Will Trump's China Tariffs REALLY Cripple the US Seafood Industry? A Response to Alaska Fish Radio - P.O.W. Report

Monday, July 16, 2018

Will Trump's China Tariffs REALLY Cripple the US Seafood Industry? A Response to Alaska Fish Radio

Rain Coast Data shared a post from Alaska Fish Radio recently titled, "Why Trump’s China’s seafood tariffs can cripple the US seafood industry" by Laine Welch that I want to bring several rebuttals on.

You may read the article [here] and i'm simply going to highlight a few key paragraphs that jumped out at me.

First, if tariffs remain in place as a trade war escalates, this will disadvantage the US position in the global seafood trade.

Second, the fastest and most dynamic growing market for high-end seafood is in China. US producers, after having spent millions of dollars building relationships in that market, may get shut out.

Third, Chinese ecommerce is significantly more advanced than in the US. The disruption to ecommerce supply chains, which in China may be pressured not to touch US product, will consign US seafood products to second class status.

1. China ALREADY had a tariff on AK/US seafood of 15%, now it's increasing to 25%...why were we selling to China at such a high tax rate in the first place?

Seafood is the most highly traded international commodity. In the US, between 85% and 90% of all seafood consumed in a given year is imported. China represents about 15% of that amount. But when trade flows are restricted, as they are by these tariffs, it puts US importers and exporters in a second class status.

2. China ONLY represents 15% of our seafood sales...so who cares if we never trade with China again???

3. The idea that tariffs or trade wars will harm America and Alaska is BS and is ignorant of History (see below for clarification.)

4. Case in point, let's say we are now forced to sell that 15% trade deficit that used to be in China to Alaskans/Americans, who wins? We do! The seafood stays here and the money stays here in our economy.

So a question will come up, "well we sell to China because they buy at a cheaper rate than what the US is buying..." Um...Ok, so American fishermen are OK with making LESS money per pound of fish to China instead of America? Or a counter-argument will be, "well actually the fish price is set at an international level..." Hmmmmmmmm...so if you can sell a fish for $1 in America, why would you sell that same fish for .85 cents to China then and take a hit to your bottom line?

6. Frankly, Trump's tariffs forces Americans to deregulate in order to solve the dilemma of getting fish to the market. Why can't I buy Alaskan Fish in the grocery store? I can guarantee Alaskans want to buy Alaskan fish but we can't because of regulations. I'm not the only one who has asked why Islanders can't go to the grocery store and buy a fresh salmon off the commercial boats? The reason is because of regulations.

On Trade Wars (answering point 3):

Depression have been debated for decades. The problem with all of the analysis is this same attempt to reduce the cause to a single event. In school, we read the Great Crash by Galbraith. He was a socialist so he blamed the corporations and never bothered to ever even mention the Sovereign Defaults of 1931 for that would have put blame on government instead of the private sector. Then there is the argument that the tariffs at least “contributed” to the Great Depression if were the leading factor, again disregarding the Sovereign Debt defaults.

Smoot-Hawley wasn’t signed into law until June 17th, 1930, when stocks had already taken a nose dive from 1929 September high. Cato Institute’s Alan Reynolds argued that Smoot-Hawley was an ongoing drag on the economy and that it was, in fact, a substantial contribution to the stock market arguing that traders saw it coming and acted in anticipation. The argument on the one hand correctly states that traders acted in anticipation, but it incorrectly adopts the position that BUT FOR the tariff issue, the stock market would have continued higher anyway?

Moreover, the pretense that somehow the Smoot-Hawley Tariff created or contributed to the Great Depression ignoring the European Sovereign Debt Crisis, is really a specious argument. This ignores the entire issue of tariffs that predate Smoot Hawley. The Emergency Tariff Act of 1921 was a stopgap tariff measure which was rushed out and put in place until Congress could deal with the issue. The Republican Party wanted to quickly reverse the low rates of the Underwood-Simmons Tariff of the Wilson administration prewar. Protectionism had never died-out but remained merely dormant on the back-burner during World War I. After the war, the supporters of tariffs based their arguments on both economics and nationalism. They argued that the economic prosperity which occurred during the war as America produced the food for Europe and goods, unfolded because there was no competition from imports and therefore it was the abundance of exports that created the economic boom (the German export model today which lurks behind the euro). While on the surface this was correct, they overlooked the problem that Europe could not produce in the midst of war and therefore American production sustained Europe. Now that the war had ended, European imports would increase and this would threaten the current economic prosperity was the dominant argument.

