Last Friday President Trump spoke to the National Association of Manufacturers, proclaiming how his newly-unveiled tax reform plan will restore American industry, bring jobs back to American workers, and end the “era of economic surrender.” President Trump appears to be continuing to attempt to deliver on his oft-repeated campaign promise to rebuild our country’s industrial base as well as renegotiate and enforce our international trade agreements.
As both the tax reform package and the Trump Administration as a whole move forward, both his voters and the country as a whole are eagerly waiting for how legislative and regulatory action will improve our economic opportunities and prosperity.
International trade is an extraordinarily complex subject that does not fit well into the easy sound bites of our day-to-day news media. Nonetheless, every year America imports trillions of dollars of products, with $2.71 trillion in 2016 of our $18.57 trillion GDP, with extraordinary impact on the jobs, consumer choice, and livelihood of almost every American.
A particularly interesting battle has been brewing that is representative of how the Trump Administration is working to restore authentic free trade and reduce predatory trade practices that have hurt many American workers in recent decades. It is about a product every American uses and is responsible for thousands of jobs and billions of dollars of economic activity in the United States – washing machines.
The U.S. washing machines market is divided up between several major competitors, specifically the U.S.-based Whirlpool Corporation, the India-based Videocon Industries Ltd., and the South Korea-based LG Corporation and Samsung Group.
Lately however there has been controversy, as Whirlpool Corporation has filed a complaint with the U.S. International Trade Commission (ITC) accusing Samsung and LG of ‘dumping’ washing machine products into the United States at below-market predatory prices.
In fact, in 2013 the U.S. government had already determined that Samsung and LG were selling below-market priced washing machines manufactured in South Korea and Mexico, whereupon both companies moved their production to China.
Soon after, the U.S. government once again found both companies to be producing products at below-market prices and dumping them into the United States, whereupon they moved their production to Thailand and Vietnam and continued to flood the U.S. market with artificially underpriced washing machines, leading to the current controversy.
The washing machines situation, which is currently in the process of being decided upon by the Trump Administration and International Trade Commission, is particularly interesting because it shows mechanically how the often-decried “our jobs are flowing overseas” and “unfair trade deals” actually take place firsthand. While this feud only concerns washing machines, it is representative of the abusive trade practices that have been taking place in many different product markets over the years.
In this case, by producing washing machines that are artificially priced below-market, Samsung and LG are able to unfairly increase their market share in the U.S. washing machine market and push out competitors. Once their competitors are neutralized and the free market twisted, they can then raise their prices.
As a result, Americans would be left with higher-priced and lower-quality washing machines, due to not receiving the benefits of authentic free market competition. Furthermore, we would also see fewer jobs and economic activity as extremely cheap foreign production processes, often enhanced by currency manipulation and other abusive trade practices, stifles our market here at home.
How this specific dispute between Whirlpool, Samsung, and LG resolves itself remains to be seen. The International Trade Commission is currently reviewing a safeguard petition from Whirlpool, which is a regulatory complaint that is more powerful than previous government actions against Samsung and LG and is meant to put a stop to habitual abuses and legal maneuvering by corporations who repeatedly attempt to circumvent U.S. trade agreements and market regulations.
Whether it be on the regulatory or legislative side, our policymakers should listen to the millions of Americans who spoke out at the ballot box last November. Many of these Americans, of all political affiliations, voted for President Trump because they wanted to see real rule-based free markets enforced rather than the distorted and often predatory one of recent years.
Whether it be washing machines, cars, engines, food, oil, or computer parts, our country imports trillions of dollars of products each year and is deeply embedded in the global economic system. Free trade and free competition remain essential parts of the American fabric, but, as President Trump said during the campaign, it also must be “fair trade” that truly embraces a level playing field that allows the benefits of free market competition to actually materialize.