[lbo-talk] Michael Roberts on free trade and protectionism in the global capitalist economy

Marv Gandall marvgand2 at gmail.com
Thu Mar 22 17:08:12 PDT 2018

British Marxist economist Michael Roberts examines this week's tariff policies announced by the Trump administration in his latest blog post.

As Roberts notes midway through his post, Trump’s threatened trade war on China would redound to the US’s disadvantage in two major ways, which is why it's almost certainly more bark than bite.

1) High trade barriers would accelerate The PRC's redirection of outward capital flows away from the US to other countries. China's foreign direct investment - two thirds of which is in Asia - has surged in the past decade and now ranks only behind the US.

"China is also pushing aggressively into ‘the belt’ countries of its ‘one road’ project. That’s reflected in its exports, with sales to these states double those to the US", adds Roberts. "So any restrictive measures taken by the Trump administration against China can only accelerate this reallocation process.”

2) Multinationals domiciled in the US increasingly rely on profits from their foreign operations rather than exports - think Apple, Walmart, Boeing, Caterpillar - and a Trump- initiated global trade war would both leave them vulnerable to retaliation from China and other countries and make their own exports from their subsidiaries into the United States more costly.

"Back in the 1940s, foreign subsidiaries of US-based corporations accounted for only 7% of all US profits –the same proportion as exports. Globalisation of US corporate operations and capital investment has changed that in the last 35 years. In 2016, the share of domestic profits has shrunk to 48% of total profits, while the shares of foreign operations and exports have grown to 40% and 12%, respectively."

Full: https://thenextrecession.wordpress.com/2018/03/19/trumps-trade-tantrums-free-trade-or-protectionism/

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