The art of the imag­i­nary deal

The Hazleton Standard-Speaker - - OPINION - PAUL KRUGMAN

Are we go­ing to have a full-blown trade war with China, and maybe the rest of the world? No­body knows — be­cause it all de­pends on the whims of one man. And Tar­iff Man is ig­no­rant, volatile and delu­sional.

Why do I say that it’s all about one man? Af­ter all, af­ter the 2016 U.S. elec­tion and the Brexit vote in Bri­tain, there was a lot of talk about a broad pop­u­lar back­lash against glob­al­iza­tion. Over the past two years, how­ever, it has be­come clear that this back­lash was both smaller and shal­lower than ad­ver­tised.

Where, af­ter all, is the ma­jor con­stituency sup­port­ing Don­ald Trump’s tar­iffs and threats to exit in­ter­na­tional agree­ments? Big busi­ness hates the prospect of a trade war, and stocks plunge when­ever that prospect be­comes more likely. La­bor hasn’t ral­lied be­hind Trump­ist pro­tec­tion­ism ei­ther.

Mean­while, the per­cent­age of Amer­i­cans believ­ing that for­eign trade is good for the econ­omy is near a record high. Even those who crit­i­cize trade seem to be mo­ti­vated by loy­alty to Trump, not by deep pol­icy con­vic­tions: Dur­ing the 2016 cam­paign self-iden­ti­fied Repub­li­cans swung wildly from the view that trade agree­ments are good to the view that they’re bad, then swung back again once Trump seemed to be ne­go­ti­at­ing agree­ments of his own. (We have al­ways been in a trade war with Eas­ta­sia.)

But if there’s no strong con­stituency for pro­tec­tion­ism, why are we tee­ter­ing on the brink of a trade war? Blame U.S. trade law.

Once upon a time, Congress used to write de­tailed tar­iff bills that were stuffed full of give­aways to spe­cial in­ter­ests, with de­struc­tive ef­fects on both the econ­omy and Amer­i­can diplo­macy. So in the 1930s FDR es­tab­lished a new sys­tem in which the ex­ec­u­tive branch ne­go­ti­ates trade deals with other coun­tries, and Congress sim­ply votes these deals up or down. The U.S. sys­tem then be­came the tem­plate for global ne­go­ti­a­tions that cul­mi­nated in the cre­ation of the World Trade Or­ga­ni­za­tion.

The cre­ators of the U.S. trade pol­icy sys­tem re­al­ized, how­ever, that it couldn’t be too rigid or it would shat­ter in times of stress; there had to be ways to re­lieve pres­sure when nec­es­sary. So trade law gives the ex­ec­u­tive the right to im­pose tar­iffs with­out new leg­is­la­tion un­der cer­tain cir­cum­stances, mainly to pro­tect na­tional se­cu­rity, to re­tal­i­ate against un­fair for­eign prac­tices, or to give in­dus­tries fac­ing sud­den surges in for­eign com­pe­ti­tion time to ad­just.

In other words, U.S. trade law gives the pres­i­dent a lot of dis­cre­tionary power over trade, as part of a sys­tem that curbs the de­struc­tive in­flu­ence of cor­rupt, ir­re­spon­si­ble mem­bers of Congress. And that setup worked very well for more than 80 years.

Un­for­tu­nately, it wasn’t in­tended to han­dle the prob­lem of a cor­rupt, ir­re­spon­si­ble pres­i­dent. Trump is pretty much all alone in lust­ing for a trade war, but he has vir­tu­ally dic­ta­to­rial au­thor­ity over trade.

What’s he do­ing with that power? He’s try­ing to ne­go­ti­ate deals. Un­for­tu­nately, he re­ally, re­ally doesn’t know what he’s do­ing. On trade, he’s a rebel with­out a clue.

Even as he de­clared him­self Tar­iff Man, Trump re­vealed that he doesn’t un­der­stand how tar­iffs work. No, they aren’t taxes on for­eign­ers, they’re taxes on our own con­sumers.

When try­ing to make deals, he seems to care only about whether he can claim a “win,” not about sub­stance. He has been tout­ing the “U.S. Mex­ico Canada Trade Agree­ment” as a re­pu­di­a­tion of NAFTA, when it’s ac­tu­ally just a fairly mi­nor mod­i­fi­ca­tion. (Nancy Pelosi calls it “the trade agree­ment formerly known as Prince.”)

Most im­por­tant, his in­abil­ity to do in­ter­na­tional diplo­macy, which we’ve seen on many fronts, car­ries over to trade talks. Re­mem­ber, he claimed to have “solved” the North Korean nu­clear cri­sis, but Kim Jong Un is still ex­pand­ing his bal­lis­tic mis­sile ca­pac­ity. Well, last week­end he claimed to have reached a ma­jor trade un­der­stand­ing with China; but as J.P. Mor­gan soon re­ported in a note to its clients, his claims “seem if not com­pletely fab­ri­cated then grossly ex­ag­ger­ated.”

Let’s be clear: China is not a good ac­tor in the world econ­omy. It en­gages in real mis­be­hav­ior, es­pe­cially with re­gard to in­tel­lec­tual prop­erty: The Chi­nese es­sen­tially rip off tech­nol­ogy. So there is a case for tough­en­ing our stance on trade.

But that tough­en­ing should be un­der­taken in con­cert with other na­tions that also suf­fer from Chi­nese mis­be­hav­ior, and it should have clear ob­jec­tives. The last per­son you want to play hard­ball here is some­one who doesn’t grasp the ba­sics of trade pol­icy, who di­rects his ag­gres­sive­ness at ev­ery­one — tar­iffs on Cana­dian alu­minum to pro­tect our na­tional se­cu­rity? Re­ally? — and who can’t even give an hon­est ac­count of what went down in a meet­ing.

Un­for­tu­nately, that’s the per­son who’s now in charge, and it’s hard to see how he can be re­strained. So the fu­ture of world trade, with all it im­plies for the world econ­omy, now hinges largely on Don­ald Trump’s men­tal pro­cesses. That is not a com­fort­ing thought.

PAUL KRUGMAN is a colum­nist with The New York Times.

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