• The President As Hero

    Donald Trump is, as we all know by now, a simple soul.  The real world may present him with all kinds of intractable problems, but there is always room in the Trumpian world for the President as hero, riding to the rescue and calling “Hi ho Silver!” or, in his case, “Increased tariffs on imports!”

    This is not to say that President Trump has not identified a real problem – it is the proposed solution that is a little less than convincing.  As the President looks at the American economy, he is right to ask why the United States, with all of its industrial power, is a less efficient producer of steel and aluminium than many other countries who can supply the America market at prices significantly lower than those charged by domestic producers.

    He is also right to recognise that this state of affairs is both a consequence and a cause of the de-industrialisation that has destroyed so many American jobs in what has now become known as the “rust belt” – a region that delivered so many votes to Trump in the 2016 election.

    But, instead of facing facts, and listening to expert opinion on what needs to be done by way of increased investment, better skill training and a macro-economic environment that is better able to encourage innovation and efficiency, President Trump has gone straight for the apparent and simplistic solution.  If foreign suppliers can undercut American producers, he reasons, it is nothing to do with American shortcomings but is attributable to unfair practices by dastardly foreigners, and the problem must be faced by raising the prices that they unfairly charge, whether they like it or not.

    The problem is that, not surprisingly, they do not like it, and they are all too likely to retaliate.  So, in addition to coming up with a “solution” that simply entrenches the real problem – the relative inefficiency and therefore uncompetitiveness of American industry and their propensity to charge more than the going rate – President Trump has launched a trade war that will hurt not only the American economy but the global economy as well.

    Protection for domestic industries is of course a remedy to which many economies have quite properly had recourse – particularly when, as in the case of post-war Japan, they are trying to build or re-build their industrial strength. (Not all countries are as naïve as New Zealand in ignoring economic realities and unilaterally throwing open its borders to all comers, without securing any corresponding benefits in return so that they have nothing left to offer when it comes to multilateral trade deals.)

    But it would be stretching credulity to a considerable degree to treat the US as a developing economy that needs protection if it is to survive as an industrial power.  Even the President’s own advisers and Republican political supporters are aghast at what he has now so proudly announced as an instance of putting “America first”.  They can see that his supposed solution is in reality no more than an admission of failure, and that it will in reality make matters worse, as America’s trading partners have recourse to retaliatory measures as an expression of their displeasure.

    President Trump, however, is so deluded and so persuaded by his comic-book version of how a “President as hero” should behave that he avers that “trade wars are good and are easily won.”  The reality is that, as even a cursory survey of history would reveal, trade wars are not only bitter and destructive but also, in the end, dangerous, and can be a precursor to wars of a rather more militaristic kind.

    At the very least, a trade war developing off the back of this Trumpian “solution” could be damagingly inimical to the interests of a small open economy such as New Zealand.  “Free trade” may not always be what it seems – particularly when it takes the form of a TPP – but we have more to lose than most if trade barriers are re-erected.  We should always be alert to the price we are asked to pay for apparently “free” access to overseas markets (like China), but we should be under no illusion that we could be badly hurt by this latest outburst of simple-mindedness from the White House.

    Let us hope that, for once, the Republican party will recognise its responsibilities and keep their wayward toddler under better control, and unable to throw his toys out of his playpen.

    Bryan Gould

    9 March 2018