Middle Israel: Donald Trump and the beauty of trade wars

Lumping together everyone and everything is absurd, but foul play indeed begs an American reply.

By
March 9, 2018 11:07
US PRESIDENT Donald Trump and Vice President Mike Pence stand next to Caterpillar equipment.

US PRESIDENT Donald Trump and Vice President Mike Pence stand next to Caterpillar equipment as they visit a ‘Made in America’ products showcase at the White House in July.. (photo credit: CARLOS BARRIA / REUTERS)

You can say they began in 1853, when Commodore Matthew Perry, flanked by 250 American sailors and one military band and facing 5,000 Samurai warriors, handed Japanese officials a letter from President Millard Fillmore to Emperor Komei, demanding that he open Japan to US trade.

You can also say they began 60 years earlier, when China’s Qianlong Emperor dismissed a British delegation’s similar demand, saying that China had no need for anything the outer world had to offer.

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And you can also say they began in 1789, when the US Congress made it law “that duties be laid on goods, wares and merchandise.”

Whenever they started, modern trade wars were mostly tales of bravado, blackmail and bullying, where surrender was repeatedly followed by ironic twists of plots.

For instance, the same US whose first major legislation after passing its Constitution was the Tariff of 1789 eventually became the global preacher of free trade. Even more ironically, the same Japan that Perry amused by giving its shoguns circular rides on a miniature train he built especially to impress them now has bullet trains of which Americans can only dream.

And that is also how the same Western civilization that in 1793 begged access to the Chinese economy – and later also bombed Canton in order to forcefully open China’s economic gates – now decries a globalized Chinese economy’s sway.

It follows, then, that Donald Trump’s declaration of commercial war last week is nothing original, much the way his war’s outcomes are unpredictable, just as his insight that “trade wars are good” is as convincing as his jovial assurance that they are “easy to win.”

Having said all this, on this one he has a case.

TRADE WARS are not good.

Had the US not forced its way into Japan’s economy, Japan might never have industrialized as efficiently as it later did, and if Japan had not been commercially brutalized, it might not have later molested its neighbors, including the US.

And trade wars are certainly not easy to win, as the Arab League can attest.

What began with decades of banishing Israeli goods and threatening whoever planned to do business with Israel sparked a hyperactivity that made Israel’s besieged economy a success it might otherwise have never become.

The 1970s’ oil embargo was even worse for its masterminds, as the Western economies that were that trade war’s targets turned to conservation, new prospecting, and finally to fracking, all of which decimated oil’s price and emptied it of the financial dynamite that once made of it a political weapon.

Yes, trade wars are bad, and they are not at all easy to win, but that does not mean they should not be fought, provided you are not the one who wages them but the one they were designed to defeat.

THE CASES of 19th-century Japan and China are morally tricky; if a country insists on being an economic recluse, it isn’t clearly fair to forcibly open it up.

The case of the 2018 US is not tricky. The US has been bamboozled, and it has all the right to respond.

Following World War II the Western powers engineered an economic era of good feeling.

Open, fair and vibrant trade, they rightly said, will prevent war. They therefore set out to lift barriers wherever they could.

That is how French and German workers began crossing their mutual border to work in their former enemies’ factories; that is how the US, Canada and Mexico freed their trilateral trade; and that is why Richard Nixon persuaded China to open its doors to American manufacturers.

Alas, what began in 1979 with a Coca Cola plant in Shanghai evolved into a mass migration of American assembly lines, while US manufacturing jobs shrank within 30 years by 30%. Yes, some of this shrinkage resulted from automation, but much of it was about China’s unfair play.

Beijing imposed high tariffs on US imports while US imports remained low, and Beijing undervalued its currency, effectively subsidizing its exporters and taxing its importers. This was, in effect, a mixture of the Qianlong Emperor’s isolationism and Victorian Britain’s commercial aggression.

Yes, Trump has foolishly lumped together America’s fair and unfair trade partners, and now realizes he should exempt Canada and Mexico from the tariffs he is out to impose on imported steel and aluminum.

Trump has shot from the hip not only in choosing his targets but also in choosing his ammunition, which should not be raw materials but finished goods, such as the refrigerators, vacuum cleaners and laundry machines that Americans no longer make, because their governments effectively exported their assembly lines to a foul-playing competitor.

Recent days’ headlines about Trump having waged a trade war distort the facts.

Trump did not wage this war. China did.

And meeting it in the battlefield it chose to enter is imperative in every respect: diplomatically, commercially and, above all, socially.

The US lost its manufacturing jobs not only because of market forces and industrial change, but also because of political decisions – belligerent decisions in Beijing and defeatist decisions in Washington.

The social results of this political imbalance are profound. Middle Americans lost not only their jobs but also their trust in the entire postwar economy that, in their parents’ days, made the working class feel its employment, income, savings and status were secure.

Trump’s election may or may not have been helped by Russian spooks, but it certainly was helped by what China did to the American blue-collar worker.

Just how fast and to what extent fighting back would repair this damage is impossible to predict, though it is instructive to recall that Japan’s industrial success was also initially helped by high duties, until American pressure made Tokyo cut them to a nearly minimal 2.5%.

What can be said already now is that demanding justice for the dislocated American worker is exactly what Trump was elected to do.

And so, in the spirit of the historic trade wars’ many ironies, Trump can invert what the Qianlong Emperor told British diplomat George Macartney, by telling now his own Chinese interlocutors: Play fair, or you’ll see that there’s nothing made in China that American workers will not do themselves.

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