26TRADE
THE CASE FOR FAIR TRADEPeter Navarro

For decades the world has struggled with a shifting maze of punitive tariffs,
export subsidies, quotas, dollar-locked currencies, and the like. Manyof these import-inhibiting and export-encouraging devices have long
been employed by major exporting countries trying to amass ever larger[trade] surpluses.
Warren Buffett, CEO, Berkshire Hathaway1
The Chinese government is implementing a comprehensive, long-term
industrial strategy to ensure its global dominance…. Beijing’s ultimate goal
is for domestic companies to replace foreign companies as designers andmanufacturers of key technology and products first at home, then abroad.
U.S.–China Economic and Security Review Commission2
The United States of America is the world’s dominant superpower and remains
the world’s arsenal of democracy. To maintain that global positioning—and thereby
best protect the homeland and our own democratic institutions—it is critical that
the United States strengthen its manufacturing and defense industrial base at thesame time that it increases the reliability and resilience of its globally dispersed— 765 —

Mandate for Leadership: The Conservative Promise

supply chains. That will necessarily require the onshoring of a significant portionof production currently offshored by American multinational corporations.
Trade policy can and must play an essential role in an American manufacturing
and defense industrial base renaissance. However, several major challenges in theinternational trading environment are pushing America in the opposite direction.
The first challenge is rooted in MFN: the “most favored nation” rule of the World
Trade Organization (WTO). According to the MFN rule, WTO members must apply
the lowest tariffs that they apply to the products of any one country to the productsof every other country.3 However, WTO members can charge higher tariffs if they
apply these nonreciprocal tariffs to all countries.
The practical result has been the systematic exploitation of American farmers,
ranchers, manufacturers, and workers through higher tariffs institutionalized by
MFN. In turn, this unfair and nonreciprocal trade has resulted in chronic U.S. trade
deficits with much of the rest of the world. This systemic trade imbalance serves asa brake and bridle on both GDP growth and real wages in the American economy
while encumbering the U.S. with significant foreign debt.
The second challenge is part of the broader existential threat posed by the
Chinese Communist Party (CCP) in its quest for global dominance. That challenge is rooted in the CCP’s continued economic aggression, which begins withmercantilist and protectionist trade policy tools such as tariffs, nontariff barriers,
dumping, counterfeiting and piracy, and currency manipulation. However, Communist China’s economic aggression also extends to an intricate set of industrial
policies and technology transfer–forcing policies that have dramatically skewed
the international trading arena.
Both the unfair, unbalanced, and nonreciprocal trade institutionalized by the
WTO and Communist China’s economic aggression are weakening America’s manufacturing and defense industrial base even as the fragility of globally dispersed
supply chains has been brought into sharp relief by the COVID-19 pandemic with
its associated lockdowns and other disruptions and by the Russian invasion of
Ukraine. Russian revanchism, in particular, has demonstrated once again how bad
actors on the world stage can use trade policy (for example, export restraints onnatural gas) as a weapon of war.
LAYING THE TRADE DEFICIT PREDICATEThe great football coach Bill Parcells once said, “You are what your record says
you are.” America’s record on trade—specifically American’s chronic and ever-expanding trade deficit—says that America is the globe’s biggest trade loser and a
victim of unfair, unbalanced, and nonreciprocal trade.
During the first year of the Biden Administration, the overall U.S. trade deficit, including goods and services, soared by 29 percent, from $654 billion in 2020
to $845 billion in 2021.4 Over the same time period, imports of consumer goods,— 766 —

2025 Presidential Transition Project
TABLE 1

America’s Trade Deficit in Goods and Services
with Major Trading Partners
FY 2022 FIGURES FOR SELECTED AREAS, IN BILLIONS OF DOLLARSCountry

DeficitCountry

DeficitCommunist China-338.1

South Korea-35.6

European Union-192.6

Thailand-36.6

Mexico-108.2

India

-33.8

Vietnam-99.8

Malaysia-30.9

Canada-72.4

Switzerland

-19.0

Japan

-55.0

Indonesia-21.1

Ireland

-54.6

Total

Taiwan-41.1-1,138.0

SOURCE: Exhibit 14, “U.S. Trade in Goods by Selected Countries and Areas: 2022,” in press release, “Monthly U.S.
International Trade in Goods and Services, October 2022,” U.S. Department of Commerce, U.S. Census Bureau,
December 6, 2022, https://www.census.gov/foreign-trade/Press-Release/ft900/ft900_2210.pdf (accessed
March 21, 2023).
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capital goods, and the category of foods, feeds, and beverages were the highest on
record, and imports of industrial supplies and materials were the highest since 2014.
As for the U.S. trade deficit in goods, which primarily measures manufacturing
output, Table 1 catalogues that deficit for the top 13 countries plus the European
Union (EU) in fiscal year (FY) 2022. Note that the trade deficit in goods with Communist China is by far the largest: It accounts for fully one-third of that deficit andis more than twice the size of the deficit with the EU.
These trade deficit statistics implicitly measure the large amounts of America’s manufacturing and defense industrial base and supply chains that have been
offshored to foreign lands. Such offshoring not only suppresses the real wages ofAmerican blue-collar workers and denies millions of Americans the opportunity
to climb up the rungs of the ladder to the middle class, but also raises the specter ofa manufacturing and defense industrial base that, unlike our experience in World
Wars I and II, will not be able to provide the weapons and matériel that would beneeded should America enter another major world war or seek to assist a major ally
like Europe, Japan, or Taiwan. It is wise to recall Stalin’s admonition that “quantity— 767 —

