Game of Tariffs: America first, Germany first

Moving a Ford plant to Mexico to re-export to the U.S. is not free trade. Building a Ford plant in Mexico to sell to Mexicans is another matter.

Image courtesy of Wikimedia Commons.

WASHINGTON, January 22, 2017 — No one who respects liberty and other human beings should fear the slogan “America First.” The slogan was re-popularized by President Trump during his presidential campaign and used in his Inauguration.

We say “re-popularized” because the slogan didn’t originate with Trump. It was popular in the 1930s and even earlier, for a variety of reasons.

The notion of putting America first is only fearful to those who fear and hate freedom and who pretend the world is something that it is not. The only thing to fear is that President Trump might conclude that the world exists primarily to serve America, which would be unfortunate, but also unlikely.

Trade is essentially the exchange of commodities between two countries. A commodity is anything that is sold in the market; oil, gold, and wheat are commodities just as are cars, beads and computers, in the truest sense of the word commodity.

Trump has been particularly tough in statements to the automobile industry, rightfully warning Ford that to move a plant to Mexico is morally and economically wrong. Regardless of what economists supporting globalism say, Mexico is a different political entity from the U.S. If Mexico wants a car manufacturing plant, it should create the right conditions to foster a domestic automotive industry, just as South Korea, the U.S., Germany and Japan have done in their own economies.

The globalists will shout down this logic. But moving a Ford plant to Mexico to re-export to the U.S. is not free trade. Building a Ford plant in Mexico to sell to Mexicans is another matter.

But for transactions like this and, even more, for more robust internal business development, Mexico must introduce real personal and business freedom and competition, ending its boasts about having the richest men in the world as citizens—men who got rich from government-protected monopolies.

Globalists apparently feel they owe nothing to the societies that create the conditions that enable them to build  industries. By that peculiar logic, if only Kim Jong-Un would stop his saber rattling, Apple and Ford could build plants in North Korea, pay labor 50 cents a day, and re-export finished products to America, labeling this free trade.

One reason that Donald Trump is the President of the U.S. is that he opposes counterproductive trade deals that effectively subsidize oppressive regimes that stifle liberty. Such regimes must frequently be bailed out and protected from revolution by American taxpayers so that Apple and other corporate giants can make huge profits for their shareholders.

No more.

Freedom lovers are hoping that Trump truly understands freedom and avoids the kind of protectionist policies he has seemed to embrace at times. Freedom lovers understand that Apple must be allowed to sell its goods from America with zero tariffs into Japan, and Samsung has a right to sell its products into America with zero tariffs. That is the real meaning of free trade. On the other hand, Ford should not be helped to build plants in Mexico with American subsidies. That is the meaning of the term “free ride.”

If Ford decides to build a plant in Mexico with the idea of selling those cars in America, perhaps the Trump administration will impose tariffs of 35-60 percent or higher. And why not? who cares? These kinds of arrangements destroy the meaning and benefit of truly free trade.

In a recent article by German newspaper Bild, as translated by, President Trump said:

“I would tell BMW if they think they’re gonna build a plant in Mexico and sell cars into the US without a 35 percent tax, it’s not gonna happen, it’s not gonna happen—so if they want to build cars for the world I would say wish them luck—they can build cars for the US but they’ll be paying a 35 percent tax on every car that comes into the country.”

But ironically, what applies to America should apply to Germany by this logic. The Germans, in turn, should be putting Germany first, and all BMW’s should be made in Germany. If its plants are at full capacity, BMW can certainly build plants in other countries, but those BMWs should never be permitted to be re-exported to Germany. Furthermore, by extension, since Germany is in the European Union (EU), no BMW built outside the union should be re-exported to any country within the union. In the case of expansion to fill the needs of the EU market, it would be more moral for BMW to build a plant in Portugal or Greece to sustain that political union before building a plant in Mexico.

Another issue involved with free trade, particularly in the automobile industry, is the matter of quality. For example, when it comes to quality of engineering, consumers prefer BMWs to Chevrolets or Cadillacs if they can afford a BMW. They perceive BMWs as highly desirable, high quality cars and worth the extra cost because they regard them to be better engineered and longer-lasting than cars built by General Motors. Why place tariffs on foreign manufactured cars if they are proven to be superior to equivalent domestic products?

What President Trump must do is keep the ideals of liberty and freedom foremost in his mind in any trade or manufacturing issues his presidency will face. He must (and likely will) strive to get rid of outmoded trade deals and other trade pacts that disadvantage the American economy and rob America of jobs and related skills while subsidizing the same in foreign countries.

In the same spirit, if countries in Africa or Asia want to build automobiles in a domestic plant, why not establish a tradition of democracy that puts liberty and freedom in the forefront, doing away with oligarchies, tribalism, or phony crony capitalism? In time, regimes that can’t keep up will collapse under their own weight, allowing their citizens to evolve. That way, in the future, when we build new global political deals, companies will be able to build plants wherever there is a market for their products. The world will be richer, because liberty will make us all rich.

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