He is right, they probably won’t. But they should. And so should he.
Trump has moved to enhance the ability of U.S. companies and manufacturers to compete in the global marketplace by curtailing regulations, but in declaring a tariff war with our trading partners he placed a huge barrier on our manufacturers’ incentive to compete. If his goal is to make U.S. manufacturers more competitive in global markets, he should remove all tariffs and advocate for free trade.
A country’s competitiveness is not enhanced by building trade barriers.
The Wall Street Journal on Monday published a commentary by Bill Lane, former global government affairs director at Caterpillar. Lane wrote about the 1988 proposal Caterpillar’s then-CEO George Schaefer sent to U.S. Trade Representative Clayton Yeutter, urging the elimination of tariffs globally on the construction, material-handling and earth-moving equipment and engines that Caterpillar manufactured. He said, “In the long run, we’re confident that our employees, customers and investors are best served when we’re allowed to compete in a totally open market.”
In the 1970s, Japanese automakers started selling cars in the U.S. that were cheaper, more efficient and better built than their American competitors. The U.S. manufacturers pushed for restrictions on imports and the Japanese government in 1981 accepted a temporary restriction on the number of imports to the United States. This agreement was eventually extended to 1985 to give U.S. manufacturers time to become competitive. Sales of domestically produced cars increased; however, it was not until the import restrictions lapsed that U.S. automakers were forced to begin building cars that were competitive to those coming from Japan.
In the 1997 East Asian financial crisis, Taiwan suffered less than its neighbors. Taiwan had its economic house in order and imposed fewer restrictions on its manufacturers and imposed fewer restrictions to competition. Manufacturers had to stand on their ability to compete in the global marketplace with the knowledge that if they failed, the government was not going to step in to save them. It was this “right to fail” that made the Taiwanese economy stronger than their neighbors and better able to withstand the Asian economic crisis.
If Trump truly has confidence in U.S. inventiveness and the ability of U.S. manufacturers to compete in the global marketplace, he should remove all tariffs. It will force U.S. manufacturers and employees to compete in the global marketplace. It plays to our strengths as a nation and is the only way we can win the global trade war. But he won’t.
Hayes Howard is CEO and publisher of American Shipper. He may be reached by email at hhoward@shippers.com.