Mandate for Leadership: The Conservative Promise

has a quality of its own.” In World War II in particular, it was not just the bravesoldiers, sailors, and pilots who beat the Nazis and Imperial Japan. It was America’s
factories—its “arsenal of democracy”—that overwhelmed the Axis forces.
In the wake of the COVID-19 pandemic, almost certainly spawned in a CCP
biological weapons lab in Wuhan, China,5 global supply chains have been undersignificant pressures from lockdown policies, energy price shocks, and other disruptions, including labor market disruptions. At the height of the pandemic, therising geopolitical risk associated with globalized supply chains was underscoredwhen Communist China, which controls much of the world’s pharmaceutical production and supply chains, threatened to plunge America “into a mighty sea ofcoronavirus” through pharmaceutical export controls6 if American politicians
dared to investigate what happened at the Wuhan lab.
Add all this up, and America’s trade situation and massive trade imbalancespose not only a severe economic security threat, but also a national security threat.
As President Donald Trump indicated in announcing his 2017 National Security
Strategy, “economic security is national security.”7
CHALLENGE #1: UNFAIR AND NONRECIPROCALTRADE INSTITUTIONALIZED IN WTO RULES

Tonight, I am also asking you to pass the United States Reciprocal Trade
Act, so that if another country places an unfair tariff on an American product,
we can charge them the exact same tariff on the exact same product thatthey sell to us.
President Donald J. Trump, 2019 State of the Union Address8
The World Trade Organization, with its 164 members, governs international
trade rules. Under its most favored nation (MFN) rule, each WTO member must
apply the lowest tariffs it applies to the products of any one country to the productsof every other WTO country. Importantly, nothing in the MFN rule requires a WTO
member to provide equal—that is, reciprocal or mirror—tariff rates to its trading
partners. Rather, under MFN, WTO members can charge systematically higher
tariffs to other countries to the extent negotiated in their WTO tariff schedules
so long as they apply those same higher tariffs to all countries.
As a poster child for the kind of nonreciprocal tariffs that American manufacturers often face, the MFN tariff for automobiles applied by the U.S. is only 2.5 percent.
In contrast, the EU charges 10 percent, Communist China 15 percent, and Brazil 35
percent. Similarly, while the U.S. applies an MFN tariff rate of 6.2 percent on therice it buys from Malaysia, Malaysia applies an ad-valorem equivalent tariff of 40
percent on rice from the U.S. Meanwhile, European milk producers are shielded— 768 —

2025 Presidential Transition Project
TABLE 2

Nonreciprocal Tariff Rates Under “Most Favored Nation” Rule
Foreign
Partner Applies
Higher Tariff

U.S. Applies
Higher Tariff

U.S. and Foreign
Partner Apply
Same Tariff

Number of HS6 Product Lines

467,015

141,736

87,319Percent of HS6 Product Lines

67%

20%

13%

Tariff Differential

12.3%

8.7%

0.0%

132-Country Sample

NOTE: HS6—Harmonized Commodity Description and Coding System.
SOURCE: United Nations Conference on Trade and Development, “Trade Analysis Information System,” https://
databank.worldbank.org/source/unctad-%5E-trade-analysis-information-system-(trains) (accessed March 21, 2023).
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by 67 percent tariffs while American milk producers benefit only from a 15 percent
tariff on foreign imports.9
From the perspective of strategic game theory, the WTO’s MFN rule provides
little or no incentive for higher-tariff countries to lower their tariffs. Rather, underthese conditions, the dominant strategy of any relatively high-tariff country issimply to maintain those high tariffs while free riding off the lower-tariff countries.
The U.S. is disproportionately harmed by the WTO’s nonreciprocal tariff regime.
The countries that are hurt most by the WTO’s nonreciprocal tariff regime arethose like the United States that charge the lowest tariffs on average. This point is
illustrated in Table 2, which reports information on nonreciprocal tariffs that are
applied under the MFN rule on product lines at the six-digit level of the Harmonized Commodity Description and Coding System (HS6).10
Table 2 presents results for a broad sample of 132 countries that account for
more than 60 percent of total U.S. trade and 98 percent of U.S. trade that is not covered by free trade agreements (FTAs). Within this broad sample of 132 countries,
U.S. exporters face higher tariffs in 467,015 different cases compared to 141,736
cases in which the U.S. charges higher nonreciprocal rates. In other words, U.S.
exporters face higher tariffs more than three times as often as the U.S. applies
higher tariffs.
Moreover, when American exporters face higher tariffs, the nonreciprocal tariffs are typically much higher. As row 4 of Table 2 indicates, in the 467,015 cases inwhich foreign partners charge higher tariffs, the average rate applied by the foreign
partners is 12.3 percentage points above the rate applied by the U.S. In contrast,— 769 —

