The Wall Street Journal is going after Donald Trump with both barrels right now. Let’s be honest: They loathe the often abrasive businessman — but primarily for his views on trade, which don’t square with their free-trade fairyland.
The WSJ started going after the Trump campaign with a pseudo-economics hit piece by Mary O’Grady that explained why Trump is wrong on NAFTA/Mexico. They followed this with an editorial lamenting Trump’s “protectionist” views in the most recent GOP debate. Then came another take-out section in a piece by Karl Rove on Trump as the debate’s sole loser. And finally, they blasted another editorial on why Mr. Trump is wrong on the TPP, China, and the international economic policy of that strategic genius, Barack Obama, apparently a WSJ trade hero — although they dared not mention him by name.
Let’s start with the post-debate analysis.
Following the most recent GOP debate, during which only Trump was asked for his views on the Trans-Pacific Partnership (TPP) trade deal — and by WSJ Editor-in-Chief Gerard Baker (a set-up by any standard)— the Journal opined that Trump doesn’t have “any idea” what’s in the TPP. And because Trump cited China and its currency manipulation as a key problem, the Journal was cheered by Sen. Rand Paul’s non-sequitur debating point that China isn’t even a party to the TPP negotiations.
But in the actual debate, and in response to Baker’s question on opposition to the TPP, Mr. Trump said at the outset that no one reads the TPP— because it’s just too long and complex. Presumably, Trump included himself in this vast group of non-readers, which likely also includes the editorial board of the WSJ, and the moderators, as well as all the candidates at the debate. And let’s also note that a mere read-through of the actual trade text is hardly sufficient. The pact’s dense legalese is often so opaque and self-referential that reading and understanding are two very different things. Literally, the process requires days if not weeks of concentration.
However, Mr. Trump’s key points in response to Baker were: (1) that China could enter the agreement “through the back door,” which means that they are not an original or “front door” party to the agreement, and (2) that China’s currency manipulation has proven to be a big problem for U.S. manufacturing businesses, which neither the Bush II or Obama administrations have addressed successfully.
Rather than being the ignoramus that the Journal claims him to be, Mr. Trump is in fact correct on both points. The TPP is a “dockable agreement,” which means that, in the future, any country wanting to join the final deal can do so if it agrees to the full terms. Beijing has already expressed interest in joining the TPP, and recently, U.S. Secretary of State John Kerry actually went on record to invite both China and Russia into the fold.
Trump is also correct that the TPP lacks any enforceable provisions on currency manipulation (such as sanctions that would actually punish violators), as opposed to the TPP requirements for reporting on currency and meetings to discuss manipulation. In emphasizing this glaring omission, Mr. Trump focused on potential member China as an example but his remarks covered the free pass currently being given to known TPP manipulators such as Japan, Singapore, and Malaysia, and other potential TPP member-manipulators, such as Korea and Taiwan.
Rand Paul, who was either unable to follow Trump’s line of argument, or is fine with currency manipulation, interrupted to explain that China isn’t part of the deal. Ok, thanks, Rand, but Donald never said it was. And Trump is correct that China’s currency malfeasance has cost the U.S. dearly in terms of displaced factories and jobs, foregone wealth creation, loss of market share both at home and abroad, and diminishing power and influence.
Moderator Baker seized Paul’s interruption to editorialize in favor of the TPP, saying that, if America didn’t ratify the deal, China’s influence would fill the void, and thus expand in the region. This happens to be a direct cite of President Obama’s TPP taking points. But to suggest that China’s economic course is somehow going to be altered by the TPP is errant nonsense. TPP countries already trade quite willingly and extensively with China, and on unequal terms. The TPP will not alter that fact. Nor will it stop China from concluding bilateral and multilateral trade agreements, or any other action that Beijing considers to be in the national interest.
A case in point is China’s new Asia Investment and Infrastructure Bank.
