The
US/China “Trade Deal”?
By Paul Craig Roberts
January 18, 2020 "Information
Clearing House"
- The first thing to understand is that it is
not a trade deal. It is Trump backing off his
tariffs when he discovered that the tarrifs fall
on US goods and American consumers, not on
China. Trump is covering his retraction by
calling it a trade deal. China’s part of the
deal is to agree to purchase the US goods that
it already intended to purchase.
The purpose of tariffs is to protect domestic
producers from foreign competition by raising
the price of imported goods. What Trump, his
administration, and the financial press did not
understand is that at least half of the US trade
deficit with China is the offshored goods
produced in China by such corporations as Apple,
Nike, and Levi. The offshored production of US
global corporations counts as imports when they
are brought into the US to be sold to Americans.
Thus, the cost of the tariffs were falling on US
corporations and US consumers.
Tariffs are not an effective way to bring
offshored US manufacturing home. If Trump or any
US government wants to bring US manufacturing
back to the US from its offshored locations, the
way to achieve this result is to change the way
the US taxes corporations. The rule would be: If
a US corporation produces in the US with US
labor for US markets, the firm’s profits are
taxed at a low rate. If the corporation produces
products for the US market abroad with foreign
labor, the tax rate will be high enough to more
than wipe out the labor cost savings.
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As I have
emphasized for years, the offshoring of US
manufacturing has inflicted massive external
costs on the United States. Middle class jobs
have been lost, careers ended, living standards
of former US manufacturing workers and families
have dropped. The tax base of cities and states
has shrunk, causing cutbacks in public services
and undermining municipal and state pension
funds. You can add to this list. These costs are
the true cost of the increased profits from the
lower foreign labor and compliance costs. A
relatively few executives and shareholders
benefitted at the expense of a vast number of
Americans.
This is the problem that needs to be addressed
and corrected.
Dr. Paul Craig Roberts was Assistant Secretary of
the Treasury for Economic Policy and associate
editor of the Wall Street Journal. He was
columnist for Business Week, Scripps Howard News
Service, and Creators Syndicate. He has had many
university appointments. His internet columns
have attracted a worldwide following. Roberts'
latest books are
The Failure of Laissez Faire
Capitalism and Economic Dissolution of the West,
How America Was Lost,
and
The Neoconservative Threat to
World Order.
Donate
and support Dr, Roberts Work.
==See Also==
The U.S.-China Trade Deal
Was Not Even a Modest Win:
This pseudo-deal deserves not just
skepticism but calling out as a dramatic failure
of U.S. policy
The
views expressed in this article are solely those
of the author and do not necessarily reflect the
opinions of Information Clearing House.