Mandate for Leadership: The Conservative Promisein the 141,736 cases in which the U.S. charges the higher tariff, the average U.S.
applied rate is only 8.7 percentage points higher than the average applied tariff ofthe foreign partner.
Separately, Communist China levies higher tariffs on 10 products for every
one Chinese product that is subject to a U.S.-applied higher tariff.11 India’s ratio iseven higher at 13 to one. Further, both Communist China and India also featuresignificant nontariff barriers. Collectively, these higher nonreciprocal tariffs inCommunist China and India block American exporters from selling goods at competitive prices to more than one-third of the world’s population.
Trade Deficit Impacts of the U.S. Reciprocal Trade Act. Under current
United States laws and regulations, an American President has limited ability
to fight back against the higher MFN tariffs now being levied against American
workers, farmers, ranchers, and manufacturers. Accordingly, behind the WTO’s
protective MFN shield, America’s free-riding trading partners have little or no
incentive to come to the bargaining table to negotiate lower tariffs.
To address this nonreciprocity stalemate, President Trump urged Congress in
his 2019 State of the Union address to pass the United States Reciprocal Trade Act(USRTA).12 Under the USRTA, the President would have the authority to bring any
American trading partner that is currently applying higher nonreciprocal tariffs tothe negotiating table. If that trading partner refused to lower tariffs to U.S. levels,
the President then would have the authority to raise U.S. tariffs to match or “mirror”
the foreign partner’s tariffs.
The USRTA was introduced on January 24, 2019, by then-Representative Sean
Duffy (R–WI). The following month, a Harvard–Harris poll of 1,792 registeredvoters found that 80 percent of respondents supported the USRTA.13 As Representative Duffy noted at the time, the purpose of granting the President theseauthorities was not to raise tariffs. Rather, it was to give the President, working inclose consultation with Congress, a sophisticated and targeted tool that he could
use to force other countries to lower their tariffs and nontariff barriers.14
Following the introduction of the USRTA, the White House Office of Trade andManufacturing Policy (which the author directed) ran simulations to estimate theimpact that implementation of the USRTA might have on the overall U.S. trade
deficit in goods and the large bilateral trade deficits the U.S. runs with many of its
major trading partners. The sample consisted of the same 132 trading partners usedin Table 2 above.15 The results underscore the unfair and unbalanced nonreciprocal
trade the U.S. is forced to accept under WTO MFN rules.
Two Scenarios. Scenario One in Table 3 assumes that our trading partners
lower their applied tariff rates on specific products to U.S. levels in cases where
their applied tariffs are higher. Scenario Two assumes that our trading partners
refuse to lower their tariff rates to match those of the U.S. Instead, in order touphold the principle of reciprocity, the U.S. raises its tariffs to mirror levels. To— 770 —

2025 Presidential Transition Project
TABLE 3

Trade Deficit Reductions Under Alternative USRTA Scenarios
REDUCTION IN U.S. TRADE DEFICIT WITH WORLD

Scenario One:
Partner Countries
Match U.S. Tariff Rate

Scenario Two:
U.S. Matches Partner
Tariff Rates

In Billions of Dollars

$58.3

$63.6

As Percentage of 2018 Deficit

9.4%

10.2%

Metric

NOTE: USRTA—U.S. Reciprocal Trade Act.
SOURCE: White House Office of Trade and Manufacturing Policy, The United States Reciprocal Trade Act: Estimated
Job & Trade Deficit Effects, May 2029, p. 18, https://www.wsj.com/public/resources/documents/RTAReport.
pdf?mod=article_inline (accessed March 21, 2023).
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calculate the trade deficit reductions under Scenario One and Scenario Two, theanalysis relied on the World Bank’s SMART tariff simulator. Table 3 provides thesimulation results.
In Scenario One, if all 132 countries were to lower their higher nonreciprocal
tariffs to U.S. levels, the overall U.S. trade deficit in goods would be reduced by$58.3 billion, or about 9.4 percent of that deficit. In contrast, in Scenario Two, if
these countries were to refuse to reciprocate and the U.S. were to raise its tariffs
to mirror those countries’ levels, the reduction in the U.S. trade deficit would
be slightly larger: an estimated $63.6 billion, or 10.2 percent of the deficit. Thissuggests that implementing the USRTA would help to create between 350,000
and 380,000 jobs.
The slightly larger reduction in the trade deficit in Scenario Two as a resultof the U.S. raising its tariffs to mirror those of its partners, as opposed to foreigncountries lowering their tariffs to U.S. levels, may seem surprising to those who aresteeped in Ricardian dogma and the textbook lessons of free trade. However, thisresult speaks to the fact that so many of America’s trading partners are applying
significantly higher tariffs to thousands of American products.
Estimated Impacts on Key U.S. Bilateral Trade Deficits. If the USRTA wereenacted, a President would likely have to prioritize which countries he should
negotiate with first. One way to create such a priority list would be to choose thosecountries that have relatively large trade deficits with the U.S. and apply relatively
high tariffs. This is illustrated in Figure 1, which maps bilateral trade deficits— 771 —

Mandate for Leadership: The Conservative Promise
FIGURE 1

Mapping Bilateral Trade Deficits Against Tariff Differentials■ Largest bilateral trade deficit and/or largest tariff differential■ Second-to-largest bilateral trade deficit and/or second-to-largest bilateral tariff differential■ Smallest bilateral trade deficit and/or smallest tariff differential
AVERAGE MOST-FREE-NATION DIFFERENTIAL, SIMPLE MEAN
10%

India
8%

ThailandTaiwanChina

6%Vietnam4%

2%

Malaysia

Japan

E.U.

0%
0

$50

$100

$150

$200

$250

$300

$350

$400

$450

BILATERAL TRADE DEFICIT, 2018, IN BILLIONS OF U.S. DOLLARSSOURCE: White House Office of Trade and Manufacturing Policy, The United States Reciprocal Trade Act: Estimated
Job & Trade Deficit Effects, May 2019, p. 20, https://www.wsj.com/public/resources/documents/RTAReport.pdf?
mod=article_inline (accessed March 21, 2023).
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against tariff differentials for eight major U.S. trading partners, which account for47.6 percent of total U.S. trade and 88.6 percent of the U.S. trade deficit in goods.
Figure 1 shows that the USRTA priority list would include the countries in
red—Communist China and India—along with trading partners in the yellow zone.
This yellow zone includes the European Union, which features a very high deficit,
along with Thailand, Taiwan, and Vietnam, which feature particularly high tariff
differentials.
Table 4 estimates the improvement in the U.S. trade deficit under ScenarioOne, in which partner countries match the U.S. tariff rate under pressure from— 772 —

2025 Presidential Transition Project
TABLE 4

Trade Deficit Reductions for Target Countries
SCENARIO ONE:PARTNER COUNTRIESMATCH U.S. TARIFF RATESCENARIO TWO:
U.S. MATCHES PARTNERTARIFF RATES

Projected
Change in
Bilateral Trade
Balance($ Billions)Bilateral
Deficit
Reduction
as Share of2018 Bilateral
Deficit

Projected
Change in
Bilateral Trade
Balance($ Billions)Bilateral
Deficit
Reduction
as Share of2018 Bilateral
Deficit

