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Thursday, May 23, 2019

Trump’s Huawei Ban Vandalizes Basic Economics

There's no economic basis for the federal government’s attempts to mug Huawei.

Napoleon “did not realize until it was too late that the only closed political economy is the world economy. Britain could not be starved into submission by blockade unless she were totally cut off from the world. As long as Britain could trade with any nation outside France, it was thus trading indirectly with France.”—Jude Wanniski, The Way The World Works. 

In his excellent new book, Prisoner: My 544 Days In An Iranian Prison, former Washington Post Tehran bureau chief Jason Rezaian gave readers a fascinating sense of what life was like in Iran for himself, along with his wife Yegi. This rates mention in consideration of strict rules against alcohol consumption in the country. Despite them, the Rezaian’s had an impressive stash of liquor in their apartment and the storage unit of their apartment. And despite trading bans between “America” and “Iran,” both owned Apple iPhones.

A Basic Economic Truth

It’s all a reminder of a simple economic truth that increasingly eludes some in the electorate: if you’re producing something of market value you’re quite literally trading with the whole world. All those “countries” that your federal minders tell you can’t trade with you’re in fact trading with. You’re just not doing so directly.

There’s quite simply no accounting for the final destination of any market good. Though US companies and individual producers may be forced to abide and suffer the witless attempts of an increasingly protectionist right to bend the laws of economics, those laws ultimately prevail. Thankfully, they do.

The US economy didn’t become the world’s most dynamic and richest because it had the feds routinely holding its proverbial hands and issuing global threats.

This requires discussion in consideration of a move made this past week by the US Commerce Department to block Huawei and its various affiliates “from obtaining US-made goods and software.” That blue chip US companies such as Google, Intel, and Qualcomm would be the first-line victims of the Commerce Department’s economic illiteracy (media accounts indicate that Huawei is a size buyer of US-made technology of the $10 billion-plus variety on an annual basis) doesn’t seem to concern a Trump administration that has frequentlyand properlychosen to have its success or failure measured by the health of the US economy. In this case, the Administration’s actions vandalize basic economics. Luckily for the Administration, basic laws of economics will save it from its flirtation with economic folly.

Indeed, “America” will continue to trade with “China” despite the Administration’s periodic disdain for reason, economic and otherwise. Alphabet, Intel, and Qualcomm, unless they cease selling their technology altogether, will continue to sell their wares to Huawei, albeit indirectly, much as “Arab oil” continued to flow into the United States after the wholly symbolic Arab oil “embargo” of 1973. So did “American” trade continue with “Germany” during WWI despite embargoes imposed. The goods were merely routed through Scandinavian countries.

Bugging or Mugging?

So while there’s no economic or “embargo” basis for the federal government’s attempts to mug Huawei, it’s also true that common sense and government rarely go together. Based on the laughable presumption that Huawei is an agent of the Chinese government, and by extension, eager to spy on us, our federal rulers want to erect barriers to its ongoing growth.

That Huawei could mostly only happen on government incompetence assuming it aimed to bug us doesn’t seem to concern conservatives eager to limit the global corporation’s ascent. As for the presumption that Hauwei may help Chinese businesses bug top US businesses, it’s worth asking what useful “intelligence” they could lift? By Bill Gates’s own admission, most corporate initiativeseven at Microsoftare expensive failures. And assuming Huawei is a creation of the Chinese state, what are conservatives so afraid of? When have government-controlled businesses ever proven too dynamic for market-disciplined corporations that are everywhere in the US?

The US economy is great because it’s free, not because politicians fight to allegedly improve trading arrangements for American businesses.

To which sane minds might reply that Huawei thrives in 177 countries around the world precisely because it’s not a creation of the state. About this blinding glimpse of the obvious, can the overnight protectionists on the right at least try to be serious? Do they really think a business this effective could be state run, reliant on the state, or working closely with the state? For conservatives to believe the latter is for them basically refute all that they used to believe about big government existing as an enemy of innovative commerce.  

Huawei’s greatness as a provider of crucial technology speaks to how very much it’s not an agent of the Chinese government. That it’s not a state functionary is a wonderful thing, at which point wise Americans should hope that it is able to quickly roll out 5G and countless other life-changing technologies. If so, Americans will have access to the technology as though it had been hatched next door. In a free economy, and the US economy is rich beyond belief largely because it’s free, all technological innovations have a “next door” quality to them. The origin of a technological advance is of zero consequence in a globalized world. What matters is that technology advances. It’s a beautiful thing that the Chinese are increasingly producing alongside us, as opposed to starving.

The Key to Prosperity

As for the conservatives who’ve quickly (and surely “coincidentally”) developed an overnight paranoia about China, they have some explaining to do. They do because they know well that China wasn’t much of a concern for them until Donald Trump was elected president, which means their economic views are now being shaped by someone who’s flaunted his trade illiteracy for decades, along with the obnoxiously confused economics professor advising President Trump, Peter Navarro. How conservatives know they have explaining to do concerns how very loudly they’d be protesting if Hillary Clinton were intervening in the natural workings of global commerce as Trump presently is. Even the great Holman Jenkins has entered the echo chamber with his recent suggestion that China is a larger, more sophisticated (in terms of its corruption), North Korea. Jenkins has since moderated his rhetoric somewhat, but his latest column calls for Trump to basically dangle the possibility of the US allowing Huawei to survive in return for broad Chinese reforms. No, the view is anti-conservative.

Lest members of the right forget, the US economy didn’t become the world’s most dynamic and richest because it had the feds routinely holding its proverbial hands and issuing global threats. The US economy is great because it’s free, not because politicians fight to allegedly improve trading arrangements for American businesses. It’s not too late for conservatives to reacquaint themselves with these crucial basics of prosperity.

This article is reprinted with permission from RealClearMarkets.

  • John Tamny is Director of the Center for Economic Freedom at FreedomWorks, a senior economic adviser to Toreador Research & Trading, and editor of RealClearMarkets.