Tag Archives: markets

Are Tariffs Protectionist?

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Certainly, they can be.  And tariffs, for a long time, were intended to protect domestic industry from foreign competition as well as being a major source of income for a nation.  Our own nation was a skilled practitioner of the tariff arts for our first 125+ years and again during the Great Depression and the aftermath.

And that’s the line the Koch brothers are taking with regard to President Donald Trump’s tariff impositions.

The urge to protect ourselves from change has doomed many countries throughout history.  This protectionist mind-set has destroyed countless businesses.

That’s also the line Trump says out loud, often, when he talks about tariffs.  As the old saw goes, though, actions speak louder than words, and it’s useful also to consult the actions Trump has taken vis-à-vis tariffs.  Those actions include the following:

  • offering markedly lower tariffs on all goods and services to Mexico as part of NAFTA renegotiations
  • offering a zero-tariff regime to the G-7
  • offering a zero-tariff, zero-subsidy, zero-non-trade barrier regime to the G-20
  • agreeing in principle to a zero-auto tariff arrangement with the German auto companies, the latter which are pushing their government to push the matter with the EU
  • despite the G-7’s and G-20’s craven refusal even to discuss the matter, getting agreement with European Commission President Jean-Claude Juncker to work toward a zero-tariff, zero-subsidy, zero-non-trade barrier agreement between the EU and the US

Tariffs also are a tool of national policy and have little necessarily to do with protectionism.

Who’s Doing the Blocking?

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Yoram Hazony has a book coming out—The Virtue of Nationalism—that he wanted to advertise on Facebook.  Fat chance.  After he accepted Facebook’s Boost Post process, he got some boosted postings of his book, and then he got

Your ad was not approved because your Page has not been authorized to run ads with political content.

Never mind that the book is a history of the rise of the nation-state and a comparison of nationalism with imperialism.  Doesn’t matter.  It’s about nationalism, and so it’s political.

Hazony wrote an op-ed in Wednesday’s Wall Street Journal outlining his ultimately failed effort to get Facebook to let him promote his book on that social medium. The sub-headline on that piece summarizes the problem from Hazony’s perspective:

The robots won’t let me advertise my book on nationalism

His concern is mis-aimed, though. Hazony’s book advertising is not blocked by any Facebook algorithm (“robot”); it’s being blocked by Facebook’s management team. Facebook’s algorithms only do what they’re programmed to do. Facebook’s management team employs the programmers who program the algorithms, and those programmers are only doing what their bosses have employed them to do.

Facebook’s censorship is the direct result of instructions from Zuckerberg and his senior management team members.

Serious or Not?

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European Commission President Jean-Claude Juncker came to DC Wednesday, allegedly to talk about trade.  Juncker came with no offers, or even ideas, to propose concerning the European Union’s trade status with the US , and he was proud of that lack.  Apparently, he just came for some idle chit-chat and to see the sights.  EU Trade Commissioner Cecilia Malmstrom, though, had some concrete things to say before Juncker left to come over.

If the tariff dispute were to include cars that would be a “disaster,”

Deutsche Welle cited her as saying.  And this, as paraphrased by DW:

trade is between companies and people, not between states. The citizens, she says, would end up paying the price for the quarrel.

President Donald Trump has already proposed, both to the G-7 and to the G-20, a completely tariff-free trade regime.  There is already an offer on the table, agreed in principle between the US and German auto companies, to have completely tariff-free auto and auto parts trade between the US and the EU.

The EU, the other six members of the G-7, and the other nineteen members of the G-20 refuse even to acknowledge, much less discuss, those no-tariff offers.

If Malmstrom is serious, why will she not discuss these things in Brussels, especially the removal of tariffs from the auto and auto parts trade?  If Malmstrom is serious, why is she not working to get the EU’s governance out of the way so companies and people can conduct their trade without EU interference?

In the event, Trump and Juncker did reach an agreement to discuss a deal–and to work toward realization of Trump’s offer of a no-tariff trade regime, and to include in that discussion talks with a view to working toward a no-subsidy and no-trade non-tariff barrier regime.

We’ll see what comes to fruition–any EU agreement requires unanimity across all 28 wildly philosophically disparate nations, any one of which can veto an agreement.

Foreign Business Inside the PRC

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The Qualcomm’s acquisition of NXP Semiconductors is supposedly in jeopardy as the People’s Republic of China threatens approval of the acquisition in its prosecution of its long-term trade fight with the US.

But wait—Qualcomm is an American company, and NXP is a Dutch company.  Why does the PRC even have a say in this?

[The PRC] is the last of nine markets where Qualcomm and NXP need approval from competition authorities….

There’s a perfectly straightforward way around this.  The two could stop doing business in the PRC, which is not a business-friendly nation, anyway, what with the nation’s demands that foreign companies give up their technology to domestic “partners” and that they install backdoors into their core softwares so the PRC government can go in and poke around at whim.

Certainly, there would be large initial costs from walking away from such a large market, and there would be market share reduction in the middle term from ceding that market to competitors.  But what would be the costs, really?  Less anticompetitive restrictions on the combined company’s operations, less government sanctioned—even demanded—theft of proprietary and intellectual property, saddling the PRC albatross to those competitors anxious to fill the “gap.”

And real gains from quitting the PRC market: more efficiencies from better focus on the other eight markets, and a better ability to keep and expand the combined company’s technological edge over its competitors by not having to give up that edge to the PRC.

Auto Tariffs Revisited

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EU Trade Commissioner Cecilia Malmström says the EU will respond to any increase in US tariffs on imported autos and auto parts with its own tariffs on autos and parts imported from the US.

And,

The EU cannot offer a bilateral deal only on autos, Ms. Malmström said, to address Mr Trumps complaints about the 28-member bloc’s 10% car tariffs—which are quadruple the US rate.

Never mind that applying its own auto and auto parts tariffs to imports from the US is precisely such a bilateral action.

In the meantime, Malmström, along with the rest of EU governance, continue to studiously ignore an offer already on the table: no tariffs at all on auto and auto parts imports.