International trade is a highly complex topic, so let’s use this platform to set the stage for the high-level theorems we want to strive toward. Trading partners are really graded on two dimensions: First, are they a Developed nation, or a Developing nation? Second, are they a Friendly nation, or a Hostile nation. If we placed those dimensions into quadrants, we’d want all of our partners to be in the “Developed, Friendly” quadrant. Unfortunately, not all nations are developed, and not all are friendly to the US.
Generally speaking, the US should have all developed nations practice fair, open, and balanced trade with us. If we open our markets to developed nation “A” and buy $500M worth of goods from that nation, they should also allow us the same open market access and also buy $500M worth of goods from us (+/- 5%). If they are not willing to do so, we should invoke some form of restrictions or penalties, e.g., tariffs (exceptions should be noted for multi-partner trading, where more than two nations are involved in a trade alliance and balance is measured across the alliance, not by individual nation). Keep in mind that when we create an expanding economy, we bleed off its growth via unbalanced trade that exports cash. We also have to ask ourselves what would motivate a developed nation to not want to trade equally with us?
Developing nations are a different scenario, however. Those nations are typically highly impoverished and working hard to grow national wealth and subsequent stability. In those cases, the US should not require 95%+ balanced trade equity, but should still insist on open markets. In all fairness, those developing nations will probably buy very little from the US, but we should still have open access while they are also able to freely access our markets.
Hostile nations are those which conduct themselves on an international stage with a level of unfairness deliberately targeting (all) other nations. These are often predatory in nature, and these nations should be highlighted as risky trade partners that should be examined on micro levels. The following examples help highlight these types of nations:
- Currency manipulation: A nation fixes its currency exchange rate on international markets, not allowing fluctuations in value against other currencies around the world. This creates artificially low exchange rates, and thus makes their product and labor rates abnormally low on international markets. This has direct and negative impacts on manufacturing in other nations. China is a key player in this strategy.
- Predatory acquisitions. A nation sees an industry to pursue, and purchases one or more of the suppliers in that industry. Over a short time (often 2-5 years) that nation migrates all acquired operations to its shores, and then begins manufacturing and exporting at a far lower rate, forcing competitors out of the market. China is again a key predator, with countless industries it has purchased, re-homed to China, and formed growing international market monopolies. This has included pharmaceuticals, medical supplies, electronic and automotive subcomponents, heavy equipment, etc.
- Intellectual Property theft. To combat international pricing pressures, often due to labor and material pricing, many companies have been forced to move manufacturing to offshore production facilities. In several of these nations the opening of factories is only allowed if the host nation owns at least 51% share in the facility, and all designs, patents, and other intellectual property is revealed to them without any fear of recourse. This practice should be dealt with swiftly and harshly by the US, and those products should not be allowed back into the US without market-equalizing tariffs or other penalties. China is guilty of both of these practices (IP theft and factory ownership), however many developing nations also force a government ownership clause into agreements as well.
The US should continue to work with all nations to create a trade environment that is fair to all, protects industries and jobs, and also isolates bad players. These bad players are often regime-based, surviving multiple leadership changes in other nations that have free elections, thus allowing them to invoke long-term predatory trade practices that do substantial economic damage but are slow to develop and therefore often overlooked.
This platform should not be seen at all as isolationist; on the contrary, this platform rewards and encourages fairness on a global stage, while also working to protect all economies, not just the US economy. Hostile nations have goals that are rarely, if ever, considerate of mutual global advancement; those goals are not compatible with global interests and should be dealt with accordingly.