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OPED: Reduce China trade deficit by exporting more, not piling on more tariffs
The Trump administration’s anti-trade actions, intended to radically shake up world trade, may be having unintended consequences.
Is it lowering the trade deficit? No.
Is it bringing manufacturing jobs back to America? No.
Is it helping or hurting the U.S. economy? Look at the facts.
Are we heading for a trade war involving the world’s two largest economies? Yes.
The president has no clue, or is dismissive, of the fact that it is U.S. importers who pay the tariffs, which they must absorb or pass on to the retailers and end-users (manufacturers). Ultimately, it’s something of a 10 to 25 percent tax on U.S. consumers. China’s predictable retaliation has alarmed American producers who are increasingly dependent on foreign markets.
Yes, the trade deficit is an issue and should be addressed, but arbitrarily imposing punishing tariffs on China and our trade partners is not the solution. What is the solution? It’s exporting more, not importing less. Our major competitors — China, Japan, Germany — all have ambitious government programs that give their exporters an advantage in this increasingly competitive global economy. The U.S., by comparison, is so preoccupied with limiting imports that there is little or no attention given to boosting exports.
In Congress, I chaired the House Foreign Affairs Committee Subcommittee on International Economic Policy and Trade. I got a call from President Ronald Reagan’s Secretary of Commerce, Malcom Baldridge, who invited me to breakfast to talk about trade. The next week, entering his office, I was struck by the memorabilia, including a saddle, displaying his hobby of competing in rodeos.
Yes, we had a shared concern about the trade deficit. The question was how could we work together to solve the problem. As we sat down to devour our scrambled eggs and hash browns, he asked about upgrading the commercial attaches in U.S. embassies, whose task was to assist American businesses seeking markets or investments in foreign countries. My response was, “yes, I can include that in the next authorization bill.”
At our next breakfast, Secretary Baldrige shared his thoughts about the 20,000 American companies that were competitive but had difficulty pursuing foreign markets. Unlike America’s large corporations with global outlets, many of the export-shy, midsize companies needed to collaborate without violating antitrust laws to market and ship their products into foreign markets. We agreed to work together on legislation that would allow these small and medium size companies to be more competitive internationally, which led to enactment of the Export Trading Company Act. Reagan signed it into law at the Long Beach, California, port on Oct. 2, 1982
Eventually we turned to the larger question. Why doesn’t our government match what other countries have been doing for years, adopting global strategies, backed by ambitious programs to insure their companies get a larger share of the world market. Secretary Baldrige felt our executive branch was dysfunctional, with trade agencies acting more like fiefdoms despite their respective mandates to help U.S. exporters. No global strategy, no coherence, just cherry picking for the few midsize companies looking for guidance and support.
We agreed something needed to be done. His Commerce Department drafted legislation to reorganize the federal government that brought the trade agencies under one umbrella and added new mandates to assist American companies so they could be more competitive, which I introduced on Nov. 17, 1983. A Ronald Reagan Republican and a Democrat congressman working closely together made good things happen.
Our government needs to make exporting a much higher calling to at least match what other countries are doing that has put U.S. companies at a disadvantage in today’s global marketplace.
The Trump administration’s continued threats and tariffs on China and our trading partners may lead to the repeat of the Smoot-Hawley Tariff Act, enacted in 1928, that precipitated collapse of the world trading system and led to the Great Depression. A trade war America started and lost.
— Don Bonker is a former Democratic congressman from Washington state. He wrote this for the Seattle Times.