02.07.2017 2

Clarifying my position on trade

By Rick Manning

Congressional Quarterly was kind enough to interview me in its Feb. 6 edition in a conversation about trade, and as expected, the answers were longer than could be accommodated in their magazine spread. The editor of the piece did a fine job, but I felt that some very important nuances found their way onto the cutting room floor, and I did not want them forgotten.

Most importantly, trade is a very important part of our nation’s economic vibrancy. It should not be misinterpreted that trade between nations is not in America’s interests. However, trade deals need to serve both partners interests or else eventually the devolve into bitterness on one side or the other. This is the situation we find ourselves in today.

Bilateral trade deals between the United States and developed nations like Japan and South Korea need to recognize that currency manipulation has become the modern subsidy and tariff. By artificially tying money to the dollar or stockpiling dollar-denominated reserves to devalue a currency, foreign competitors are ensuring that U.S. manufactured goods always cost more in their countries and that their goods are always cheaper for sale here.

In order to build equitable trading relationships, then, the U.S. government needs to work to end the currency tariffs that are being raised rather than accepting them as former President Barack Obama did.

Also, looking to the future, President Donald Trump needs to cut the cost of doing business in America both from a regulatory and corporate tax perspective before completing new trade deals.

The American free enterprise system works for everyone, but in the past twenty years the combination of regulatory compliance and the highest business tax rate in the world have made moving manufacturing and other jobs overseas, an attractive business decision in a competitive world.

In order to make it cost effective for businesses to create jobs domestically, America must lower the basic underlying cost of doing business domestically in order to at least partially offset the higher domestic cost of labor. This has the virtuous effect of not only helping multi-national corporations, but also mid and small sized companies who do most of the hiring in the country.

These small to mid-sized corporations don’t have the army of lawyers and accountants manipulating their spending to lower the heavy impact of high taxes and confusing regulations, so they end up disproportionately bearing the costs. This stifles growth to the detriment of U.S. job growth.

The final and important point is that many states are taking aggressive action to make themselves more competitive by increasing worker freedom through passage of “right to work” employment laws.  There is an increased awareness that states like Michigan are not just competing with Indiana or even Ontario, Canada, but instead are fighting to keep and gain market share against competitors around the world.

This recognition has led to a transformational shift in former private employer union stronghold Michigan, which rejected those very labor bosses entreaties to keep an employment system in place that has been at least partially responsible for the hollowing out of the state’s manufacturing sector. In the first month of 2017, Kentucky already passing and signing right to work and Missouri’s legislation sitting on their Governor’s desk waiting him to sign it into law.

The hoped for impact of these employment law changes is to make these states more attractive for business that currently employs their citizens, but also to outside businesses which may be looking to relocate.

If anything can be learned about trade it is that many factors in an economy combine to make a nation attractive or unattractive to invest in. Over the course of the past twenty years, while America has been opening our borders to competitor’s products, we have also pursued a course of punishing those who extract, make or build things here in America through regulatory and tax schemes that seemingly were designed to push our manufacturing sector overseas.

President Trump has made great strides through a number of executive orders and memoranda designed to rein in the administrative state to rebalance the international trade equation. If he and Congress can also figure out both health care and tax reform, our nation will be well on its way to balanced trade relations and an ability to compete with anyone for the world’s 21st century manufacturing jobs.

While the Congressional Quarterly interview allowed me the opportunity to make the case on trade, I don’t believe any trade deal would work to America’s greatest advantage unless our nation’s government creates a much more equitable environment for growth. When that occurs, American business and its workforce will be able to compete with anyone in the world, and the world as a whole will prosper as a result.

Rick Manning is the President of Americans for Limited Government.

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