I have read several defenses of “free trade” in the Wall Street Journal. They have been remarkably consistent on their philosophy. And remarkably wrong about its practice.
Free trade cannot continue out of balance for years or decades. If a trade balance is uneven, it leads to bad results. Free trade must be fair trade. Over time, trade must balance out. Otherwise, you get unintended consequences: the closing of our manufacturers, the loss of millions of jobs, and the rise of China.
China is quite different from the EU, but we can deal with both if we just insist on balanced trade. It is a simple concept, one which we can monitor, and one which we can control. If foreigners do not want a free trading arrangement, then they can sell their goods elsewhere.
The WSJ believes in free trade even when it isn’t fair, so today’s Best of the Web column (which is my favorite column to read in the WSJ) makes the ludicrous argument that we should respond with a direct attack on our technology companies (a rare bright spot in our otherwise unbalanced trade deficit with the EU) by presidential tweet. And, we should invite French entrepreneurs to move to America and start their new businesses here.
Yes, instead of a forceful and immediate response that gets the EU to back down immediately, we should accept their illegal and unfair taxes targeting our tech companies and instead have a long-range plan to get people in France to move to the U.S. and start up more technology companies here. This might be a fair response if EU was in the driver’s seat, but they are not. We are.
The article’s suggestion is preposterous, but I will say that the WSJ does not seem to understand that when we have massive trade deficits that continue for years and decades, the way to fix them is with tariffs. In the short run, yes, consumers might have to pay more. If foreign goods go up in price, consumers might pay the higher price, or buy a domestic product that becomes more attractive, or find a substitute product instead. But this pain is short-term and necessary to change foreign behavior.
One thing the Journal got unintentionally correct is that tariffs would encourage French entrepreneurs to move to the U.S. They can sell their goods free of tariffs if they manufacture them in the U.S. So Trump should slap the tariffs on, then send out a tweet and invite the French over. But tariffs are a necessary evil when someone tries to take advantage of our markets.
Here is a simple analogy. If every day, a bully stops you on the way to school and demands your lunch money, do you just give it over and be happy you weren’t punched, or do you figure out a way to stop him? How long do you go without lunch before you take action?
The WSJ believes that since a punch in the nose is much worse than going without lunch for a day, you should just keep turning over your money forever. Getting punched in the face will always be worse than going hungry for a few hours. Instead, just bring extra money and pay the bully off.
The bully analogy isn’t perfect, because we are bigger and stronger than France. We don’t need to let the bully take our lunch money and just dream of getting even one day. We can tell the bully to stop, otherwise we will give a call to the bully’s parents and the bully will be grounded for a month. And if the bully decides to try to punch us, our black belt in karate will take care of him swiftly.
I agree with most of the Journal’s editorial positions, but this trade blind-spot is bewildering. It’s almost as if the Journal needs to find something, anything, they can criticize Donald Trump over. This ain’t it.
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