Why Free Trade Doesn't Work with Ian Fletcher

very interesting conversation where i am i learned a couple of things him status within fletcher he's an adjunct fellow for the u_s_ business and industry council he's also the author of free-trade doesn't work what should replace it and why and uh... it's just wrote the mythical concept of trade war an article allowance are about as well in one of the entrance sanction let me ask you guys put out a great show against it on the stuff a little bit here now this value ralph camps of free trade and fair trade the free-trade guys say no tariffs no restrictions the fair trade guys say we have to have equivalent rules so for him to trade with china that's at the same environmental rules labor rules et-cetera as my rough understand first of all is that right saleable wordy for mac well it's really two different senses of the term fair trade the first that are born somalia weapons certain receptors fair trade coffee or fairtrade chocolate covered by it doug that nice supermarkets nowadays that basically means that some uh... nice to putting people have uh... set up a trading arrangement to make sure the performers in the poor tropical countries where these products are actually grown get a reasonable share the profits from selling these products that's a good thing the more important sense unfair trade refers to the fact that its a lot easier to export a car from japan to the united states than vice versa and cars is just the beginning date trading arrangement throughout the world of systematically *** by governments are favored various interests and the united states has for the last generation or so pit on the short end of this but we also do our own set of subsidies a set of right i mean are that we have tremendous subsidies for corn and other countries don't necessarily have a night gives us an advantage not really the first when you have to understand it the trade in agricultural products is mult percentage of overall trade between developed countries the only country to recruit cultural product you're a picture of the economy are third world countries with the first point the second point is that u_s_ agricultural subsidies are kind of bizarre they're not nearly as bizarre at that what they have in europe and if you go to japan their science fiction no or examine well i mean as well i mean japanese agricultural subsidy for japanese growth writes on tiny plots of land that nobody would use in the right growing originally had to stay put but we cannot because japan is a highly urbanized society and most of their appeal and has about this anyway but they continue to support rice for complicated reasons having to do with japanese culture and politics and so forth also it incredibly subsidized image you buy write him and tokyo you're mostly eating government subsidy so am i right in saying that you don't think it is a means any such thing as free trade anyway amin it depends on who's perspective you look at it from uh... so if we don't do tariffs on china ok we call a free trade but it's not really free trade for because china's doing tariffs on us is that right yes or no the first thing you have to understand is that what i used the term free-trade i don't literally main bhi perfect hundred-percent pure nit-picking quick identically accurate free-trade that one could insist upon if one were sitting at the truck board in a classroom imported to the united states are about ninety nine percent three to be perfectly honest i base that figure on the fact that u_s_ tariffs are roughly one percent of u_s_ imports but ninety nine percent free is free for all practical purposes the larger point that you've made it's trade in the opposite direction exports to the united states to foreign countries not even close to ninety nine percent free which is why we have this terrible trade imbalance of the u_s_ importing more than it exports to the tuna several hundred billion dollars a year right now people say that we can't really thinks that because it'll start a trade war and that if we raise tasks than other countries will raise their taps why do you think that's wrong weatherproof when you have to remember that we are the ones running the deficit and for admission to the ones running a surplus is against it so they have much more to lose that we do if they want to start a trade war so the decadents we stacked against them and our present position of weakness is actually a position of strength that's reason number one real number two it if you look at nations like china which are running a huge trade deficit again sorry shoe trade surplus against you know it's eight they know perfectly well with the surplus cannot go on forever in fact it's probably going to die at some point in the next five years or so as a result would be reinstated talking about changing the world trading regime so that either we pilots from that molded by more for months that's gonna bring to an end are really sweet deal that they know whether they want to say this republic or not they know he's going to come to an end anyway so the choice they're facing is not whether they give up their trade surplus with united states or not the question is whether it goes away in a nice orderly negotiated fashion between our government employers or whether they were on the risk of heading for a sudden the bark all the way we had financial the buckle in two thousand a date for the good reasons for them to end this trade surplus with nice way rather than a nasty way you know it's we're turning in fletcher here his book is free trade doesn't work what should replace it and why that