There still isn’t a great deal going on to comment on and I don’t have a lot of time to reconnoiter but, in the light of the Trump Administration’s trade bill, I did want to remark on the U. S.’s role in international organizations.
I do not believe that the U. S. should exit the United Nations, the North Atlantic Treaty Organization, or the World Trade Organization. I do believe that our participation in them should more closely resemble the participation of other member countries.
For example, the U. S. contribution to United Nations funding should be more in the vicinity of 15% (our proportion of world GDP) than it is to our present tithe (22%).
In the case of NATO, we should remove our troops from Europe to whatever extent we can without injuring out-of-theater operations. Henceforward, our participation in NATO should be largely symbolic. We should attend the events, cut the ribbons, and make bold speeches about the U. S.’s and Europe’s close bond. Otherwise, not much.
We should do about what we’re doing WRT the WTO except that we should take every possible opportunity to point out that China has never lived up to the obligations it assumed as a condition of its membership, violates the terms of its membership more than any other country other than Russia, and that it owes its present position in the world economy to WTO membership, suggesting that it be ousted for non-compliance.
If those are the new rules we should definitely play by them.
I don’t really understand this 2% thing. Even if they do spend 2% on paper, it can be gamed. Take most of our troops out. Let them figure out what they want to spend to protect themselves. (To their credit, they did send troops when we went into Iraq.)
Steve
I don’t care what the percent is. I care about outcomes. We know that the French (1.82% or 2.2% depending on who you ask) were unable to sustain operations during the bombing runs on Libya. Definitionally, they’re not spending enough. The readiness level of the Germans is pathetically low. They’re obviously not spending enough either.
As I said in my earlier post, the right amount might be 2%, it might be 3.5%, it might be 7%. The NATO agreement says 2% but that assumes a continuing commitment, not just hitting the target occasionally.
The primary reason for overseas deployment is logistics – the prepositioning of armaments and materiel. When it is time to mobilize cargo capacity and travel time are major constraints.
Which is why I qualified my proposal as I did.
OT- I hear a lot of people making strong declarative statements that trade wars are bad or easy to win or you can always win if you are the one with the trade deficit. However, I don’t see people citing a lot of past cases to support their claims, beyond Smoot Hawley. Are there a lot of trade wars with good outcomes that i just can’t find?
Steve
There’s no rigorous definition of a “trade war”. I think we’ve been in one for the last 40 years. I suspect a neoclassical economist would claim that trade wars always turn out worse for the more restrictive party.
I am not even sure what would necessarily count as a win.
Steve
“There’s no rigorous definition of a “trade warâ€. I think we’ve been in one for the last 40 years.”
and
“I am not even sure what would necessarily count as a win.”
It seems to me that both of those observations illustrate the complexity of the issue. As I have attempted to point out umpteen times, set aside entire countries like China, say, Germany, or the US, and the moniker “War.” The point is that there are individual winners and losers, chosen by a court of national level government policy overlords and the lobbyists who bribe them. Its managed trade.
Just consider the US. A worker in a low value added/high labor content manufacturing business (eg toys, assembly intense) has been a loser. A US consumer of electronics or apparel, a winner. etc, etc
For years it was fashionable to lament, to do anti-corporate stories, about the off-shoring trend. Greedy corporate bastards. Little was written about the consumer who was benefitted. The narrative has changed. Suddenly a guy comes along talking about America (workers) first and people are staunch free traders, wringing their hands about TRADE WARS.
Its simply an object lesson about inevitable government tendencies and power. Let them put their finger on the scales and you get structural trouble. Then rectification becomes a huge dislocation.
But hey, it sure helps media storytellers, and politicians seeking cash and votes. You can even have people conflating issues for political commentary purposes, like trade and ag subsidies.
Another fine mess.
Here’s another complication. When an American company imports components from abroad and assembles them into finished goods, at what point is the finished good an import? There are no American small cars and haven’t been for decades. U. S. carmakers import parts from foreign companies and subsidiaries and then assemble them into “American cars”. The way China has been dumping steel worldwide there’s an argument that all small cars (and many larger ones) are Chinese.
