Economists and foreign policy experts fear Donald Trump’s economic nationalism will disrupt the global institutions that have fostered international economic cooperation and security for seven decades and instigate chaos.
Fortunately for unlettered folk, Mr. Trump’s got it right and the experts are wrong.
Recognizing high tariffs and currency manipulation exacerbated the Great Depression and contributed to the rise of militarism in Germany, Italy and Japan, after World War II, the United States and its allies established the General Agreement on Tariffs and Trade (which later became the World Trade Organization) to lower tariffs and other barriers to trade, the International Monetary
Fund to police national exchange rate regimes, and the World Bank to provide assistance to developing countries.
The GATT was intended to link together institutionally similar market economies and encourage international commerce based on comparative advantage. Those were supposed to create better paying jobs in export industries to replace those lost to imports – American workers would move into autos, industrial machinery and high tech as they ceded markets in footwear, textiles and furniture.
Things have not worked out that way. As GATT membership expanded to include Japan and other Asian nations, arcane forms of protectionism, mercantilism and currency manipulation often replaced high tariffs and more transparent barriers to trade. American industries such as electronics and autos were targeted by foreign governments and cartels and severely damaged. Too few decent paying jobs in services were created to replace employment lost in manufacturing.
Blue collar workers were rendered obsolete. Middle class families in the Midwest and South were reduced to poverty and all but ignored by Washington – tossed a few bones through extended unemployment benefits, food stamps, Medicaid and inadequate retraining programs.
Disruptions to U.S. labor markets, as much as global political correctness (remember folks railing against proposed conversion to the metric system in the 1970s), created the Reagan Democrats who put the Gipper in the White House. He eased burdens by implementing the Chrysler bailout (initiated in 1980 by Jimmy Carter), negotiated restrictions on Japanese car imports and challenged the private sector to create new industries with lower taxes and lighter government regulation.
The liberal international economic system also tends to enable the worst predatory instincts of developing country governments by
affording them special and differential treatment.
The WTO and IMF hue to the notion that high tariffs and other more mercurial barriers to imports and foreign investment, export subsidies and currency manipulation encourage inefficiency among American workers and businesses but instigate enterprise among their Chinese and other developing country counterparts. For example, China was permitted to join the WTO in 2001 while maintaining 25 percent tariffs on cars, byzantine regulations on foreign companies and according to World Bank estimates, a currency trading at half the value it would be worth.
An onslaught of imports have hammered down U.S. growth, and weakened the capacity of the American economy to both support both a military with global responsibilities and address domestic social needs on a par with other industrialized nations.
Security arrangements in place since World War II in Europe (NATO) and with allies in Asia require that the United States provide the bulk of personnel, naval, air and other resources to address Russian threats in Eastern Europe, terrorism in the Middle East and Beijing’s provocations in the South China Sea, while slow growth and democratic processes increasingly impel Washington to assist citizens and states with health care, education and other needs.
Those contradictions are unsustainable, and responsibilities in international economic and security arrangements must be rebalanced if American prosperity is to be restored and global security is to be preserved.
That is something ordinary voters who elected Mr. Trump sense but economic and foreign policy experts refuse to grasp.
Donald Trump’s call to renegotiate international trade agreements – for example, the rules for commerce with China under the WTO and IMF – and to require Germany, Japan and others to pay their fair share of the defense burden is simple economic necessity.
Granted, he has threatened high tariffs and to withdraw the protection of the American military from allies who don’t pay up, but past efforts to bring powers like China and Germany to reason on trade and defense issues without such threats have failed. Mr. Trump is no wrecking ball – just a change agent, long overdue.