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Tuesday, June 18, 2019

ANALYSIS/OPINION:

Tariffs are crude instruments. These can raise profits and employment in protected industries but the United States and other western democracies have worked hard to lower those — and other trade barriers like subsidies, preferences in procurement for domestic suppliers and lax protection for intellectual property — because those make us poorer by frustrating the efficient global allocation of industry based on skills and natural resources and discourage R&D.

Comparative advantage, like managing tradeoffs, is among the first lessons of economics but hardly the last.


China, like other predators, subsidizes exports, strong arms state enterprises and private firms to buy inferior, less efficiently made, domestic products, violates foreign patents and sponsors industrial espionage with the zeal of an 18th century Caribbean buccaneer. In its western provinces, Beijing uses stolen knowhow to impose forced labor reminiscent of the Third Reich.

All those deny trade based on comparative advantage, raises incomes in China and lowers them in the United States, impose terrible inefficiencies and help finance a navy that threatens security in Asia, oppression of the Uighur Muslims in Xinjiang and other minorities, and Beijing’s Belt and Road initiative to gain influence and sell its dark model of dictatorship and crony capitalism to vulnerable governments.

America has no business trading with China under those terms, and tariffs are a logical remedy. If 25 percent doesn’t do it, raise them until Beijing comes to the table repentant and sincere to act like a civilized nation.

Tariffs for Mexico are dumb at several levels.

Mexican President Obrador, inaugurated in December, foolishly adopted an open border policy to Guatemala, enabled migrants to pass through its territory and ignored the coyotes and sympathetic Mexicans that provide assistance for the passage to the U.S. border.

Mexico is not a rampant trade cheater, and our complaints are about immigration not commerce. Using tariffs to extract a promise to enforce its southern border, crack down on smugglers and take back those migrants that cross the U.S. border illegally or while asylum claims are heard is a victory for Mr. Trump but its ultimate effectiveness is uncertain and comes at a high cost.

Tariffs on Mexican products would have hurt the United States, perhaps even more, than Mexico. Border taxes on Mexican crude oil, an enormous range of climate-specific horticultural products and even Jack Daniel’s el Jimador Tequila would raise prices on products that can’t be sourced here.

The automotive supply chain and similar integration in industrial machinery, electrical components and computers, medical and telecommunications equipment and other sectors help keep jobs in North America — combining lower wages in Mexico with U.S. knowhow to compete with Asian imports — and make America more prosperous.

Mexico has free trade agreements with Europe, Japan and others permitting the Detroit Three to configure production for duty-fee market access in those markets.

With a trade war with China becoming a permanent part of the landscape, NAFTA would permit production to relocate from China to Mexico but the highly uncertain prospects for the success of the immigration deal will make investors wary about further investing in cross-border arrangements and moving production to Mexico instead of Vietnam.

Similarly, the Europeans enjoy a trade surplus with America on autos, because the Detroit Three can’t figure out how to compete in sedans — even when Asian manufacturers assemble cars here and pay American wages. Trucks are not the problem, and Trump’s threatened tariffs on BMWs and Fiats are just off target.

More importantly, our whole argument to the world is that China is a trade cheater and doesn’t deserve to be treated according to WTO agreements it so flagrantly violates. The Canadians, Europeans and others have similar gripes with China but how do we get them to support us if we are brandishing Chinese-like trade sabers so disrespectful of the rules.

Mr. Trump wants to negotiate bilateral agreements with countries like the U.K. and Japan. They have much less incentive if he blatantly violates NAFTA to obtain advantage on unrelated foreign policy issues.

America’s international brand has been strong rules and fair play. The goodwill of three generations can be squandered by one reckless man behaving as if the presidency were an episode of “The Apprentice.”

• Peter Morici is an economist and business professor at the University of Maryland, and a national columnist.


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