India

5.0

24%

18.7

88%

Taiwan

1.0

6%

9.2

59%

Vietnam

0.7

2%

17.2

44%

Thailand

3.2

17%

6.4

34%

Communist China

18.5

4%

70.6

17%

European Union

8.0

5%

25.3

15%

Total

35.4

4%

45.6

5%

Country

SOURCE: White House Office of Trade and Manufacturing Policy, The United States Reciprocal Trade Act: Estimated
Job & Trade Deficit Effects, May 2029, p. 21, https://www.wsj.com/public/resources/documents/RTAReport.
pdf?mod=article_inline (accessed March 21, 2023).
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the American President, and then under Scenario Two, in which the U.S. matches
the tariffs of partners that refuse to lower their tariffs. Columns 2 and 4 in Table 4,
when the USRTA is applied first to Communist China and then to the EU, show thelargest absolute dollar reductions in bilateral trade deficits. This results in bilateral deficit reductions in Scenario One of $18.5 billion for China and $8.0 billion
for the EU. In Scenario Two, the impacts for Communist China and the EU are
substantially larger: $70.6 billion and $25.3 billion, respectively.
Note further that the largest relative dollar reductions in percent terms comefrom applying the USRTA first to India and then to Taiwan and Vietnam. For example, if India were to reduce its tariffs to U.S. levels, as in Scenario One, this would
reduce the bilateral trade deficit with India by 24 percent. If the U.S. raised its
tariffs to mirror India’s levels, the result would be a far more dramatic 88 percent— 773 —

— 774 —%Anti-monopoly Law Extortion%%

Burdensome andIntrusive Testing

Chinese Communist Party Coopts Corporate Governance

Chinese Nationals
as Non-Traditional
Information Collectors%“Brand Forcing” — Forced
Use of Chinese Brands

Bid-Rig Foreign Government
Procurement Contracts%

Adverse Administrative
Approvals and Licensing
Processes

China's Acts, Policies,
and Practices of
Economic Aggression

Protect
China's Home
Market from
Competition
and Imports

%

%

%

Expand China’s
Share of Global
Markets

Secure andControlCore Natural
Resources
Globally%%

Dominate
Traditional
Manufacturing
Industries

Communist China’s Categories of Economic Aggression (Page 1 of 8)

TABLE 5

%

%

%

%

%

Acquire Key
Technologies
and IP from
Other Countries
and the U.S.

%

%

%

%

%

%

CaptureEmerging
High-Tech
Industries that
Drive Future
Growth andAdvancements
in Defense
Industry

Mandate for Leadership: The Conservative Promise

— 775 —“Debt-Trap” Financing to
Developing Countries

Data Localization Mandates

Cyber-Enabled
Espionage and Theft%%%

Currency Manipulationand Undervaluation%%

Counterfeiting and Piracy
Steals Intellectual Property%

Consolidate StateOwned Enterprises into
National Champions%%

Expand China’s
Share of Global
Markets

Claim Sovereign Immunity on
U.S. Soil to Prevent Litigation

China's Acts, Policies,
and Practices of
Economic Aggression

Protect
China's Home
Market from
Competition
and Imports%%

Secure andControlCore Natural
Resources
Globally

%

%

%

%

Dominate
Traditional
Manufacturing
Industries

Communist China’s Categories of Economic Aggression (Page 2 of 8)

TABLE 5

%

%

%

%

Acquire Key
Technologies
and IP from
Other Countries
and the U.S.

%

%

%

%

CaptureEmerging
High-Tech
Industries that
Drive Future
Growth andAdvancements
in Defense
Industry2025 Presidential Transition Project

— 776 —%%Export Restraints Restrict
Access to Raw Materials

%

%

%

%

%

Acquire Key
Technologies
and IP from
Other Countries
and the U.S.

Expert Review Panels
Force Disclosure of
Proprietary Information%%

Dominate
Traditional
Manufacturing
Industries

%

%

%

%

Expand China’s
Share of Global
Markets

Secure andControlCore Natural
Resources
Globally

Evasion of U.S. Export
Control Laws%%

Discriminatory Patent andOther IP Rights Restrictions

Dumping Below Cost
Into Foreign Markets%

Discriminatory
Catalogues and Lists

Delays in Regulatory Approvals

China's Acts, Policies,
and Practices of
Economic Aggression

Protect
China's Home
Market from
Competition
and Imports

Communist China’s Categories of Economic Aggression (Page 3 of 8)

TABLE 5

%

%

%

%

%

%

%

CaptureEmerging
High-Tech
Industries that
Drive Future
Growth andAdvancements
in Defense
Industry

Mandate for Leadership: The Conservative Promise

— 777 —Lack of Transparency%%

Indigenous Technology
Standards“Junk Patent” Lawsuits%

Government Procurement
Restrictions

%

%

%

%

%

Acquire Key
Technologies
and IP from
Other Countries
and the U.S.

Foreign Ownership Restrictions
Force Technology and IP Transfer%

Dominate
Traditional
Manufacturing
Industries%%

Expand China’s
Share of Global
Markets

Secure andControlCore Natural
Resources
Globally

Forced Research andDevelopment (“R&DLocalization”)

Financial Support to Boost
Exports and Promote
Import Substitution

China's Acts, Policies,
and Practices of
Economic Aggression

Protect
China's Home
Market from
Competition
and Imports

Communist China’s Categories of Economic Aggression (Page 4 of 8)

TABLE 5

%

%

%

%

CaptureEmerging
High-Tech
Industries that
Drive Future
Growth andAdvancements
in Defense
Industry2025 Presidential Transition Project

— 778 —%%Price Controls to Restrict Imports%

Physical Theft ofTechnologies and IP ThroughEconomic Espionage

Placement of Chinese Employeeswith Foreign Joint Ventures%

Overcapacity Drives
Out Foreign Rivals

Open Source Collection of
Science and Technology
Information

%

%

%

%

%

%

%

Acquire Key
Technologies
and IP from
Other Countries
and the U.S.