I’m kind of a dissenter about trade. Imagine some single trade reform that results in a $100 billion increase in Jeff Bezos’s income but no impact on anybody else’s. There’s an increase in GDI. Should we support it? I’m indifferent.
Now imagine another single trade reform that results in a $100 billion increase in Jeff Bezos’s income and a decrease of $90 billion in the incomes of those earning below $100K per year. There’s still a net increase in GDI but I think we should oppose such reforms. We’ve been supporting them for 40 years.
In other words I don’t think we should be chasing GDP or GDI. I think the objective of policy should be to maximize welfare (in the economic sense) and minimize economic harm even at the expense of low consumer prices. What good are cheap sneakers to you when you’re out of a job?
The snide definitions are that when China, Japan, and Germany engage in predatory trade practices that cost American workers jobs, it’s free trade. When we counter their moves, it’s trade war.
“In other words I don’t think we should be chasing GDP or GDI. I think the objective of policy should be to maximize welfare (in the economic sense) and minimize economic harm even at the expense of low consumer prices.”
To me, its the very act of manipulation that opens Pandora’s box. Better to let markets sort it out. Make crappy cars like we did in the 70’s and 80’s at the expense of consumers and you need competition. Subsidize steelworkers and steel management wages at the expense of consumers and you need competition. Letting China or Europe benefit their workers at the expense of US workers but the benefit of US consumers is no better. But who can fairly sort all this out? Absolutely not governments. Its a recipe for manipulation. Better would be markets. But that said, the most vexing problem is what to do when the inherent attributes of various countries are so different (eg peasant labor in China) or a government’s objectives are to beggar thy neighbor, so as to disrupt and corrupt market forces. Government seems the answer, but good policy is in vanishingly short supply.
So you end up with:
“What good are cheap sneakers to you when you’re out of a job.”
That’s probably overwrought. There are consumer beneficiaries. But it reminds one of the quip: “a recession is when your neighbor is out of a job; a depression is when you are out of a job.”
As you can see, I have no answers that could be distilled into prescriptions. But I do think things are way out of hand. As an investor in manufacturing, I’ve seen it first hand. All I can say is that I’m supportive of the stance of the current resident of the White House who says “we need a better deal.” What that is, and how we get there, is probably going to be messy.
We don’t have a choice. We’re going to regulate food, health, and product safety. We know from experience that the market doesn’t do it. And we’re going to continue to have patents and copyrights. A perfectly free market is not a viable alternative.
Once that sinks in, the challenge is maintaining the balance between regulation and the market.
“We’re going to regulate food, health, and product safety. We know from experience that the market doesn’t do it.”
And we also know the regulators don’t do it well, either. Often overdoing it. We do a terrible job of maintaining balance.
However imperfect, I still maintain that Trump is correct in a massive pushback. The squealing of the Chinese and Euros provide some confirmation.
Anything where a buck can be made will be hard to maintain in balance.
“The condition upon which God hath given liberty to man is eternal vigilance.”
“All I can say is that I’m supportive of the stance of the current resident of the White House who says “we need a better deal.â€
Lay down your predictions. I think that what we will see as the result of Trump’s efforts are more corporate profits and more money for the managers and shareholders, if he doesn’t cause a recession. I don’t see the workers you seem to think he cares about (actually, I have a hard time thinking you really believe that and think you were just feeling tribal when you wrote that) coming out ahead at all. We will just see more jobs shipped South where they will earn much less and have no benefits. At least they won’t have unions.
Steve
Speaking of tribal……….all you can think to do is lay down the gloom and doom, steve, and relish the political effects.
What’s really at issue is how to deal with, as I said, extreme differences in prevailing wage expectations between trading countries, and state policies (eg tariffs or outright quotas ) designed to create trading price and volume differentials.
Dave’s basic position is use government and remain vigilant. Perhaps that proves correct. My concern is that government became the mechanism of managed trade in the first place, corrupted by political favoritism. Recognizing that, Trump’s position is, crudely put, the current situation is unacceptable, so match tariff with tariff. What’s happening now is just a test of resolve. It will be messy.
Get back to us when you have something useful.
Coward, or maybe deep down you agree. Tariffs, no tariffs, the outcome for most people will be the same.
Steve