Prof. Czinkota gave a 20 minutes interview with Chinese Channel CCTV about the Trade Impact of the meeting of the National People’s Congress and the Re-Election of President Xi Jinping
- The Admin
Tariffs Can Be Useful
Michael R. Czinkota
President Trump has announced tariffs against steel and aluminum imports to help domestic industries long suffering from import pressure. Pundits have bemoaned these steps as inappropriate and precursors to a trade war. But other dimensions in play make these announcements useful.
Shifts in policy and diplomatic direction are implemented with great difficulty in Washington. Bureaucrats typically far outlast their current team of policy makers. It is therefore quite difficult for a well-intentioned appointee to implement change and witness its result.
Trade is only one of the economic components of government, and just one section of many policy parameters. New policy makers go through all the same motions as those before them, the initial touching of base, the mutual assurances of collaboration, and the plans to develop a joint vision.
But, little if anything happens. Things just chug along without new outcomes. More time brings new issues which take priority over earlier pressing concerns. Existing trade structures may eventually become acceptable to many leaders, which makes changing them even more difficult.
Shifts of global issues are slow in coming. To speed things up and to get results, there has to be a spotlight. Issues have to affect a number of important countries simultaneously, and lie on the surface of the policy cauldron.
For progress to occur different issue trade-offs between countries have to be possible. There has to be some “give” in exchange of some “take”. Governments have to decide whether their greatest preoccupation lies with economies that “grow”, that “make”, that “create” or that “coordinate”, and then place their negotiating chips accordingly. There has to be timing immediacy to move things along and to have government leaders and their bureaucracies address, analyze, understand and endorse changes. For all this, there needs to be an anvil focus.
The tariffs open the world outlook onto a new direction: they command attention from all trading partners; they require a specific response instead of the typical speechwriter niceties. New thoughts on the purpose and capability of trade can lead to an active re-analysis of policy steps and agreements.
Much of today’s trade understanding has been in place since the international institutions of Bretton Woods were formed in 1944. Surely, after 74 years, policy makers, firms, their long range planners, and academics should be able to come up with some helpful innovations.
All this is likely to precipitate shifts, adjustments, and new conditions. There will be new global actions and perhaps even entirely new paths and expectations for both international and domestic business transactions, lifestyles and relationships.
Change will lead to adjustment. Maybe there will be more domestic vacations, shorter college times, fewer flowers in winter, more eating of white asparagus, and more living within extended families. We just might wind up with adaptations which make society more productive and life more pleasant.
As President Trump’s announcements and communications capture the attention of world leaders, they can astutely trigger progress and new approaches. Recognizing that a crisis could happen tends to clear the mind.
The benefit of the tariff announcements depends on the new processes and changes which they trigger. Then the threat of tariffs can be a useful means to an end. Strong admonishment with flexible rescission can make all boats rise.
Michael Czinkota teaches international business and trade at Georgetown University’s McDonough School of Business and the University of Kent. His key book (with Ilkka Ronkainen) is “International Marketing” (10th ed., CENGAGE).
What gave Rome it’s preeminent power in the ancient world? No doubt its legionnaires were feared from Iberia to Galcantray. To fund military might the descendants of Romulus engaged in prolific international trade. Today, as globalization and international trade spark heated debates in capitals around the world, it is important to remember the long history of trade. From the Chinese to the Phoenicians, the Spaniards and the Dutch, the mighty British empire and the American industrial powerhouse, trade has been at the center of every great power in history. Great powers can either take that which they need by force, or buy it away. To most, trade is clearly preferable.