Wednesday, June 29, 2016

Does Donald Trump Understand Free Trade?

On Monday, Donald Trump delivered a speech just outside Pittsburgh, Pennsylvania. It was named the "Declaring America's Economic Independence" speech by the Trump campaign.

The first question that must be asked is: What the hell does "declaring economic independence" mean? Does Trump really want to reduce trade with the rest of the world and become independent when it comes to trade.? What else could "economic independence" mean? It is neanderthal thinking, yes neanderthal.

By the time he got around to trade, after declaring a desire for economic independence, he let out a screed of anti-free trade, mercantilist points, just a notch above neanderthal:
Today, we import nearly $800 billion more in goods than we export.
This is not some natural disaster. It is politician-made disaster...
George Washington said that "the promotion of domestic manufactur[ing] will be among the first consequences to flow from an energetic government.”
Alexander Hamilton spoke frequently of the "expediency of encouraging manufactur[ing] in the United States." The first Republican President, Abraham Lincoln,warned that: "The abandonment of the protective policy by the American government…must produce want and ruin among our people."
Our original Constitution did not even have an income tax. Instead, it had tariffs - emphasizing taxation of foreign, not domestic, production...
America has lost nearly one-third of its manufacturing jobs since 1997 - even as the country has increased its population by 50 million people...

Almost half of our entire manufacturing trade deficit in goods with the world is the result of trade with China...
To understand why trade reform creates jobs, we need to understand how all nations grow and prosper.
Massive trade deficits subtract directly from our Gross Domestic Product...
America's "job creation deficit" due to slower growth since 2002 is well over 20 million jobs - and that's just about the number of jobs our country needs right now to put America back to work at decent wages.
Trump couched these comments around attacks of Hillary Clinton for her support of backroom globalist trade deals such as TPP, but there was nothing in his comments that suggested Trump appreciates free trade. To him, it is all about tough negotiating. He went on in his speech:
I'm going to appoint the toughest and smartest trade negotiators to fight on behalf of American workers.
I'm going to direct the Secretary of Commerce to identify every violation of trade agreements a foreign country is currently using to harm our workers. I will then direct all appropriate agencies to use every tool under American and international law to end these abuses.
I am going to instruct my Treasury Secretary to label China a currency manipulator. Any country that devalues their currency in order to take advantage of the United States will be met with sharply.
I am going to instruct the U.S. Trade Representative to bring trade cases against China, both in this country and at the WTO. China's unfair subsidy behavior is prohibited by the terms of its entrance to the WTO, and I intend to enforce those rules.
It is clear that Trump does not appreciate the difference between true global free trade, which requires no negotiations, versus  backroom globalism. He just wants to negotiate "better" backroom deals.

He clearly does not understand comparative advantage, the lump of labor fallacy or the importance of  even unilateral free trade or just free trade in general.

Trump is no friend of economic progress or free trade. He is shockingly ignorant of basic fundamental economic principles.



  1. When Vitali Glattfelder and Battiston (2011) exposed a secret super entity headed by Barclays Bank that owns and controls 96.2% of the world's multinational corporations the revelation made anyone who believes in free trade look naive. The reality is we live in a world where a giant secret monopoly has control and nothing resembling free trade can occur until this situation is remedied.

  2. "He clearly does not understand comparative advantage, the lump of labor fallacy or the importance of even unilateral free trade or just free trade in general."

    And you seem to not understand that he is running a political campaign not teaching a class the principles of libertarianism.

    1. True. Our best hope is that campaign promises are almost never kept. But still, he must believe there are a large number of voters who embrace these shoot-yourself-in-the-foot policies!


      The real world choice is between bureaucrat micro-managed low tariff policies and high income taxes versus higher tariffs and lower income taxes. The Founders of this Republic preferred tariffs, excise taxes and no income tax whatsoever. Since we have to make less than ideal choices in a less than ideal world I think The Founders had it right.

      Higher tariffs and lower income taxes would encourage savings and investment and discourage profligate consumption. Lower income taxes for individuals and corporations would also encourage more production in this country and create jobs here instead of in China, South Korea, Japan, Vietnam, etc.

      Nothing wrong with foreigners having jobs of course, but as an American I would rather see those jobs created here rather than in mercantilist and extremely protectionist countries run by autocratic, corrupt one party political systems.