leads me to a national question of quickly how much would you raise a terrace because there's gotta be some women to it in in which case you would really started and chain reaction of people raising tariffs all over the world was doesn't really help anybody i don't think well i think it might block the what i would do is i would just go back to the teddy roosevelt air at the united states being a terror protected economy which is what the u_s_ was pretty much from the american revolution to move the end of world war two i would suggest in the book a flat care if the same for all product so that there's no political mischief of strength twenty five fourth thirty percent if you look at america's history that so uh... in line with historical precedence and if you look at various estimates you can't make it how much will trade is distorted by foreign nations and how much it would take to put a bomb on the other side of the scale to bring it back to the balance but also a plausible figure but i uh... i'm not nit-picking quick fact about that obviously that would be something that would be negotiated floor of congress overtook them one of the more ideal inside of us who are quite out of a percent it wouldn't get everybody else to go down there one percent the probable is the united states has been trying to get other nations to cut it's not just paris it's non-tariff barriers some of which are negligible because they simply consistent behind-the-scenes understandings between foreign governments and foreign corporations that you just don't report american goods if you know what's good for you and sometimes it's understandings between four major banks in foreign countries for example in japan and germany the economy is controlled for the banks which all the big chunks of the debt of the major corporations are people who just told don't to import if you know what's good for you as a result it's very hard to chip away the trade barriers of foreign nations let alone negotiate them away a bit we've been trying to do that since bill clinton was in office and it hasn't worked so aldrich how much longer we have to go on with that strategy before we learn our lesson haley's practical but okay so we have a higher tariffs so we're all agreed that we're going to have a higher prices for us and consumer yes no the person have to remember section ordered say twenty five percent character all-important and that you want to buy a flat screen tv made in japan it's gonna cost twenty five percent more you don't have to be by the imported model you could buy an american t_v_ actually not for flat screens for those are made in the u_s_ anymore that's itself a danger sign and beat like to relocate industry back to the u_s_ but if you don't want to pay twenty five percent tobacco depart toyota buying chevy instead that's point number one point number two is when you have attire and you collect hundreds of billions of dollars in tariff revenue you can rebate that to the income tax you could finance a big cut in income tax with the tariff revenue that you would get and that's what i suggest in my book because i a neutral about what the overall level of taxation should be issue for me is not how much we tax which is a legitimate argument between liberals and conservatives usual is what we tax i think we should not tax income so much bad start taxing imports instead you know what the u_s_ business and industry council is yes set a washington-based think-tank rounded in nineteen thirty three i run the california office which is in san francisco right but do you guys have a motivation to increase the tabs of for companies and so the u_s_ companies do better competitively let part of the that's part of the picture obviously a lot of our membership is hurting from or an unfair trade practices and it is destroying jobs in indiana and plates so sure that's uh... war mean that's uh... if my part of what we're about yeah ill at i'll let's but you said at the end of world war two we had passed my test until then the world war two but in when i look at what happened historically we had eight this enormous boom uh... after vendor world war two so is that correlated with give it s and then we have this incredibly strong county for about fifty years what happened is would weep started cutting our tariffs at the end of more true with beginning of the cold war this was largely a cold war strategy to fight communism by helping other nations through exports of u_s_ and finding them to be at stake we have except i'm overwhelming technological and economic superiority over the rest of world so we could afford to indulge free trade for you know fifteen or twenty years after nineteen forty five the problem is that that position of superiority which is an historical accident did not last forever and increasing way after the mid nineteen sixties as foreign nations caught up with us it started to matter there unfair trading practices there mercantilist aggressiveness against the united states and those chickens are coming home to roost right now yeah i think they are as they are not convinced of that i think that it's that not necessarily a quest that is that we had the boom afterwards and i'll tell you another concern i have which is that either protectionism is going to work if their produce goods cheaper somewhere else it we can raise our tariffs all day long but we'll produce stuff that's either good enough or or cheap enough the wrestler world is going to buy and it's just the ambitious cycle i had a lot of idle see that working long you're correct but that's actually where i disagree with you one of the point to make my