Trump Right on Trade Predators

Trump Right on Trade Predators, by Pat Buchanan.

America’s allies are cheating and robbing her blind on trade.

According to the WTO, Britain, France, Spain, Germany and the EU pumped $22 billion in illegal subsidies into Airbus to swindle Boeing out of the sale of 375 commercial jets.

Subsidies to the A320 caused lost sales of 271 Boeing 737s, writes journalist Alan Boyle. Subsidies for planes in the twin-aisle market cost the sale of 50 Boeing 767s, 777s and 787s. And subsidies to the A380 cost Boeing the sale of 54 747s. These represent crippling losses for Boeing, a crown jewel of U.S. manufacturing and a critical component of our national defense.

Earlier, writes Boyle, the WTO ruled that, “without the subsidies, Airbus would not have existed … and there would be no Airbus aircraft on the market.”

In “The Great Betrayal” in 1998, I noted that in its first 25 years the socialist cartel called Airbus Industrie “sold 770 planes to 102 airlines but did not make a penny of profit.”

Richard Evans of British Aerospace explained: “Airbus is going to attack the Americans, including Boeing, until they bleed and scream.” And another executive said, “If Airbus has to give away planes, we will do it.”

When Europe’s taxpayers objected to the $26 billion in subsidies Airbus had gotten by 1990, German aerospace coordinator Erich Riedl was dismissive, “We don’t care about criticism from small-minded pencil-pushers.”

This is the voice of economic nationalism. Where is ours?

“Free trade” is not a simple issue.

In the case of the US, another factor is often overlooked. The US manufactures the world’s reserve currency, the US dollar. It is an exporter of US dollars, as evidenced by the large number of US dollars outside US borders. Much of world trade between countries other than the US is conducted in US dollars, so there is a strong demand for US dollars — which bids up their price on international currency markets.

This is both a boon and a curse for the US. A boon because the US gets to export US dollars, created at the click of some computer keys, in return for real goods and services imported into the US. But also a curse because it makes it harder for US industry, whose costs are in US dollars,  to compete. Because of the overlooked role of currency, some of the usual arguments for free trade do not apply to the US.

Fortunately the situation, which has existed since 1945, is gradually normalizing. More and more international trade that does not involve the US is conducted in currencies other than the US dollar. But this is a reduction from 90% or more, and has a long way to go. China is particularly keen for trade to be conducted in other currencies, as it vies for world supremacy.

hat-tip Stephen Neil