The Trial Ends, But The Beat Goes On

Cognitive dissonance. “The state of having inconsistent thoughts, beliefs or attitudes … that produces a feeling of discomfort…”. That explains why voters in America are afflicted with feelings of discomfort, confusion, with many seeking comfort by binge-watching re-runs on Netflix while consuming large quantities of Chinese take-away.

In recent weeks we have been exposed to television coverage of the senate trial of the President on impeachment charges brought by the House. This may well be the most protracted dose of daggers-drawn partisanship we have witnessed even in this era when the visceral contempt Democrats have for Trump, reciprocated by a name-calling President who favors large rallies at which to denounce his enemies, has been regularly on display.

At the same time we have seen incidents of bipartisanship such as the passage of a revised NAFTA agreement, which the President prefers to call the United States-Mexico-Canada-Agreement (USMCA). The Democrat-controlled House approved the trade deal less than 24-hours after it impeached the President for committing high crimes and misdemeanors. In a similar display of bipartisanship, the senate, by a vote of 89-10 approved USMCA. The 37 Democratic senators who voted for the President’s trade deal were at the same time preparing to vote to end his tenure at the White House. Go figure, as we say in Trump’s former residence, New York City.

President Trump is about to be acquitted by the senate of the charges contained in the House’s bill of impeachment. Alas, that does not end the nightmare of daggers-drawn partisan warfare that is afflicting the nation. On one side, the Democrats who have always argued that Trump is an illegitimate President, and denied him a fair hearing in the House, now argue that the senate trial is as illegitimate as was Trump’s election. To use the formulation of their leader in the senate, Chuck Schumer, it was a “sham … meaningless.”

On the other side, Trump denies that he threatened to withhold from Ukraine the lethal military aid that President Obama had refused to provide. His goal, according to Democrats (and not a few Republicans): to get Ukrainian’s president, Vladymyr Zelensky, to dig dirt on Trump political opponent Joe Biden. Now, with acquittal scheduled for later this week, a more thoughtful man might reflect on the behavior that gave the Democrats an opportunity to remove him for office; introspection is not Trump’s long suit.

Meanwhile, this week will present another event that will increase the confusion. On Wednesday, the President will deliver his State of the Union address in the very House that impeached him, before an audience that will include those senators who voted to convict him of high crimes and misdemeanors not to mention the Chief Justice of the Supreme Court, undoubtedly weary from having presided over the impeachment trial. The next day the senate will vote acquittal.

With luck, we will not witness the rioting that characterizes legislatures in other countries. But the image of the President mounting a stage, with his sworn enemy, House Speaker Nancy Pelosi sitting directly behind him, his accusers arrayed in front of him, can be taken as a testimonial to the resilience of our system, or to the cynicism of our political class. The binge-watching as refuge from the effects of cognitive dissonance will continue.

Polls suggest that the President is the winner of this battle. For one thing, the support of his core has hardened as a result of the effort to impeach him. For another, Trump’s trade policy produced concessions from the Chinese, and delivered on his promise to replace NAFTA with a better deal for America. Which gives Republicans an opportunity to argue that voters must choose between a President who is delivering for the American people while his enemies spend their energy in a spiteful effort to reverse the results of the 2016 election, and deny them an opportunity to bestow on him another term.

Whether the Chinese deal and USMCA are the triumphs Trump say they are is open to some doubt. Despite his characterization of USMCA as “the biggest [trade] deal ever done in the history of our country … ,” it is better described as a modest modification of NAFTA: in the long-run it might add 0.35% to U.S. GDP, according to the U.S. International Trade Commission. It does reserve more auto and auto parts jobs to American workers, but at the expense of consumers who, for example, will pay for the substitution of these higher-paid American workers for Mexican laborers earning about one-third as much. That is not necessarily a bad thing, but it is a gain that carries costs Trump refuses to acknowledge.

The agreement also opens Canadian markets to some American dairy products, a Presidential nod to Wisconsin’s dairy farmers whose ten electoral votes brought Trump’s total to 270 and put him over the top in 2016. It can be no small source of Hillary Clinton’s continuing regret that, certain of Wisconsin’s votes, she turned down her husband’s advice to make a campaign appearance in that state.

As for China’s agreement to purchase more U.S. stuff, it is at best a minor win in a war that has long to run. It expires in two years and must “reflect market conditions”. It applies only if there is sufficient demand from Chinese consumers, and only if American products are commercially competitive with those of other countries, in which case China would have bought them anyhow. It does not include a promise to end subsidies to the industries China plans to dominate in the next decade.

More important, it is not at all certain that the overall, long-run effect of Trump’s upending of the global trading system will be to America’s advantage. True, after decades in which Presidents allowed China to steal America’s intellectual property, use subsidies and currency manipulation to hollow out the nation’s manufacturing sector and the communities in which thousands of shuttered factories were located, Trump brought the communist regime to the bargaining table.

But he has not persuaded Xi Jinping, general secretary of the communist party and “core leader”, to abandon his Made in China 2025 programme of subsidizing the industries of the future and restricting access of U.S. firms to China’s markets. If you believe that there will be a phase two that does that, you must also believe that China will some day honour the pledges it made almost two decades ago to gain entry into the World Trade Organization, and, later, not to militaries the islands it constructed in the South China Sea.

Robert Zoellick, former president of the World Bank, says that under Trump America has adopted “command economics” and “managed trade”. The President directs China’s purchases to industries that he favours because they favour him at the polls — China is to buy farm goods so that farmers will vote Trump in November. Lots of American industries are adversely affected by China’s reciprocal tariffs on their products, but only swing-state farmers have received $28 billion (estimate is from Bloomberg, the company, not the candidate) from taxpayers to soothe their pain.

The message is clear: if you want the benefits of managed trade policy while the costs are borne by others, live in a swing state. Tariffs are here to stay, and both Trump and any Democratic candidate will shape trade policy to your advantage. Free markets are only for nostalgia-afflicted Republicans who remember when their party believed free choices of independent consumers should decide how the nation allocates its resources.

Many citizens of EU member states also have fond recollections of a past when American Presidents turned the other cheek when the EU levied tariffs on made-in-the-USA vehicles, and restricted imports of agricultural goods. Trump, deals with China, Mexico and Canada in hand, needs a new adversary. The EU, especially German auto makers and French farmers and purveyors of luxury goods, are in his sights. Trigger to be pulled sooner rather than later.