Some wise and sagacious advice from Richard Epstein for Mr. Trump on trade, his area of greatest economic weakness
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In an Open Letter to President Trump, Richard E. Epstein (Senior Fellow at the Hoover Institution, Professor of Law at the NYU Law School and senior lecturer at the University of Chicago) offers some very wise and economically critical advice to Mr. Trump on trade, which has to be the president-elect’s greatest economic liability and shortcoming by far. Trump’s views on trade are completely ill-informed, immature, flawed, and deficient, and it’s an area where he desperately needs the kind of maturity and insight that Professor Epstein offers below.
Simply put, Trump’s view on trade and trade deficits aren’t just a little wrong, or partly wrong, they are actually completely wrong, upside-down and backwards, as I argued in the Los Angeles Times earlier this year (“Trump is completely wrong about the U.S. trade deficit“). President-elect Trump, Listen Up! Hear what Professor Epstein has to say about trade, you really need to understand this important economic issue if you want to promote economic prosperity and really make America great again. Above all, you have to avoid the lose-lose approach to trade that you’ve have been peddling to the American people.Bottom Line: If Trump pursues the outdated, ill-advised, lose-lose, prosperity-killing mercantilist trade policies of tariffs, protectionism, and trade restrictions that he’s been promoting, we can unfortunately look forward to a stagnant US economy with continued weak growth in jobs and output. But if Trump listens to Richard Epstein and hopefully his pro-growth economic advisers, and pursues domestic reforms and takes a win-win approach to reducing trade barriers, signing the TPP, and leaving NAFTA and other trade agreements alone, that is the more certain path to greater economic prosperity and a bright economic future.Right off the bat you face this key choice on how to mend the economy by making the United States more competitive than it has been. You have two choices, one of which is fatal and the other that promises a fair measure of success. The first path is to try to shut out the competition from overseas by putting up trade barriers, reneging on previous trade deals, and vetoing the Transpacific Partnership. It is strictly a lose/lose proposition. The consequences of this approach could lead to a trade war that would make the economic sins of progressive politicians look puny in comparison. Taking that approach will also alienate huge portions of American businesses that depend on foreign trade. The upshot will be a further loss in jobs for the very people who need them most, who will abandon you in droves when this happens. I interpret the surprising rise in the market as evidence that Wall Street does not think that you will follow through on that plan. You should listen to its advice.
The correct approach is to leave international affairs as they are by taking steps to fix the economy at home. The largest growth industry in the United States is compliance. Remove those barriers domestically and American businesses, large and small, will be able to compete more effectively in world markets in ways that will benefit workers at home and consumers overseas who can get the benefit of our products. This approach is win/win. Jobs will return to the United States when we remove the domestic barriers to their creation. Foreign nations will benefit from the increased trade, and become stronger and better allies.
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The key point remains this. If we clean out our own domestic institutions, we shall raise the ability of American firms to compete world-wide. Jobs will then be created and standards of living will move up. So you must hold off on your ill-conceived trade plans so that domestic reforms will allow for economic prosperity both at home and abroad. You have a busy period ahead. Don’t fritter the opportunity away.