Who Will Protect Americans from the Protectionists?

By George Will

Saturday, February 11, 2017

At their post–Civil War apogee, 19th-century Republicans were the party of activist government, using protectionism to pick commercial winners and promising wondrous benefits from government’s deft interventions in economic life. Today, a Republican administration promises that wisely wielded Washington power can rearrange commercial activities in ways superior to those produced by private-sector calculations in free-market transactions.    

According to the Financial Times, which interviewed him, Peter Navarro, head of the president’s National Trade Council, says an administration priority is “unwinding and repatriating the international supply chains on which many U.S. multinational companies rely.” This will make life interesting for, among many others, America’s third- and 24th-largest corporations, Apple and Boeing.

The tiny print on the back of iPhones accurately says they are “assembled,” not manufactured, in China. The American Enterprise Institute’s James Pethokoukis notes that parts come from South Korea, Japan, Italy, Taiwan, Germany, and the United States. Components of Boeing airliners’ wings come from Japan, South Korea, and Australia; horizontal stabilizers and center fuselages from Italy; cargo-access doors from Sweden; passenger-entry doors from France; landing-gear doors from Canada; engines and landing gear from Britain.

Navarro’s “unwinding and repatriating” is, to say no more, part of an improbable project: making American greater by making Apple, Boeing, and many other corporations much less efficient and less competitive. This will further slow economic growth, making even more unattainable the 4 percent (more than double the economy’s average growth this century) or higher growth that the administration says will enable it to spend $1 trillion on infrastructure (including a $15 billion or so wall on the Mexican border, begun after nearly a decade of net-negative immigration from Mexico), while substantially increasing military spending, leaving entitlements unreformed, and delivering enormous tax cuts. Cuts that, according to the Committee for a Responsible Federal Budget (co-chaired by Republican Mitch Daniels and Democrat Leon Panetta, both former directors of the Office of Management and Budget), will reduce revenues by $5.8 trillion over ten years. This, as the Congressional Budget Office projects that even without any of the administration’s proposed spending spree and tax cuts, under current law the national debt would increase by $9.4 trillion.

Speaking of supply chains: In her book The Travels of a T-Shirt in the Global Economy, Georgetown University’s Pietra Rivoli recounts a conversation with a man from Shanghai who said that if she would come to China he would help her see various places involved in producing the inexpensive T-shirts exported to America. She would see where the yarn is spun, the fabric is knit, and the shirts are sewn. Asked if she could see where the cotton is grown, the man from China said he could not show her that because the cotton probably is grown in “Teksa.” Rivoli spun a globe around to China and asked him to point to Teksa. “He took the globe and spun it back around the other way. ‘Here, I think it is grown here.’ I followed his finger. Patrick was pointing at Texas.”

Today’s Republican administration promises protection against the destruction of American jobs by the Chinese, Mexicans, and other foreigners. The really prolific destroyers are: Americans. As Reason’s John Tamny says, Americans streaming movies from Netflix (based in Los Gatos, Calif.) erase American jobs in movie theaters and DVD-rental stores. Americans buying books from Seattle-based Amazon have caused many American bookstores to do what Borders (400 stores, 11,000 employees) did: disappear. Americans using San Francisco–based Uber are destroying many taxi drivers’ jobs.

Evidently our protectors in the administration must believe this: The destruction of American jobs because Americans buy goods or services of some American companies rather than those of other American companies is benign. But the destruction of American jobs because Americans buy goods or services of foreign companies is intolerable.

An administration confident about conducting interventions in the economy should demonstrate care when bandying numbers. But in defending the sensible idea of reducing government regulation of the financial sector, Gary Cohn, director of the president’s National Economic Council, said this would save “literally hundreds of billions of dollars of regulatory costs every year.” Former treasury secretary Larry Summers notes the implausibility: “Total bank profits last year were about $170 billion.” Deregulation will more than double profits?

As today’s Republicans celebrate a protectionist administration that is confident that Washington’s superior wisdom can improve upon the market’s allocation of economic resources, Democrats must resent Republican plagiarism. Who will protect Americans from their protectors?