Hoping UC Irvine Will Do the World a Favor, and Take Peter Navarro Back

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When the 21st century began, Apple was limping away from near-bankruptcy.  Amazon was peddling books, CDs and DVDs to a tiny portion of the U.S. consumer population.

The above truth can’t be stressed enough for countless reasons.  It’s particularly useful as a counterweight to Peter Navarro’s unfortunate rise to prominence within the Trump administration.   The 21st century ascent of what are now two of the five most valuable companies in the world discredits the musings of Navarro.  In particular, Amazon and Apple discredit Navarro’s rather juvenile fear of China.

But first, one of Navarro’s many misconceptions about trade requires correcting.  The UCI Anteater contends that “[T]wo countries trade freely based on comparative advantage.” Except that they don’t.  People trade.  Always.  Trade is a very personal thing.  What I value in return for my work is surely different from what you the reader desire, or for that matter what Navarro desires. 

Despite this, despite the basic truth that we all have differing wants, Navarro wants government to step in and police individual exchange because of what he deems a “comparative advantage” asymmetry. Ok, but does anyone consider “comparative advantage” when they enter the marketplace in order to get in return for their own personal toil? Not a chance.  We just look for the best deal. 

As for the varied skills that economists have reduced to “comparative advantage,” thank goodness we individuals bring different talents to the marketplace. Could you the reader design and sew the clothes you wear? Or build the dwelling that shelters you?  When Navarro bemoans China’s comparative advantage he’s whining about variety.  Absent comparative advantage, we’d all live lives of unrelenting drudgery simply because we couldn’t productively divide up work in ways that accentuate the unique skills each one of us brings to the marketplace.  

As for Navarro’s complaint that “China has historically undervalued its currency,” the professor is revealing a fundamental misunderstanding about money.  It’s just a measure that enables the very exchange that curls his toes.  To say it's undervalued or overvalued is as mindless as saying a foot is too long.  No, a foot quite simply is.  Historically money quite simply was.  It was a trade lubricant.  It enabled the baker to trade with the vintner even though the vintner solely wanted the butcher’s meat.

Money doesn’t confer an advantage as much as we all gain when money is most stable.  That’s the case because the sole purpose of work is to import.  Money facilitates the getting among people with disparate wants.  Applied to China, its currency rises and falls based on the dollar’s movements. The yuan is neither strong nor weak; rather it mimics the dollar.  Too bad the U.S. Treasury has no interest in a stable dollar.  If so, trade between Americans and Chinese would be even more frequent, and we’d all be better off. 

Navarro is troubled by “a bilateral trade deficit in goods of $375 billion” that we run with China, but what troubles him is a good thing.  If anyone doubts this, consider the companies mentioned at the beginning of this column.  As of 2000, we consumers had much smaller “trade deficits” with Amazon and Apple.  And we were poorer for it.  They weren’t meeting our needs very expertly. Now they are, and our “trade deficits” with them are large.  Good.  Imports are the reward.  Would we be happier without iPhones and low-cost access to the world’s plenty?

Per Navarro, American consumers similarly buy a lot of what’s produced in China.  By extension, we would be much poorer absent our “trade deficits” with China.  Yet China is a threat? Would Navarro, President Trump and the Republican happy talkers prefer a return to the days when Chinese workers lacked the freedom to meet our needs? All to reduce what is an accounting abstraction?

Navarro equates wealth with “manufacturing jobs,” but that’s because he doesn’t have to work in a factory. He is blind to how backbreaking, repetitive, and undercompensated is factory work.  Missed by Trump’s top trade strategist is that just as the “loss” of farming jobs signaled progress, so does the departure of manufacturing jobs to China signal great advance.  We’ll know China is a truly rich country when factories based there are moved to much poorer countries around the world. 

Navarro worries that China “dominates” production of refrigerators, televisions and computers, but that’s because he once again doesn’t have to earn his living in a factory.  As for American businesses, they don’t “dominate” the production of consumer items simply because there’s little money in the production.  Apple instructs here.  It’s the world’s most valuable company precisely because it designs the iPhone in Cupertino only to have the latter manufactured in Asia. 

Navarro also worries about “China’s” plans to “dominate the industries” of the future, but if the professor had a clue about the important industries of the future, he most certainly wouldn’t be a professor.  That’s why readers should similarly discount his whining about IP theft.  No doubt it happens in China, no doubt U.S. companies steal ideas too, but Jeff Bezos has lost billions on bad ideas that once looked good.  Those who can discern good or bad IP are earning in a day what it would take ankle-biters like Navarro decades to earn.  They aren’t college professors.    

And they certainly don’t fear alleged Chinese economic dominance thanks to “state-directed investments, nonmarket economy, and disregard for the rule of law.” Yes, Navarro believes that government planning of the economy leads to prosperity. Central planning's .000 batting average doesn't deter this most mediocre of thinkers. Why do supposedly market-friendly Republicans let a professor and president in thrall to the failed ideas of the 20th century set the tone for their anti-China droolings in the 21st?

Back to reality, trade is as natural as breathing.  The more that Chinese producers innovate, the better off we are.  The more that Apple and Amazon prosper, the better off we are.  Would you the reader stop buying Apple products if it were based in Shanghai? Country origin is of no consequence.

Peter Navarro misunderstands all of this.  That’s why he’s perfect for the college campus.  Clueless professors preaching falsehoods to kids who happily have other things on their minds.  Unknown is if UCI will take such an embarrassing scholar back.  Let’s hope the school will. 

John Tamny is editor of RealClearMarkets, Director of the Center for Economic Freedom at FreedomWorks, and a senior economic adviser to Toreador Research and Trading (www.trtadvisors.com). His new book is titled They're Both Wrong: A Policy Guide for America's Frustrated Independent Thinkers. Other books by Tamny include The End of Work, about the exciting growth of jobs more and more of us love, Who Needs the Fed? and Popular Economics. He can be reached at jtamny@realclearmarkets.com.  

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