Every president has an opportunity to leave a mark on America. The most consequential impact the administration of Donald Trump may have is in the area of international trade. In no other sphere have the president’s actions been more decisive and potentially transformative.
Many previous presidents have struggled with America’s lopsided trade imbalance, but none to date have been willing to challenge hidebound economic orthodoxy to truly shake up the world trading order. Trump has shown no such reticence. If he sticks to his guns — and doesn’t get sidetracked with petty and distracting side fights — he has a real chance to correct unfair international trade practices that have gone on for decades and left too much of America a hollowed-out economic shell.
The challenge Trump faces is particularly steep. The U.S. has run $500 billion yearly trade deficits for a decade. As much as $375 billion of that annual deficit is in trade with China, which uses every tool it has to unfairly promote its exports and repel imports.
Prohibitively high Chinese import tariffs keep foreign goods out. Below-cost dumping of exports and blatant manipulation of the country’s currency artificially subsidizes goods it ships out. Non-tariff barriers and bureaucratic overkill further squeeze out foreign competition. Chinese industrial espionage and patent pilfering steal U.S. technology and know-how.
What does China do with the billions it rakes in from this unfair competition with the U.S.? A big portion has gone toward loaning money back to America. China is the largest single holder of U.S. Treasury debt. As of this year, it has bought over $1 trillion in U.S. government securities.
The cycle goes like this: We buy Chinese goods, ship U.S. dollars to government-supported Chinese companies, and the Chinese government-industrial-complex loans a good chunk of those dollars back to the U.S. government, which uses them in part to finance government deficits. That’s right, the U.S. trade deficit helps finance U.S. budget deficits.
If this sounds like an unsustainable and dangerous death spiral for America, it is. Eventually, if this pattern doesn’t change, the U.S. will be in such hock to foreign creditors like China that not only our financial independence will be challenged. The U.S. will become a debtor nation so beholden to foreign loans that our very democracy will be threatened. Maybe we aren’t yet a bankrupt country like Greece, but we’re heading dangerously in that direction.
For me this fight is intensely personal. In the inimitable words of Yogi Berra, it’s like déjà vu all over again. Years ago, as New York’s junior senator, I saw firsthand how unfair foreign competition was eating away at America’s industrial muscle. Back then the problem was below-cost dumping of early-generation Japanese-made word processors into the U.S.
To offset this, the iconic American company Smith-Corona, which had a factory in upstate New York that employed hundreds of people, decided to move the plant to Mexico, where it could pay workers half what it paid them in the U.S. For months I struggled in vain trying to persuade American trade officials to take decisive action against this blatant double-edged foreign assault on American jobs. But U.S. bureaucrats dragged their feet, afraid to take on the threat for fear that it might somehow upset the “international trading order.”
Finally, in a last-ditch effort to force our own government to act, I took to the Senate floor with my colleague Pat Moynihan for a marathon 15-hour filibuster to try to add a provision to tax legislation directing U.S. officials to simply enforce trade rules that might help save the New York plant. (You can see it at cs.pn/2KONgHK.) But the free trade argument prevailed over the case for fair trade, and the rest, as they say, is history.
Looking back now, I realize that Moynihan and I weren’t just fighting a tide; we were fighting a sea change. Over the ensuing decades, factory after factory in New York and everywhere else in America would be shuttered and moved to other countries. To this day, much of our state and nation have not recovered from this hemorrhage of good-paying industrial jobs.
All of which helps explain the historic importance of Trump’s effort to bring balance back to America’s world trading relationships. It’s something both Democrats and Republicans, liberals and conservatives, should agree on. If it’s the one big thing Trump’s presidency achieves, it will be more than big enough. Because what’s not fair can’t really be free.
Al D’Amato, a former U.S. senator from New York, is the founder of Park Strategies LLC, a public policy and business development firm. Comments about this column? ADAmato@liherald.com.