to impose conditions consistent with our values to gain access to our markets.
Should we do business with China when we know their goal is to make us irrelevant? Should we continue to have trade with Sri Lanka when we see that they use child slave labor? We have a golden goose, and we should not just give it away.
I intend to introduce a long-term set of permanent trade-rules that are predictable for all countries and businesses wishing to do business with the United States. A reciprocal-tariff program with all of our trading partners will bring stability and predictability to world markets while guarding Americans against economic pain. This will help to deter Presidential administrations’ need to place punitive tariffs on specific industries for specific countries.