Move the Regulatory Goalposts%

Dominate
Traditional
Manufacturing
Industries%%

Expand China’s
Share of Global
Markets

Secure andControlCore Natural
Resources
Globally

Monopsony Purchasing PowerLax and Inconsistent Labor Laws

China's Acts, Policies,
and Practices of
Economic Aggression

Protect
China's Home
Market from
Competition
and Imports

Communist China’s Categories of Economic Aggression (Page 5 of 8)

TABLE 5

%

%

%

%

%

CaptureEmerging
High-Tech
Industries that
Drive Future
Growth andAdvancements
in Defense
Industry

Mandate for Leadership: The Conservative Promise

— 779 —Reverse Engineering%

Retaliation and
Retaliatory Threats%

Quotas and Tariff-Rate Quotas%%%

Promise Cooperation on
Regional Security Issues
as Bargaining Chip

Recruitment of Science,
Technology, Business,
and Finance Talent%

Expand China’s
Share of Global
Markets“Product Hop” and “Country
Hop” to Evade Antidumping
and Countervailing Duties

China's Acts, Policies,
and Practices of
Economic Aggression

Protect
China's Home
Market from
Competition
and Imports
Secure andControlCore Natural
Resources
Globally

%

%

%

%

Dominate
Traditional
Manufacturing
Industries

Communist China’s Categories of Economic Aggression (Page 6 of 8)

TABLE 5%%Acquire Key
Technologies
and IP from
Other Countries
and the U.S.

%

%

%

CaptureEmerging
High-Tech
Industries that
Drive Future
Growth andAdvancements
in Defense
Industry2025 Presidential Transition Project

— 780 —Tariffs
%

%

%

%

%

Acquire Key
Technologies
and IP from
Other Countries
and the U.S.

Subsidized Factor
Inputs — Capital, Energy,
Utilities, and Land%

Security Reviews Force
Technology and IP Transfer

Dominate
Traditional
Manufacturing
Industries%%

Secure and Controllable
Technology Standards

Expand China’s
Share of Global
Markets

Secure andControlCore Natural
Resources
Globally

Structuring Transactions to
Avoid CFIUS Review of Chinese
Investment in the U.S.

%

Sanitary and PhytosanitaryStandards Raise NonTariff Barriers

China's Acts, Policies,
and Practices of
Economic Aggression

Protect
China's Home
Market from
Competition
and Imports

Communist China’s Categories of Economic Aggression (Page 7 of 8)

TABLE 5

%

%

%

%

CaptureEmerging
High-Tech
Industries that
Drive Future
Growth andAdvancements
in Defense
Industry

Mandate for Leadership: The Conservative Promise

— 781 —%%Value-Added Tax Adjustments
and Rebates Subsidize
Chinese Exports

Weak and Laxly Enforced
Environmental Laws

Secure andControlCore Natural
Resources
Globally%%%

Dominate
Traditional
Manufacturing
Industries

SOURCE: White House Office of Trade and Manufacturing Policy, How China’s Economic Aggression Threatens the Technologies
and Intellectual Property of the United States and the World, June 2018, https://trumpwhitehouse.archives.gov/wp-content/
uploads/2018/06/FINAL-China-Technology-Report-6.18.18-PDF.pdf (accessed March 21, 2023).

%%

Expand China’s
Share of Global
Markets

Transship to Evade Antidumping
and Countervailing Duties

Traditional Spycraft

Technology-Seeking,State-Directed Foreign
Direct Investment

China's Acts, Policies,
and Practices of
Economic Aggression

Protect
China's Home
Market from
Competition
and Imports

Communist China’s Categories of Economic Aggression (Page 8 of 8)

TABLE 5%%Acquire Key
Technologies
and IP from
Other Countries
and the U.S.

A heritage.org%%

CaptureEmerging
High-Tech
Industries that
Drive Future
Growth andAdvancements
in Defense
Industry2025 Presidential Transition ProjectMandate for Leadership: The Conservative Promise

reduction in the U.S. bilateral trade deficit with India. Similarly, if Taiwan were to
reduce its tariffs to U.S. levels, the size of the U.S. bilateral trade deficit with Taiwan
would fall by 6 percent. If the U.S. imposed a mirror tariff, its bilateral trade deficit
with Taiwan would fall by 59 percent.
These results again underscore the high degree of unfair, unbalanced, andnonreciprocal trade that currently exists between the U.S. and much of the restof the world, which penalizes American farmers, ranchers, manufacturers, andworkers because of the WTO-MFN conundrum. These simulations also demonstrate that implementation of the USRTA most likely would substantially reduce
the U.S. trade deficit while creating hundreds of thousands of new jobs. Thesebenefits notwithstanding, however, the U.S. would still face a substantial overall trade deficit and substantial bilateral trade deficits with many of its major
trading partners.
Why might this be so? Because under WTO rules, America still faces numerous
nonreciprocal nontariff barriers around the world. For example, one of America’s
largest trading partners, Japan, runs a significant bilateral trade surplus in goods
with the U.S.—more than $70 billion a year. While Japan has relatively low tariffs,
it ranks high on the nontariff barrier scale. In such cases, which are numerous, passage of the USRTA would likely also be very helpful in reducing nontariff barriers.
This is because under the powers provided by the USRTA, if a foreign country
imposes significantly higher nontariff barriers, then the President has the authority
to “negotiate and seek to enter into an agreement” that “commits the country to…
eliminate [its] nontariff barriers.”16 If the country refuses to come to the negotiating table and lower its nontariff barriers, the President has the authority to levy
reciprocal duties to offset or mirror those barriers.
In summary, passage of the USRTA would go a long way toward leveling theplaying field for American farmers, ranchers, manufacturers, and workers who are
now forced to compete in an intrinsically unfair, unbalanced, and nonreciprocal
WTO-MFN system.
Nor is the USRTA necessarily the only possible legislative way to address thisissue. In 2017, then-House Speaker Paul Ryan (R–WI) and then-House Ways andMeans Committee Chairman Kevin Brady (R–TX) proposed a “border adjustment tax.” The proposed border adjustment would have eliminated the ability ofcorporations to deduct the cost of imports while eliminating the tax on income
attributable to exports. This border adjustment tax would have shifted the U.S.
corporate income tax from an origin-based tax applying to the production of goods
and services in the United States to a destination-based tax applying to the consumption of goods and services in the U.S.
This tax—strongly opposed by American multinational corporations and bigbox retailers—not only would have leveled the playing field with respect to WTO
rules, but also would have provided an innovative alternative to the application of— 782 —

