Tariffs On Foreign Autos Will Undermine National Security, Not Bolster It
Based on Commerce Secretary Wilbur Ross’ definition, the claim of national security would justify protectionist measures against any product at all. But they would all hurt Americans – and only undermine national security.
“Economic security is military security. And without economic security, you can't have military security," Ross told CNBC yesterday, when he launched an investigation into whether a surge in automobile imports over the past threatens to "impair" national security by "weakening" the U.S. economy." Ross offered a broad – probably the broadest possible – definition of national security "to include the economy, to include the impact on employment, to include a very big variety of things."
In other words, national security includes everything that you want it to cover. If automobiles – and auto purchasers – can be slapped for a 25 percent tariff based on ‘national security’ why not computers and cell phones, or for that matter t-shirts and sweatshirts? Ross seems to think that national security would somehow be enhanced if every American had to pay more for cars and every other product they buy. In fact, the most important factor in economic security is economic prosperity – and economic prosperity depends upon drawing one’s choice of goods and services from all over the world and producing products that meet the world’s needs.
The United States would not benefit if the economy of a major trading partner and ally like Germany was undermined. The wealthier the world becomes, the wealthier everyone in it becomes – and the more secure.
Ross says his department’s probe is based on an increase in U.S auto imports over the past 20 years. Has he not noticed that auto exports have also increased over that time? The overall market has grown, increasing the number of auto imports and exports all over the world. As the third-largest auto exporter in the world, the United States has been a prime beneficiary of that growth. Ask any of the thousands of employees that the BMW employs at its plant in Spartanburg, South Carolina.
While German carmakers, for example, exported nearly half a million vehicles to the United States last year, they built far more in the United States – over 800,000 cars, many of which are shipped to other countries. They actually contribute to U.S. export totals. Based on that production, German auto makers employ about 36,500 people in the United States directly. And they spawn another 80,000 jobs among parts producers.
Ross claims that the reason for the U.S. vehicle trade deficit is other countries’ tariffs, which tend to be higher than the United States’. But German officials point out that German SUVs and pick-ups already face a 25 percent tariff. When they are included, European and U.S. tariffs are almost the same, at 4.3 percent and 3.1 percent respectively.
Protectionism – particularly in the auto industry – makes even less sense than it ever did, given the universal use of cross-border supply chains. How many parts in
your car come from countries other than the place it was assembled? Making part of a car in one country, adding value in another, and assembling it in a third makes the industry more efficient, benefiting consumers throughout the United States and the world.
It is especially disappointing to see the United States increase tariffs when other countries are moving in the opposite direction. In China, for example, President Xi Jinping recently offered to cut border taxes from 25 percent to 15 percent. The move seems to be an attempt to bolster the domestic auto industry, but the industry doesn’t seem to feel bolstered.
The Trump Administration continues to broaden the definition of what actually constitutes national security, beyond military technology and supplies. It has also recently slapped higher tariffs on steel and aluminum, also under the guide of national security – despite the fact that the vast majority of imports of these products come from allies. The military benefits from wider choice – it keeps their prices down. National security actually demands access to the widest variety of specialty products – all the more reason for keeping the U.S. market open.
The most important element of U.S. national security over the past 75 years has been a close relationship with a wide network of allies. These relationships are bolstered by open trade, and undermined by attempts to close it. Countries that trade with each other and are economically integrated usually have closer and more positive relationships. Open trade borders make for better allies.
Samuel Johnson once said that “patriotism is the last refuge of a scoundrel.” In U.S. trade policy these days, national security claims seem to fulfill that role. In fact, the true road to a more dynamic economy and a strong national defense lies in trade.