Smoot-Hawley has been used by the MSM as the main cause of The Great Depression and hence, "why trade wars and tariffs are bad."

To understand the entire Smoot-Hawley Tariffs which are blamed by most economists for contributing to the Great Depression, we must look at the whole economy both globally and domestically. It was in 1927 when there was not merely a secret meeting of the four main central banks that conspired to lower US interest rates in hope of deflecting the capital flows back to Europe, but also there was the League of Nations’ World Economic Conference which also met at Geneva that year. AT that conference it was officially concluded that “the time has come to put an end to tariffs, and to move in the opposite direction.” [...]

Nonetheless, because of World War I and the wholesale destruction of the European economy, the United States was still running a trade account surplus as manufactured exports of goods were rising rapidly. Therefore, Smoot was looking primarily at the food exports which had been declining as Europe found it easier to restore agricultural production than manufacture goods requiring the construction of plants. The actual value of food imports was a little over half that of manufactured imports and thus the farmers were crying for help in an industry that was changing forever. It was NOT true that the markets were so concerned about the tariffs issue when the industrial production was in a trade surplus and profits were rising.

Senator Reed Smoot, was a Republican from Utah and chairman of the Senate Finance Committee, championed a tariff increase in 1929, which became the Smoot–Hawley Tariff Bill. In his memoirs, Smoot made explained: “The world is paying for its ruthless destruction of life and property in the World War and for its failure to adjust purchasing power to productive capacity during the industrial revolution of the decade following the war.” This was a partially correct statement, but he overlooked the dramatic change in the economic foundation set in motion by the innovation of electricity and the combustion engine. [...]

Those who blame tariffs further argue that on October 23rd, 1929, a Wednesday, it became clear the tariffs would be much broader than first believed. Again they portray the tariffs as the reason for the crash. I found no headlines to support that interpretation, which appears to be predetermined. In fact, that very day of the 23rd the bankers attempted to support the market. The downside of such intervention is when it fails, then confidence collapses completely. Also on that day, there was an assassination attempt on the Italian Crown Prince. He narrowly escaped with his life. Americans were concerned that Europe was still fighting among themselves, which was entirely correct. The resentment concerning Germany was massive and would not just fade away gracefully.

This focus on tariffs as the culprit for creating the crash was an argument from the Democrats as they did against Reagan with “trickle-down” economics. Along with such tariff proposals, some of the senators advocated a detailed investigation of the Federal Reserve Banking system, as put forth in the pending resolution of Senator William Henry King (1863 – 1949) who was also a Democratic representative from Salt Lake City, Utah who served in the Senate from 1917 until 1941. The was over the secret meeting of central bankers to lower US rates in hopes of deflecting capital flows back to Europe to ease the debt crisis building there.

Senator Carter Glass (1858 – 1946) of Virginia, who was one of the authors of the Federal Reserve banking act and then the Glass-Steagall Act, also in the midst of the October crash, started pushing his bill providing for the imposition of a 5% excise tax on sales of stock which had not been held over sixty days. It was his present plan to offer the bill as a “rider” to the pending tariff bill. To say that people feared the tariffs, which really did not impact the industrial stocks, is absolutely absurd. They were concerned about a 5% tax on stock investment the Democrats were trying to stuff into the tariff act. The Democrats contributed to created the crash in 1929 with these proposals arguing against the rich.

I'm a big fan of Alaska Fish Radio, however it's clear that the author is wholly and utterly wrong on this topic (as we all are on occasion.) Now, IF CHINA HAD A 100% IMPORT OF ALASKA FISH then we would be having a different conversation and I would still ask, "Why are we selling to China and not to Alaskans and Americans?" These questions that I ask need to be answered in order to have an honest debate on this complex topic. Instead, we see kvetching and lamenting of an end of the world disaster that is...well...it's childish.

So, No. Trump's China Tariffs will not cripple the Seafood industry and it won't put a single dent in the Alaskan Seafood Industry.

If you have a counter--counter argument send me an email to powreport@gmail.com or comment below!

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