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tariffs.17 A conservative Administration might do well to look at such a tax as partof its trade agenda.
CHALLENGE #2: COMMUNIST CHINA’S ECONOMIC
AGGRESSION AND QUEST FOR WORLD DOMINATION18

Among all of its bilateral trade relationships, America’s relationship with Communist China is the most fraught with difficulty. The problem is not just that therelentlessly mercantilist and protectionist trade policies that China has pursued
ever since its accession to the WTO in 2001 have led to chronic, massive, andever-expanding trade deficits. Communist China’s economic aggression in the
traditional trade policy space is further facilitated by equally aggressive industrial
policies and technology transfer–forcing policies that are designed to shift theworld’s manufacturing and supply chains to Communist Chinese soil.
The Chinese Communist Party’s policy goal is to propel the Chinese economy,
but its broader goal is to strengthen Communist China’s defense industrial baseand associated warfighting capabilities. That China unabashedly seeks to supplant
America as the world’s dominant economic and military power is not in dispute.
Rather, it is a prominent feature of Communist Chinese dictator Xi Jinping’s rhetoric. Xi has promised that the deed will be done by 2049, the 100-year anniversaryof the Communist takeover of the Mainland.19
In light of Communist China’s broader geopolitical and military agenda, theAmerican President who takes office in January 2025 must view the U.S.–China
trade relationship and associated policy reforms within the context of the broader
existential threat posed by Communist China. The question is whether that next
President should seek to decouple economically and financially from Communist
China as America’s first best response to China’s unrelenting aggression or continue efforts to negotiate with an authoritarian country and brutal dictatorshipwith a well-established reputation for failing to abide by any agreements it enters.
Institutionalized Aggression. Table 5 depicts more than 50 types of policy
aggression institutionalized by the CCP across six different categories of suchaggression. Viewed as whole, the extent of Communist China’s aggression isbreathtaking.
At the trade policy level, Communist China relies heavily on a wide range of
mercantilist and protectionist tools to protect its own markets and unfairly exploit
foreign markets. These instruments of Communist Chinese trade aggression
include high tariffs and nontariff barriers, currency manipulation, a heavy reliance on sweatshop labor and pollution havens, the dumping of unfairly subsidized
exports, and widespread counterfeiting and piracy: Communist China is the world’s
largest source of counterfeit and pirated products.
In addition, Communist Chinese enterprises benefit from preferential policies
that have burdened world markets with subsidized overcapacity. The resultant glut

— 783 —

Mandate for Leadership: The Conservative Promiseof Communist Chinese exports in turn depresses world prices and pushes foreign
rivals out of the global market—steel is a major example.20 Industrial policy toolsthat further reinforce Communist China’s mercantilist and protectionist trade
policies include numerous direct and indirect subsidies to boost exports and theconsolidation of heavily subsidized state-owned enterprises into “national champions” that can compete with foreign companies in both domestic and global markets.
Communist China also uses a predatory “debt trap” model of economic development aid that proffers substantial financing to developing countries in exchange for
their willingness to mortgage their natural resources and allow Communist China
access to their markets. The practical effect of this debt trap model is to give Communist China a competitive edge internationally that stems from its preferential
access to relatively lower-cost commodities needed in the manufacturing process.
These commodities range from bauxite, copper, and nickel to rarer commodities
such as beryllium, titanium, and rare earth minerals.
As a complement to this debt trap gambit and to exploit its commanding shareof a wide range of critical raw materials that are essential to the global supply
chain and production of high-technology and high-value-added products, Communist China strategically uses protectionist export restraints, including export
quotas and export duties. These export restraints thereby restrict access to raw
materials such as rare earth, tungsten, and molybdenum that are essential in
the high-technology production space. The result is to drive up world prices andthereby put pressure on American and other foreign downstream producers tomove their operations, technologies, and jobs to Communist China. Americanindustries that have been affected by Communist China’s export restraints range
from steel, chemicals, and electric cars to wind turbines, lasers, semiconductors,
and refrigerants.
Technology-Forcing Policies. Table 6, extracted from the White House Officeof Trade and Manufacturing Policy’s report on Communist China’s economic
aggression,21 provides a summary of the various policies the Chinese Communist
Party uses to force the transfer of the West’s technologies to Communist Chinesesoil. Formally, Communist Chinese industrial policy seeks to promote the “digestion, absorption, and re-innovation” of technologies and intellectual property (IP)from around the world.22
As noted in Table 6, this policy is carried out, for example, through state-sponsored IP theft—coercive and intrusive regulatory gambits to force technology
transfer, typically in exchange for limited access to the Chinese market. Communist China’s looting of American technology is further enhanced by “information
harvesting” conducted by Communist Chinese nationals who infiltrate U.S. universities, national laboratories, and other centers of innovation. Strategic sectors
targeted by Communist Chinese economic espionage have included electronics,
telecommunications, robotics, data services, pharmaceuticals, mobile phone— 784 —

