Trump’s Anti-Capitalist Economic Trade Policies

by | Apr 15, 2017 | Trade

Economic warfare threatens a downward spiral with reduced trade among nations, and declining standards of living from following this wealth-destroying path.

An often forgotten truth is that it is not just military warfare that can cause injury to innocent bystanders, the same inescapably happens in economic warfare initiated by governments, as well. But in the latter case the human “collateral damage” is a targeted victim.

On March 29, 2017, “The Wall Street Journal” ran a story highlighting the Trump Administration’s likely intention on getting tough in trade talks about American beef sales to the European Union.  Being more in tune with “nature” and the “natural” than the United States, the European Union long ago imposed trade restrictions on the importing of American beef that have been bred with the use of artificial hormones.

The dispute has gone on for decades, and was adjudicated by the World Trade Organization back in 2008. The WTO said that the EU did not have the authority to impose and maintain such restrictions on U.S. or Canadian imports, and that the latter two countries could impose retaliatory import duties on EU products until the prohibition on North American beef imports into the European Union was lifted.

A deal was made in 2009, the WSJ reports, under which the EU would allow a larger import quota of hormone-free U.S. beef, but the restriction on hormone-treated beef remained basically in affect. The U.S., therefore, retained a series of retaliatory tariffs on EU products equal to a market value of $38 million, but under the WTO ruling could raise that tariff barrier to a market value of $116.8 million, or an additional $79 million in import duties on EU goods, if the prohibition was not lifted.

The U.S. has forestalled doing so, but American beef growers are complaining that the EU regulators have dragged their feet on even allowing the agreed-upon greater amount of hormone-free beef. Enter the Trump Administration. Having declared his intention of getting tough on U.S. trade deals, Donald Trump’s government is threatening to impose these additional import taxes on EU goods, so “America” gets a better deal in our trade relationship with “Europe.”

The problem is, “America” and “Europe” do not exist as living, breathing entities.  They are short hands for all the individual consumers and producers who happen to live and work in the areas of the globe that on a map are designated the jurisdictions of the United States and the European Union member nations.

In Military Warfare a Goal is Not to Kill Bystanders

In America’s wars in the Middle East, the United States government declares that its military targets through either piloted or drone aerial attacks are the Islamic State and Al-Qaeda. But, again, there are no entities called either one. These two religious and terrorist organizations are manned by individual human beings, from the top leadership to the fanatical foot soldiers who undertake those ghastly attacks on various groups of people, both in the Middle East and elsewhere.

These individuals move about among the rest of the society wherever they are. Targeting members of the Islamic State or Al-Qaeda, even with the most precision weaponry, cannot escape, in most instances, running the risk of hitting civilians having nothing to do with the aimed target.

Referring to such victims as “collateral damage” doesn’t change the fact that innocent men, women and children, having nothing to do with the targeted enemy, may be killed or severely injured in the attack. But, at least in principle, a stated goal is to try to avoid harm to the innocent bystanders around the selected human targets, even if this often turns out not to be the outcome.

In Economic Warfare the Targets are Innocent Market Bystanders

In economic warfare, however, there is this important difference: In virtually every instance of retaliatory trade warfare the planned targets are inescapably innocent marketplace bystanders having nothing to do with the original trade restriction perpetrators. In fact, these bystanders are among those the retaliating government is directly aiming at.

Suppose that in France a group of domestic beef ranchers organize themselves to pressure the government in Paris to use its influence over the EU regulators in Brussels to impose a trade restriction on the importing of American beef. Needing a more lofty rationale to justify their special interest pleading to keep out foreign competition, they join forces with touchy-feely “leftie” environmentalists who assert that hormone-bred cattle are more likely to cause cancer in human consumers (a claim that the WTO rejected as not scientifically proven).

Who are the victims from this act of economic warfare instigated by French beef ranchers and environmental ideologues? Certainly, there are the American beef exporters who, as a result, lose sales, market share and profits from within the European Union. But, equally, the burden falls upon all those European consumers who had been or would be interested in buying American beef because they consider the quality and/or price to be more attractive than the European-raised market alternative. Their consumer choice has been narrowed and, no doubt, ends up costing them more for any beef they now purchase in this government-protected segment of the European marketplace.

Nor should it be forgotten that an additional group of victims are all those in the European Union supply-chain who have as part of their niche in the division of labor the roles of importers, packagers, transporters, and retail sellers of American-raised beef. A part of their business, maybe in some instances all of it, is ruined within the European Union in the name of French cattlemen’s anti-competitive protection and anti-GMO ideologues.

Thus, in initiating this economic warfare, the French beef interests end up harming many of their fellow Europeans in the name of defeating their American rivals. But the story does not end there. Suppose that the United States government decides to retaliate, as the WSJ reports that the Trump Administration is thinking of doing in this case. Who will be the victims of Trump’s counter-attack?

