Trump seems to have fired the first salvos of a new global trade war. Does he imagine, as did Putin with his shooting war, that opponents will rapidly fold and it'll all be over in days or weeks? Well, maybe. But Colombia might not have set the pattern.
Old Pa Drew was in the international foodstuffs game and, having been a WW2 soldier in his time, brought me up to the slogan "trade is better than war": and I'm a free-trader. Well, but it was never a cure-all, as I readily admit.
On the other side of the account, history records nations who viewed sea-faring merchant activity as the work of the devil, and sought to ban trading altogether. Which is a debate we perennially return to here at C@W in rather more subtle form: what's the appropriate degree of dependency on trade, as opposed to national self sufficiency? There's no scientific way of resolving this question, even though there are metrics one might try to deploy.
In any event, some trade-dependencies are faut-de-mieux: I was once posed a deliberately provocative question in a seminar by a Chinese energy economist, relating to Europe's dependency on cross-border electricity trade to keep our highly interconnected grids functioning: this was surely a major strategic weakness and a Very Bad Thing, she demanded. I politely replied that, yes, sometimes import dependency can work against you, and that *ahem* some countries were dependent on imports for their oil ...
Anyhow: the rationale for trade is, of course, that it engenders efficiencies. The Trump Trade War might just give us some hard data on just how costly are the inefficiencies his stymying of free-flow might bring about.
Then again, maybe everyone hastens to do his bidding...
Looking forward to hearing from some of you supporters of mercantilism and self-sufficiency out there. (I'm caricaturing a bit, I know.)
ND
12 comments:
I've tended to find the more efficient the process, the quicker it's inner workings get forgotten, the less thought out the disaster recovery, and so the more catastrophic the impact when it goes awry. A bit of friction keeps skin in the game.
Then there's the distinction of price and value, and I think sometimes we've focussed too much on price. Is there not sometimes better value in paying more for something if it comes with benefits? Even if those benefits are out of scope of what is being paid for.
On to Trumps tariffs... Seems to be a few reasons for them, including a desire to go back a century or so to before income tax was a thing. I'm not sure that'd work in today's America.
The effects on the US auto industry will be interesting, the supply chains go back and forth between the US and Canada, and sometimes with Mexico, with a tariff applied at each point, it's either going to kill the industry, or they're going to have go back to Model T designs.
Either Trump has thought this out, and planned accordingly, or he's about to get an education a lot of his voters won't enjoy him learning.
Musk is one to keep an eye on, looking like he's trying to embed himself in every aspect of the US government, presumably for profit. He fumbles that, I'd suggest he heads to Mars before the entirety of the US wants to lynch him.
I've always been pretty much a free trader: the arguments for it are persuasive. I suspect that most "strategic" arguments against it tend to be special pleading rather than intellectually serious points.
But, but, but - do the arguments for it hold up when the subject is trade between countries that are welfare states? After all, an efficiency gain from the trade could be cancelled, or worse, by imposing a welfarist inefficiency.
I won’t here attempt to aim for some profound observations on Trump’s actions, but more to point out the all-too-common failures we see in so much commentary on, well, pretty much any subject you care to mention.
Firstly, we rarely see proper means-to-ends analysis. Trump is undoubtedly trying to do *something*. What is he trying to do (the “ends”)? What is he doing it with (the “means”)? Why is he picking those means? Are there any alternatives? Are there any better options? Are the ends valid?
Second, and related to the first above — there is an awful lot of diabolism bandied about. Has anything in particular happened which suggests that Trump is inherently bad, or deranged, or some sort of Dr. Evil caricature? Or is he, rather, a rational actor doing something for a valid purpose, rather than diabolical motives?
Finally, who is served by any tendency to adopt the “two camps” messaging — “they are bad, we (whoever “we” is in context) are good” / “they are dishonest and harmful, we are wholesome and virtuous”. Where everyone and everything is black or white, and where the blacks are deepest, darkest black and the whites are the purest, brightest white. Most things in life are shades of grey. Trump may well be just the same. If anyone is claiming they are the goodies, someone else is irredeemably the baddies, my natural reaction is that I’m being deliberately misdirected.
For a long time now, we’ve been encouraging not to really think about what is done or what happens but, instead, bundle all these questions and decisions up into the “international rules” or “international agreements” or “international organisations”. Adherence to these things (and the implied subservience to them) is seen as civilised, orderly, progressive. Straying from them is destabilising, irresponsible, damaging.
Strikes me that, for whatever reason, Trump does not believe that things like trade, diplomacy or sovereignty can be shuffled off to the granny annex of technocratic expertise. For good or for ill, it belongs front and centre — and in the hands of the politicians which have been elected to rule.
The US states are large enough and (mostly) populous enough to trade between themselves. Any specialism can be serviced from within its borders rather than outwith with other countries.
Sure, wages will never be as low as in Vietnam for cheap jeans, but arguably they can be made at a price that Americans can afford to pay.
It’s a shame TTK is at the wheel. He’s certain to let the trade ship drift into the EU port of customs/tariffs/ quotas/rules/regulators and taxes.
Just when the UK could be the new holding nation for final assembly of EU and out of favour nation goods.
Ireland, about to get a serious whack from Trump, might need somewhere to export their products too. Before those products are sold on. The UK adds just 10% for the privilege of using a non EU, fully compliant former EU nation.Not the 25% the Trump seeks.
TTK isn’t going to do anything like that. He is Mr ‘No competitive advantage.’
And would rather double income Uk tax than seek to grow faster than France.
When were all those having a fit of vapours at Trump's tariffs doing likewise about the EU's external tariffs?
Oh thats right, never. Funny how the EU's tariffs are fine, but Trump's aren't, because reasons.
What would happen to the Chinese Belt and Road initiative, if tariffs became the de facto operating method? Perhaps there is madness in the method. Russia's war in Ukraine seems to have upset the plan a little. And Iran is not much better.
https://merics.org/sites/default/files/2020-06/Silkroad-Projekt_EN_2020_150dpi.png
"Anonymous said...
It’s a shame TTK is at the wheel."
Allow me. It's in reality a total disaster. and God knows what shape we'll be in by the time Labour are booted. Were I 21 and not 73 with Grandkids I'd have gone as soon as I saw him coming.
Hungary prolly...
Some might like to look at lawyer David Allen-Green's blog on Trump. In this he proposes that Trump's success is to promise things he has no intention of delivering and breaking agreements if that happens to be convenient. In essence he is non-transactional - you never (rarely) get to see the transaction.
"For Trump, a hire is only of any use so long as they can then be “fired”.
Transactions are just there for suckers".
Where this leaves Starmer and RoW is anyone's guess. The reference to Littlefinger and Chaos does I think point the way.
May you live in interesting times.
Trump has noticed the prime beachfront location occupied by the Gazans and would like to put a golf course there.
Problem is that the people who want to play golf won't want to be anywhere near the nasty murderous Palestinians.
Ideally opportunity to smoke out the other Arab countries who don't want to take in the Palli's for the same reason.
Expecting the Arabic-speaking countries to take in the Palestinians just because the latter speak a dialect of Arabic is like expecting the UK to take in Romanians, Albanians and so forth just because they speak a dialect of Indo-European.
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