2025 Presidential Transition Project

services, satellite communications and imagery, and business application software.
It has been estimated that the theft of trade secrets alone costs the U.S. “between$180 billion and $540 billion” annually.23
Closely related to Communist China’s espionage campaigns are its state-backed
efforts to evade U.S. export control laws. These laws are designed to prevent theexport of sensitive technologies with military applications.24 However, a significant
problem facing agencies like the Departments of Commerce, Defense, and State is
the growth of “dual-use” technologies, which have both military and civilian utility.
For example, airplane engine technologies have an obvious commercial application.
When acquired by a strategic economic and military competitor like Communist
China, however, such commercial items can quickly wind up propelling the aircraftof the People’s Liberation Army.
As an example of Communist China’s coercive and intrusive regulatory gambits
to force the transfer of foreign technologies and IP to Chinese competitors, foreigncompanies often must enter into joint ventures or partnerships with minority
stakes in exchange for access to the Chinese market. Once a U.S. or foreign company
is coerced into entering a joint venture with a Chinese partner, the door is open
to the transfer of technology and IP. Similarly, a relentlessly coercive Communist
China has forced American patent and technology holders to accept below-market
royalty rates in licensing and other forms of below-market compensation for theirtechnologies—and the American government has done little or nothing about it.
Information Harvesting. Every year, more than 300,000 Communist Chinese nationals attend U.S. universities or are hired at U.S. national laboratories,
innovation centers, incubators, and think tanks. To put this in perspective, according to the Chinese Ministry of Education, only 20,000 American nationals werestudying abroad at Chinese universities on the mainland in 2018.25 These Chinese
nationals—often members (or the sons and daughters of members) of the Chinese
Communist Party—now account for approximately one-third of foreign university
and college students in the United States and about 25 percent of graduate students
specializing in science, technology, engineering, or math (STEM).26 As a Defense
Innovation Unit Experimental (DIUx) report has warned:
Academia is an opportune environment for learning about science andtechnology since the cultural values of U.S. educational institutions reflect anopen and free exchange of ideas. As a result, Chinese science and engineering
students frequently master technologies that later become critical to key
military systems, amounting over time to unintentional violations of U.S.
export control laws.27

State-backed Chinese enterprises also increasingly finance joint research
programs and the construction of new research facilities on U.S. campuses. For— 785 —

Mandate for Leadership: The Conservative Promise

example, Huawei, well-known within the American intelligence community as an
instrument of Chinese military espionage, has partnered with the University ofCalifornia–Berkeley on research that focuses on artificial intelligence and relatedareas such as deep learning, reinforcement learning, machine learning, natural
language processing, and computer vision, all of which have important future military applications.28 In this way, UC–Berkeley, whether unwittingly or wittingly,
helps to boost Communist China’s capabilities and quest for military dominance.
Communist Chinese state actors are also strategically building research centers in innovation centers and hubs like Silicon Valley and Boston. Such American
research has accelerated Communist China’s development of hypersonic glide
vehicles, which travel at speeds in excess of Mach 5 and are aimed at evading
modern ballistic missile defense systems while they deliver their nuclear weapons.
Technology-Seeking, State-Financed Foreign Direct Investment (FDI).
If American entrepreneurs build it, Communist Chinese investors will come. And
come they have in droves. In the words of the United States Trade Representative:
The Chinese government directs and unfairly facilitates the systematicinvestment in, and acquisition of, U.S. companies and assets by Chinesecompanies, to obtain cutting-edge technologies and intellectual property andgenerate large-scale technology transfer in industries deemed important bystate industrial plans.29

Communist Chinese buyers have included most prominently state-owned
enterprises, private Chinese companies with interlocking ties to the Communist Chinese state, and state-backed sovereign wealth funds. These agents of theCommunist Chinese government push their foreign direct investment throughvehicles that include mergers and acquisitions, seed and venture capital financing,and greenfield investing, particularly in strategically targeted high-technology
industries. Since 2012, CB Insights has catalogued more than 600 high-technology
investments in the United States worth close to $20 billion—with artificial intelligence, augmented and virtual reality, and robotics receiving a particular focus—by
Communist China–based investors.30
All of these behaviors raise the question of whether Communist Chinese nationals should be granted visas to penetrate our universities, think tanks, and research
institutions and whether Communist Chinese capital should be allowed to invest
in America’s cutting-edge technology firms.
Policy Responses to Communist Chinese Aggression. It should be clear
from this review that Communist China’s economic aggression is both widespreadand systemic. The CCP’s self-proclaimed goal is to supplant the U.S. as the world’s
dominant economic and military superpower. The question: How should the next
American President address this aggression? Policy responses range from further— 786 —