Trump’s Planned Targets for Trade Retaliation

According to the WSJ, the planned targets of U.S. import restrictions will be Perrier mineral water, French Roquefort cheese, Italian Vesper motor scooters and some Swedish-made dirt bikes. In other words, the targets for America’s economic warfare retaliation are producers of goods having nothing to do with French or any other European cattle ranchers or the particular anti-GMO activists who are also pushing the continuation of the ban on hormone-bred beef from the United States.

The innocent bystanders are the target, precisely because there is no way to aim at French beef producers if they do not sell any of their meat in the United States; nor can the anti-GMO activists be easily targeted either, especially if they do not directly do their propagandizing in the United States – no “severe visa vetting” will work here!

All of the European producers targeted for trade retaliation by the Trump Administration would be intentionally punished with lost sales, reduced market share and smaller or no profits earned in the United States due to the interventionist lobbying efforts by beef producers in Europe in the halls of political power in Brussels and national capitals like Paris.

Furthermore, the groups of American consumers who have been and desire to continue to purchase these European products will be part of the “collateral” damage, denied the ability to purchase these products and at prices not manipulated by the United States government. Their standards and quality of living will be reduced to the extent to which buying and enjoying these products have been or could be a part of their chosen basket of purchased goods.

And, again, it should not be lost sight of that another group of targeted victims will be all those in the American market supply-chain who import, handle, transport, and retail those European products to the American consuming public. Their profits will be cut; some or all of their jobs will be potentially lost.

Let us, also, not forget that to the extent that the European producers of Perrier, Roquefort cheese, and scoopers and dirt bikes suffer reduced dollar earnings as a result of these retaliatory tariffs, this will reduce their financial capacity to buy other exportable American goods upon which they would have spent those earned dollars. Thus, other export sectors of the American economy will be negatively affected in the name of redress for American beef ranchers.

Punishing Fred and Frank Because Peter Acts Badly to Paul

Another way of thinking about this might be the following. Suppose that you hear that over in France a Frenchman named Peter is bullying and beating up on Paul, an American visiting Paris. You tell Peter that what he is doing is not very nice, and if he does not stop his bad behavior toward Paul, you will step in. When Peter continues his bullying and beating of poor Paul, you say, “I warned you,” and you start hitting a Frenchmen named Fred visiting New York City plus an American named Frank who maybe has occasionally met Peter, but both of whom have nothing to do with whatever may be the problem between Peter or Paul. You then say to Peter, “I told you I was serious, and I’ll keep hitting Fred and Frank, and maybe even someone else, if you don’t stop beating up on Paul.”

First, there no certainty that Peter is going to be moved to stop his beating up of Paul because of your hitting of Fred and Frank, especially if Peter views himself as better off by hitting Paul. And, secondly, you’ve now inflicted harm on two innocent bystanders who had nothing to do with the original problem.

Fred and Frank are unwillingly drawn into the dispute and made hapless targeted victims of someone else’s unfortunate situation. All this has done is to extend the pain to an enlarged circle of people in the society. Fred and Frank maybe able to honestly say, now, to Paul, “I feel your pain,” but that does nothing for poor Paul, and you’ve merely broadened the pain to two more people, while Peter may continue with his bullying behavior in France.

Long ago, in 1896, the British economist, Henry Dunning MacLeod, colorfully explained the effects from introducing retaliatory tariffs on a country that has imposed trade restrictions on one’s own nation’s goods. He said: “By the method of retaliatory duties, when the Frenchmen smites us on one cheek, we immediately hit ourselves an extremely hard slap on the other. The Frenchmen, by his duties, does us an injury, and we, by retaliating, immediately do ourselves a great deal more.”

If this sequence of trade retaliatory events were to continue with one counter-trade restriction after another, economic warfare then threatens a downward spiral with reduced trade among nations, falling profits and employments in export and import sectors, and declining standards of living in all the participating countries from following this wealth-destroying path.

Yet, this is the path that the Trump Administration seems set on following, with the this “beef war” between the United States and the European Union being possibly the opening shoots in a series of conflicts in which U.S. government pulls out its policy toolkit of economic weapons to inflict pain on a widening circle of innocent bystanders in the name of a misconceived notion of how to make America “great.”

Dr. Richard M. Ebeling is the recently appointed BB&T Distinguished Professor of Ethics and Free Enterprise Leadership at The Citadel. He was formerly professor of Economics at Northwood University, president of The Foundation for Economic Education (2003–2008), was the Ludwig von Mises Professor of Economics at Hillsdale College (1988–2003) in Hillsdale, Michigan, and served as vice president of academic affairs for The Future of Freedom Foundation (1989–2003).

The views expressed above represent those of the author and do not necessarily represent the views of the editors and publishers of Capitalism Magazine. Capitalism Magazine sometimes publishes articles we disagree with because we think the article provides information, or a contrasting point of view, that may be of value to our readers.

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