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The Economy: National Review and de Rugy promote suicidal “free trade” policies, attack Ex-Im

Last month, the National Review’s pseudoconservative editors (who, BTW, supported John McCain for reelection in 2010) and NRO blogger Veronique de Rugy (a scholar at the GMU’s Mercatus Center) launched another idiotic, ignorant attack on the Export-Import Bank and on the Boeing company (one of the Bank’s beneficiaries).

Why the Ex-Im Bank is needed, and why “free trade” policies like those de Rugy and the NRO advocate are suicidal, is something I’ve written about several times, most recently here, demonstrating how Britain lost her economic preeminence by embracing these “free trade” policies.

In short, the Ex-Im Bank is needed to level the playing field by loaning money to the buyers of American exports. This is because foreign countries heavily subsidize (not merely credit, but subsidize) their own exporters, thus undercutting the prices of their exports and rigging the playing field. At the same time, they impose steep tariffs and VAT taxes on all American products entering their markets.

The Ex-Im Bank is one of the crucial, absolutely needed tools to level the playing field.

But the free traders at the NRO, including its editors and Veronique de Rugy, don’t give up in their idiotic attacks on the Bank. In doing so, they’ve made some of the most idiotic, nonsensical claims I have ever heard on any issue, not just trade.

They falsely claim that the Ex-Im Bank hands out “subsidies”, which is patently false.

Subsidies are free handouts that don’t have to be paid back (and never are).

The Ex-Im Bank, OTOH, awards LOANS, which are quite different thing: they have to be paid back with interest. And in the Ex-Im Bank’s case, they always are. Last year, taxpayers made a profit of one billion dollars on that interest.

De Rugy also protests that Boeing is the largest beneficiary of Ex-Im Bank loans.

But Boeing does not receive a dime from Ex-Im. It is Boeing aircraft buyers that receive Ex-Im Bank loans.

Speaking of Boeing, it is America’s last surviving airliner aircraft maker. It is now locked in a life-and-death survival battle against the European aircraft maker Airbus, heavily subsidized by the governments of European countries, including Veronique de Rugy’s homeland, France (which begs the question: is de Rugy just plain stupid, or is she consciously advocating for a policy that would help Airbus kill Boeing?).

De Rugy asks why Boeing needs Ex-Im loans and whether it can’t simply make good aircraft that customers would want to buy.

But Boeing DOES make excellent aircraft, including the B737, the most popular medium-range jetliner in the world, and the B777, the longest-ranged plane in the world.

But making excellent products is not enough; they have to be cheap enough for customers to buy. And while Boeing receives NO subsidies from the US government whatsoever, its European rival Airbus is LAVISHLY subsidized by European governments, thus reducing Airbus aircraft prices and unfairly undercutting Boeing.

The WTO has found that EVERY SINGLE AIRCRAFT Airbus produces is illegally subsidized and has consequently found the European Union in violation of its obligation to stop such subsidies. Yet, neither the EU nor Airbus have complied or ever will.

The result: Airbus is currently winning over Boeing in the global arena, thanks to the lavish subsidies Airbus receives. In the 10 years from 2004 to 2013, Airbus has received 8,933 orders while delivering 4,824 aircraft, and Boeing has received 8,428 orders while delivering 4,458 planes.

Last year alone, Airbus received 1,503 orders while Boeing only received 1,355. From 2008 to 2013, Airbus has had a lead in orders in EVERY year except 2012.

Looking further back in time, since 2001 Airbus has had a lead (usually a large one) in orders in EVERY year except 2006, 2007, and 2012.

Recall what happened to the US civilian shipbuilding industry when Congress cut off aid to it: it collapsed, being killed by unfairly subsidized foreign competitors.

But according to de Rugy, the NRO’s editors, and idiot politicians like Sen. Mike Lee, America’s last surviving jetliner maker does not deserve support from the US government, even though Airbus is lavishly subsidized by European governments, and despite the fact that EVERY other major trading power in the world has an export-crediting agency like Ex-Im.

Which leads me to the final, and most ludicrous, claim de Rugy has made (on April 17th). It’s a statement that perfectly and completely reveals de Rugy’s and other free traders’ mindset.

De Rugy has stated that even though other countries credit and subsidize their industries and exporters, the US should not “pursue these self-destructive policies.” She asks:

“Does it make sense to pursue these self-destructive policies just because Germany, South Korea, Japan, and China do so?”

Self-destructive?

So according to de Rugy (and other free traders), supporting your own industrial base and exporters is “self-destructive”! ROTFL, you couldn’t make it up! :)

This statement perfectly reveals de Rugy’s and other free traders’ mindset and delusions.