pocket if you had to say thirty percent flat para you're not going to relocate back to the united states industries like the production crafty shorts which are mostly based on cheap labor that's fine we don't want to capture those industries because they don't pay the kind of wages it takes to live in a developed country and they're also the low innovation industry to build on the future but you weren't tend to relocate back to the united states industries as i mentioned before like the production of flat-panel televisions which are important because those are the high-tech high-value industries of not only pay high wages but have a future innervation at just before we let you know i i i i really think of course that's so depends on the numbers and how you interpret the numbers uh... i i look a little unconvinced but i hear your argument and i and i think it's of course it perfectly acceptable argument and it's an interesting one i have method just can u real quick tell me what your main issue with nafta was a white you didn't think was the right way to go i don't think you have to ever should have been signed i think that it's been a disaster for both the united states and mexico the art state lost a lot of jobs to mexico now mexico's losing jobs to china sort hasn't really worked out well for any of the countries involved in ross perot's kind of a cook but i think it was right but weren't those he sees a i'm sympathetic to that but i think if you have lower wages in mexico are the jobs of manufacturing things obviously going to migrate down and that's the one where another to some extent they will and as i've pointed out in the book and as i mentioned a few minutes ago there are other industries that the united states should be shedding in transferring abroad for example the manufacture too sure it is not a good industry americans working in because it's a cheap labor industry low-skill industry who doesn't pay to kind of wages that it takes to live here in the developed countries also has no future causes no inflation in the manufacture t-shirt so yes those kind of drunk industries they should go abroad and they will the problem is that if you look at the fact that i talk about a trickle patrol playbook u_s_ is not just losing bad in the street it's also losing good industries high-tech industries the kind of industries we need to have in this country if were to have an economic future i think where it i hear you by the indian tribe there at those anyway i mean i think they have peg you know pretty good education system in certain areas of those countries for sure and so they have a high tech thing and they have edits lower-wage you're fighting a losing battle doesn't and you can't have well if what you're going to truth of the united states is finish in the united states is going to end up with wages famous indian trying to any of your listeners one of our care for that a meadow crisil it doesn't mean we're finished and it doesn't mean we go down the india's prices in fact i was just talking over the weekend with some friends and china's wages are going to see the really up ninety region equilibrium and as much as we want to fight that i think this is that are natural all that about none of her sister navigable one of the things that document in my book at length is how much of all these realities are controlled by specific government policies for example when china under values its currency but forty percent that means that whatever their wages or whatever the property videos they take that and then on top of that there is a state generated artificial advantage of forty percent in competing with american industries this is not some free-market equilibrium adjusters are no senior definitely right about then that's a little is a black or white issue i i think we need to be more know us on this and say look if they're going to do that day and they have a thirty percent advantage than we have a right to say i will until you change that that we're going to do thirty percent on our end i think that's a fair negotiation but it's not either okay they're doing and we can do anything about away at the el free-trade or we're going to you know asl we do a thirty percent tariff no matter what they're doing right i think that that's all you have a position okay your position makes a lot more sense for the watermark its government has been doing for the last fifteen years the drawback is but if we call china's blossom trail per sport you teachers and you're subsidies remote controls in your currency manipulation or slave labor all the things you do begin the system otherwise you're facing a tariff what'll we do if they'd say uti we need at an absolute minimum contingency plan to function avatar protected economy otherwise our threats will be hollow and they will know that i think we've got to come to a middle ground where were a lot tougher in in negotiating these trade pacts so that they don't have these on even advantages but at the same time you know i don't think we go all the way to catch the silly but yes you've got to have that option is you know that i wake up the war they love them all option on the table and what comes to trade i i hear you that we should have more options open so that so they were also very glad that you appear to grasp that we need at least the option i'll be able to function as a character tected economy even if what you believe it is free trade because we need a credible threat there you go influences book is free trade doesn't work was to replace their life thank so much for coming on that innocent thank you very much a broadway show thank you