Sunday, June 17, 2018

Why It Is Good for Trump To Challenge the International Trade Establishment - E. Jeffrey Ludwig

by E. Jeffrey Ludwig

Self-interest and sovereignty require that we take steps to resist unfettered globalism.

Since the election of Pres. Trump, commentators have been asking repeatedly why he seems so cordial or complimentary of leaders of countries many consider to be "enemy countries" – especially the People's Republics of China and Russia – while being irritated with our neighbors and friends, especially on the economic front. Early on in his presidency, he indicted NATO members for not paying 2% of GDP for support of NATO. And in fact, only five of the 28 members are meeting that benchmark. 

Then, in a memorable speech from the Rose Garden on June 1, 2017, Trump withdrew the USA from the Paris Climate Accord. Students of the accord will understand that it is part of the globalist agenda thrusting toward a one-world government. In addition to presenting a host of specific reasons for leaving based on a lack of equity in the accord, he also stated, "And exiting the agreement protects the United States from future intrusions on the United States' sovereignty and massive future legal liability."

Most recently, he left the G7 meeting in Canada early and refused to sign the final communiqué that was issued, citing offense at the comments made by Canadian prime minister Justin Trudeau, which were publicly deemed to be a verbal stab in the back. The president announced increased tariffs on aluminum and steel from Canada and that there would be a variety of tariff hikes on G7 exports to the U.S.

He also has withdrawn from the Trans-Pacific Partnership, which was renamed and signed by eleven countries – Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam – in March of this year. None of these is considered an enemy by our leaders.

Despite these tensions with friendly nations, the USA is still a signatory to the General Agreement on Tariffs and Trade and a member of the World Trade Organization. We still are a major contributor to the International Monetary Fund and the World Bank, which were created, along with the United Nations, at the end of World War II. Negotiations about NAFTA continue, but we are still in that trade agreement. 

We can best understand this pushback by Pres. Trump in light of the world economic picture that has emerged since the end of WWII. International trade in our world, unlike during the period prior to WWII, is governed by a vast network of rules and regulations, and the products covered from every country are described by a variety of documents in mind-boggling detail as they move in and out of the world's ports of entry. Trade is no longer just a buyer finding a seller and vice versa; rather, it entails navigating a maze of rules that permits or denies entry into various ports, guides enforcement of health and safety requirements, requires differences in tariffs that depend on relatively small differences in the products' descriptions, and allows financing of that trade by daily trading in various currencies. International trade is a multilateral ship titanic with complex strategies for resolving disputes, assuring payments in different currencies, and evaluating quality. The rules and regulations for assuring the health and well-being and exchange of goods and services of all peoples defies the understanding of any single individual.

In this vast matrix, Pres. Trump is faced with a real dilemma: how to survive in this elaborate matrix while at the same time regaining some of the U.S. hegemony in world markets that was lost while this matrix evolved during the past 73 years (1945-2018)? Manufacturers and providers of services, as well as the buyers and sellers of those goods and services, find themselves under incredibly complex constraints. Unlike the original free-market models of Adam Smith, these free markets have been micro-managed into existence by the post-WWII multilateral agreements. There is an appearance of freedom, but the free markets so-called have been brought into existence by the regional and world players, both governmental and corporate. So the key question now is, how free are free markets? President Trump is trying to restore freedom where there is now too great an overlay of constraints, and this writer believes that Trump perceives that enhanced freedom is profoundly connected with greater U.S. hegemony in world markets. America's freedom and economic initiative were the bases for its becoming the world's strongest economy.

Yet the post-WWII thrust has been to implement the world economic model based on David Ricardo's Theory of Comparative Advantage, first published in 1817, which can be characterized as an economic version of the utilitarian principle of "the greatest good for the greatest number." Briefly, the idea is that every country has some unique efficiencies, which means that certain products will be produced more efficiently there than elsewhere. Thus, let's say certain goods and services can be produced more cheaply in other countries. Then the price of those goods and services will come down; consumers in the U.S. will be able to buy more of those goods and services; and the flow of cash to those countries will generate more worldwide demand for goods and services that we are producing, thereby creating more wealth here. Under this model, all boats are lifted by the rising (economic) sea.

One can see that as the apparatus of this matrix becomes more complex, as it assumes an international scale, or even a regional scale, managing the day-to-day working of said matrix becomes a herculean task beyond the scope of any national government. Thus, vast mechanisms have been created to administer this economic panorama. For example, the European Union is administered by a vast unelected bureaucracy that has its headquarters in Brussels, Belgium, and the World Trade Organization has a vast headquarters in Geneva, Switzerland.

While the U.S. is still at the top of the list of wealthiest countries, hegemony or control in trade has shifted toward these two above-mentioned bureaucracies and other bureaucracies, and away from the U.S. And all business models must now find a way to function within the regional and world trade matrices. Individual and corporate initiative is thereby diminished. Sectors of one's national economy – think of the coal industry or offshore drilling – become increasingly marginalized or defunct based on decisions of the masters of the matrices, not on our business or political leaders. Or we find that we rebuilt Japan's steel industry after WWII and find that in many areas, we became weaker in steel production than Japan. Self-interest and sovereignty then require that we take steps to resist the matrices that have developed. That is the underlying reason why Trump is giving some of our friends a so-called hard time, and why it is justified.

E. Jeffrey Ludwig


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