In their warped world, supporting your own industry and your own exporters is “self-destructive” and suicidal; it’s far better to let them die, be killed by foreign competitors, and become dependent on other countries for the products you need. In the fantasy world of de Rugy and other free traders, imports are preferrable to exports and trade deficits are preferrable to trade surpluses.

In their fantasy world, it’s better to let your industrial base and your own exporters be killed by foreign competitors; you don’t need to make any things yourself, it’s better to import them (on borrowed money).

Of course, anyone with half a brain knows that what de Rugy is saying is utter nonsense.

EVERY country that ever became an economic powerhouse – including Germany, Japan, and China – did so by protecting and supporting its industry and exporters; by preferring trade surpluses over deficits, preferring exports over imports, and putting tomorrow before today.

The US was doing the same thing for all of its history until the 1960s – when the free traders took over.

Since then, 6 million good manufacturing jobs and over 55,000 factories have been lost, replaced by nothing. Real wages have not risen since the 1970s. Entire industries have died, and entire regions of many states have seen a crippling deindustrialization and permanently high unemployment.

NO country has risen to economic preeminence by indulging in free trade fantasies – and America won’t be the first.

But according to de Rugy, Germany, South Korea, Japan, and China are pursuing “self-destructive” policies by protecting and actively supporting their industry! LOL!

This would be strange news to these nations. Last time I checked, all of them had sizable annual trade surpluses with the US: Germany, to the tune of $60 bn a year; South Korea, $16.6 bn; Japan, $88 bn; China, $315 bn.

Also, their industries are thriving, while America is exporting its own industry and jobs overseas, mostly to China. Just who is pursuing “self-destructive” policies here?

And just who the hell is Veronique de Rugy to lecture the Germans, the South Koreans, the Japanese, and the Chinese? She’s just another ivory tower academic “economist” who has never worked a day in a real job, has never spent one day outside the purely theoretical academic world, and has never led anything, let alone built a great nation. Neither has any of her fellow academic economists.

These people have never accomplished anything, let alone built or led a great nation.

According to de Rugy, Germany (along with the other countries she’s targeted – SK, Japan, and China) is pursuing a “self-destructive policy.” Let’s see how it has worked out for Germany:

  • It has the world’s fourth largest, and Europe’s largest, economy.
  • Its industry is thriving and makes some of the finest goods in the world.
  • It has an annual trade surplus of $260 bn, meaning it exports $260 bn more than it imports annually.
  • It exports one-third of all it produces and is the world’s third-largest exporter.
  • It is the world’s third-largest car manufacturer after China and Japan.
  • It has an unemployment rate of only 5.3%, lower than even the official (i.e. fake) US unemployment rate of 6.3%.
  • It has a balanced budget and is a country to whom other European nations turn for loans and aid.
  • Its government is one of the leading stakeholders in Airbus, the largest planemaker in the world.

All of this achieved by a country the size of Montana, with only 80 mn people, one quarter of America’s population.

If this is a “self-destructive policy”, bring it on!

And SK, Japan, and China – the other nations targeted by de Rugy for her diatribe?

South Korea, with a population barely around 30 mn, is now among the 20 wealthiest countries in the world by overall GDP and has a healthy trade surplus with the US. Since the ratification of the Korea-US Free Trade Agreement, Seoul’s trade surplus with Washington has TRIPLED.

Japan’s trade surplus with the US last year, at $88 bn, was the largest trade imbalance ever seen between Japan and the US.

America’s trade deficit with China last year, at $315 bn, was the largest trade deficit EVER recorded in ALL HUMAN HISTORY between any two countries.

Such are the results of the “free trade” policies that de Rugy and other free traders advocate.

De Rugy, as usual, is blowing smoke out of her posterior and blathering nonsense about issues she knows absolutely nothing about. Shame on her, and shame on the NRO for giving her a forum to publish her garbage.

 

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  1. efficeintmarkets says:

    After watching yesterday’s testimony I was struck by how disingenuous Anderson of Delta was with his example. It showed that there was a approximately 2 1/2 % subsidy going to Emirates, but the transactions he shared was an over-ripe apple versus a pristine orange. The non-subsidized deal was an operating lease on an A380, at the end of which the borrower can “put” the airplane back to the lender. The A380 is new and a highly speculative super-jumbo aircraft. The other “subsidized” transactions was a full payout financing, i.e. Not “put” of the aircraft to payout the balance at the end, and the plane was a B777, which has service history measured in decades and is in high demand.

    Using such a distorted comparison is cynical and contemptible, in my opinion.

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