by Pierre Lemieux

Don’t Trump and Xi have a different vision of international trade? Not really.


china trade.jpeg

Nobody knows how the protectionist tug-of-war between Chinese president Xi Jinping and U.S. President Donald Trump–each one deciding for his flock–will end. Perhaps we’ll have a disastrous trade war and recession. Perhaps Chinese consumers and businesses will persuade Xi to back off, as the latter’s April 10 speech was first interpreted (Lingling Wei, “Xi Vows Greater Access to China, Warns Against ‘Cold War Mentality‘,” Wall Street Journal, April 10)? Or perhaps American consumers and businesses will oblige Trump to back off, as corporate and stock-market resistance in America hopefully suggests? Chinese resistance may save the Americans from their ruler, and American resistance may save the Chinese from theirs. Either would be welcome.

Don’t Trump and Xi have a different vision of international trade? Not really.

Xi’s recent declarations suggest that he does not want a trade war. He said:

In a world aspiring for peace and development, the Cold War and zero-sum mentality look even more out of place.

This reference to trade as a positive-sum game looks strangely free-trade. But it only looks so. Yet, a collectivist has some reasons to favor international trade.

I take collectivism to mean a doctrine favoring choices at the level of the collective, which in the modern world is best represented by the state. By opposition, individualism is based on the primacy of the choices made by each individual. Whether the state is the Party or the Republic does not essentially matter for this distinction.

If we follow these definitions, Donald Trump and Marine LePen (leader of the Front National in France) are collectivists of the Right; Bernie Sanders or Xi Jinping are collectivists of the Left. This explains their strange agreement against free trade. The political distinction between individualist and collectivist is more useful than the one between Left and Right.

Here is the catch: collectivism is not against international trade per se, only against free trade. Try to think like a coherent collectivist for a moment. Exporting means using “our” (collective) resources to produce goods and services for foreigners. Importing means using the resources of foreigners to produce goods and services for “our” own consumption. Therefore, the less “we” export and the more “we” import, the better it is for our collective. Of course, we need exports (or foreign investment) to pay for our imports, so we must tolerate exports. End of collectivist parenthesis.

Garden-variety nationalism is merely one form of collectivism: it draws the borders of the acting collective around a national territory. Mr. Xi, who is often described as an “unabashed nationalist,” has a good collectivist justification to favor trade with the United States. He should long for a current-account deficit. Besides the balance of goods, the current-account balance incorporates the balance of services–such as financial services. Interestingly, liberalizing imports of financial services is one thing that Xi said his government would do. Why not have those bad Americans produce financial services for the Chinese?

The reader may object that collectivists ignore trade theory and cannot see the collective benefits of international trade. This may be true, but assuming that people are irrational is generally a poor explanation, for it can explain anything and everything. Moreover, there is another broad reason why collectivists share a dislike of free trade while they favor some international trade: in free trade, what they don’t like is the “free,” which refers to individual liberty, not trade per se.

For adherents of individualism–such as most economists are–free trade basically means the freedom of individuals or their private organizations and intermediaries to import what they want from where they want–even if the degree of freedom of their trading partners is lower. Your country’s electorate has little influence on liberty in foreign countries, but it has some influence at home (at least a bit more). So instead of fighting for foreigners’ liberty, let’s do it at home; let’s be free even if foreigners are not.

Collectivists can only conceive of international trade as the capacity of national collectives to control their imports and exports. They see the collective as the actor who imports and imports. Individuals have to follow. In his April speech, Mr. Xi illustrated the need for collective control by declaring about market opening (see Lingling Wei, “Xi Pledges a More Open China, Increased Imports and Lower Auto Tariffs,” Wall Street Journal, April 10):

While we’re crossing the river by feeling the stones, we’re also strengthening top-level planning.

Is Mr. Trump’s approach that different? For him, the government can coercively sacrifice some individuals to the collective. He tries to sugar-coat the pill with promises of future rewards, but any government does this, explicitly or implicitly. In a speech to the Farm Bureau, Trump explained that the farmers threatened by a possible trade war with China “are great patriots” who “understand that they are doing this for the country,” and that “we’ll make it up to them” (see Michael C. Bender, “Trump Acknowledges Farmers to Feel Impact From China Trade Actions,” Wall Street Journal, April 9). The administration is considering special subsidies to compensate farmers hit by Chinese retaliation, so the taxpayers will become the sacrificed “patriots” instead. “More government debt to pay off voters hurt by U.S. government policy,” wrote a Wall Street Journal editorial. “Saturday-morning-cartoon central planning,” said Senator Ben Sasse (R-Nebraska).

If collectivists do have economic reasons to favor international trade, they have many political reasons to fear anything resembling free trade. Free trade promotes individual autonomy. It favors the circulation of ideas and “cultural appropriation.” In his recent book A Culture of Growth, Joel Mokyr explains how the West overtook the East because early modern Europeans had no prevention against importing goods and ideas from abroad, while Eastern societies such as China were resistant to foreign ideas and new ways. Europeans unabashedly called “chinaware” dishes imported from China–as if Americans now proudly called flat-screen TVs “mexicanware” or washing machines “southkoreaware.” From a collectivist viewpoint, free trade is problematic because it renders the individual less dependent on the national collective.

Mr. Xi understands better, at least intuitively, the collectivist economic case for international trade, but he also has more reasons to fear the political impact of anything like free trade. Besides that, the opinions of the two men converge. Mr. Xi favors international trade, but only to the extent that the collective, “the country,” that is, “the Party,” reserves the power to decide what will be imported and exported, and under which conditions. Mr. Trump hides similar opinions under expressions such as “fair and sustainable trade,” as the Office of the United States Trade Representative shamelessly says; this expression has no meaning except as stating that the collective, “the Nation,” and in practice its rulers decide what is worth importing and exporting, and under which conditions.

There is a collectivist case for trade, but not for free trade.