Direct pleas from President Obama could not stop U.S. allies, with the exception of Japan, from racing to join the Bank. And so, the argument that the TPP will constrain China economically is ludicrous. And China eventually will join the TPP— and most likely subvert it. (Witness how Beijing has steadfastly ignored its WTO obligations for the 14 years of its membership, and has shirked its IMF duties not to manipulate its currency, inter alia.)
Trump expressed displeasure with the Journal’s caustic take, which prompted the paper to blast the New York businessman with even greater fire in a follow-on editorial. But essentially, the WSJ merely reiterated its original mischaracterizations regarding Trump’s debate performance. Namely: (1) He doesn’t understand the agreement and shouldn’t be citing China as a key objection to it; (2) His concerns about currency manipulation are incorrect.
But anyone who is not a dogmatic believer in free-trade ideology should stand by Trump on this one. As noted above, his concerns on China — and other countries — are more than justified. And, a lack of provisions in the TPP to sanction currency manipulation is indeed a serious matter. What’s driving the WSJ’s animus on this issue, however, is their blind allegiance to anything called free trade, which is a theory, not a law of physics.
In the current global economic arena, there is little true free trade; there is only government-managed trade. In fact, the Journal inadvertently confirms this important and basic fact when it keeps making the point that trade should occur under U.S. rules rather than China’s. The reality is that a free market is not supposed to be a government-controlled market. Instead, it should simply involve an exchange of goods and services among willing buyers and sellers. So this puts the lie to Journal’s fixation with the “free-ness” of current trade. The hard fact is that these trade schemes are not based on the law of comparative advantage. Instead, they are based on whatever various, favored industries have coopted their respective governments to include their particular needs within the trade package.
The WSJ claims that Trump will start trade and currency wars on his first day in office — because he has said that he would name China a currency manipulator on his first day in office. They are trying — irresponsibly, through character assassination and hysteria — to stampede readers away from his candidacy. They obviously prefer a pro-TPP candidate, which explains the recent column warning Marco Rubio not to oppose the TPP. The WSJ message is clear. Any candidate who dismisses the religion of free trade will get blasted.
The great irony is that China has long since carried on a trade war against the U.S., via continued dumping, subsidies, lax pollution standards and the aforementioned currency manipulation. The Journal seems intent on defending Beijing’s currency moves, and also likes to propagate the false notion that Quantitative Easing by the Federal Reserve is an “actionable” form of currency manipulation. But the comparison is false. The dollar is freely traded on world markets, with no interference by the U.S. government. This is far different from the tightly controlled band within which Beijing maintains its currency, and its numerous interventions in foreign exchange markets.
It is also misleading to imply that other countries are going to enforce currency measures against the United States, if they were actually included in trade agreements, simply because the Federal Reserve has expanded the U.S. money supply through quantitative easing. The fact that there are more dollars in circulation in part means that Americans have more money to buy more imported goods from China, Japan, et alia, who have collectively decimated America’s manufacturing industries. This is why the stimulus program didn’t work as advertised. The new money hemorrhaged overseas, stimulating foreign economies rather than ours. So it’s hard to accept the argument that these countries are going to bring cases against the United States given the resultant trade surpluses they continue to earn with us.
Overall, the WSJ attacks show the paper is very worried that Trump is challenging its favored status quo by giving voice to the majority of Americans who know instinctively that something is wrong with our trade policies, given our large trade deficits and ballooning national debt.
Trump’s attacks on so-called free trade implicate the Journal’s short-sighted policies, which have put America in peril due to lost manufacturing and thus foregone wealth creation. In fact, it is the WSJ’s failure (along with its favored establishment candidates) to adjust its trade theory to reality, and to address currency cheating by our trade partners, that have given rise to the Trump phenomenon in the first place.
Kevin L. Kearns is president of the U.S. Business & Industry Council (USBIC), a national business organization advocating for domestic U.S. manufacturers since 1933.