2025 Presidential Transition Project

attempts to negotiate with the CCP to strategically decoupling economically andfinancially from Communist China.
The Fruitlessness of Further Negotiations. If the past is prologue, and as
we learned during the Trump Administration, any further negotiations with Communist China are likely to be both fruitless and dangerous: fruitless because the
CCP now has a very well-established reputation for bargaining in bad faith anddangerous because as long as the CCP’s aggression continues, it will further weaken
America’s manufacturing and defense industrial base and global supply chains.
The record regarding Communist China’s bad-faith negotiating is clear. In
September 2015, President Barack Obama stood with Xi Jinping in the WhiteHouse Rose Garden where Xi solemnly promised not to militarize the South
China Sea and agreed that Communist China would not conduct knowingly
cyber-enabled theft of intellectual property.31 Within a year, the first promisewould be broken.32 As for Communist China’s cyberattacks on American businesses, they have never stopped.
Upon taking office in 2017, President Trump put on hold his 2016 campaign
promise to put high tariffs on Chinese products immediately. Instead, as a gestureof good faith, he sought to negotiate a comprehensive trade agreement with Chinathat would have addressed many of the issues raised in this discussion.
By the middle of 2018, it was clear that the CCP had no intention of bargaining
in good faith. As a result, on June 15, President Trump began to impose a series oftariffs33 on Chinese products that would eventually rise to cover more than $500
billion of Chinese imports. These tariffs would lead Communist China’s lead negotiator, Vice Premier Liu He, to agree tentatively in April of 2019 to what would
have been the most comprehensive trade deal in global history.34 On May 3, 2019,
however, Liu would renege on that 150-page deal and seek its drastic re-trading.35
Finally, on January 15, 2020, the U.S. and Communist China signed a “PhaseOne” deal that was a pale shadow of the original deal.36 This so-called Skinny Deal
(as it was derisively and rightly called) combined proposed modest Communist
Chinese reforms on issues related to forced technology transfer and intellectual
property theft with promises of large-scale purchases of agricultural, manufacturing, and energy products. To date, this deal has been a predictable bust: Communist
China has failed to consummate a significant fraction of its promised purchases
and has made little or no progress on reforming its mercantilist, protectionist, andtechnology transfer–forcing policies.
The clear lesson learned in both the Obama and Trump Administrations is that
Communist China will never bargain in good faith with the U.S. to stop its aggression. An equally clear lesson learned by President Trump, which he was ready to
implement in a second term, was that the better policy option was to decouple
both economically and financially from Communist China as further negotiations
would indeed be both fruitless and dangerous.

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Mandate for Leadership: The Conservative Promise
TABLE 6

Vectors of Communist China’s Economic Aggression in theTechnology and IP Space
1. Physical Theft and Cyber-Enabled Theft of Technologies and IP• Physical Theft of Technologies and IP Through Economic Espionage• Cyber-Enabled Espionage and Theft• Evasion of U.S. Export Control Laws
• Counterfeiting and Piracy• Reverse Engineering
2. Coercive and Intrusive Regulatory Gambits• Foreign Ownership Restrictions• Adverse Administrative Approvals and Licensing Requirements• Discriminatory Patent and Other IP Rights Restrictions• Security Reviews Force Technology and IP Transfers• Secure and Controllable Technology Standards• Data Localization Mandates• Burdensome and Intrusive Testing• Discriminatory Catalogues and Lists• Government Procurement Restrictions• Indigenous Technology Standards that Deviate from International Norms• Forced Research and Development• Antimonopoly Law Extortion• Expert Review Panels Force Disclosure of Proprietary Information• Chinese Communist Party Co-opts Corporate Governance• Placement of Chinese Employees with Foreign Joint Ventures
3. Economic Coercion• Export Restraints Restrict Access to Raw Materials• Monopsony Purchasing Power
4. Information Harvesting• Open-Source Collection of Science and Technology Information• Chinese Nationals in U.S. as Non-Traditional Information Collectors• Recruitment of Science, Technology, Business, and Finance Talent
5. State-Sponsored, Technology-Seeking Investment• Chinese State Actors Involved in Technology-Seeking FDI• Chinese Investment Vehicles Used to Acquire and Transfer U.S. Technologies and IP– Mergers and Acquisitions– Greenfield Investments– Seed and Venture Funding

SOURCE: White House Office of Trade and Manufacturing Policy, How China’s Economic Aggression Threatens theTechnologies and Intellectual Property of the United States and the World, June 2018, https://trumpwhitehouse.
archives.gov/wp-content/uploads/2018/06/FINAL-China-Technology-Report-6.18.18-PDF.pdf (accessed March 21, 2023).
A heritage.org— 788 —

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The following policy options were on the drawing board or in discussion as
preparations for a potential Trump second term were being made. These options
span the spectrum from purely trade-related like increasing tariffs to cutting off
Communist China’s access to American financial markets, research institutions,and consumers. The next American President should strongly consider adopting
all of them as a package:
l

l

l

l

l

l

Strategically expand tariffs to all Chinese products and increase tariff rates
to levels that will block out “Made in China” products, and execute thisstrategy in a manner and at a pace that will not expose the U.S. to lack ofaccess to essential products like key pharmaceuticals.
Provide significant financial and tax incentives to American companies thatare seeking to onshore production from Communist China to U.S. soil.
Stop Communist China’s abuse of the so-called de minimis exemption,
which allows it to evade the tariffs for products valued at less than $800.
Prohibit Communist Chinese state-owned enterprises from bidding on U.S.
government procurement contracts (for example, contracts for subway andother transportation systems).
Prohibit the use of Communist Chinese–made drones in American airspace.
Ban all Chinese social media apps such as TikTok and WeChat, which posesignificant national security risks and expose American consumers to dataand identity theft.

lProhibit all Communist Chinese investment in high-technology industries.

l

Prohibit U.S. pension funds from investing in Communist Chinese stocks.

l

l

l

Delist any Communist Chinese stocks that do not meet Public Company
Accounting Oversight Board standards or, alternatively, close off theChinese “A shares” stock market to U.S. investment and deregister U.S.sanctioned Communist Chinese companies.
Prohibit the use of Hong Kong clearinghouses as transit points for American
capital investing in the Chinese mainland.
Prohibit the inclusion of Chinese sovereign bonds in U.S. investors’ portfolios.

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Mandate for Leadership: The Conservative Promise

l

l

l

l

l

l

l

Systematically reduce and eventually eliminate any U.S. dependence on
Communist Chinese supply chains that may be used to threaten national
security such as medicines, silicon chips, rare earth minerals, computer
motherboards, flatscreen displays, and military components.
Sanction any companies, including American companies like Apple, thatfacilitate Communist China’s use of its Great Firewall surveillance andcensorship capabilities.
Order the Department of Homeland Security (DHS) and Department ofJustice to contract with U.S.-owned and U.S.-operated artificial intelligencecompanies that are capable of detecting, identifying, and disrupting both thedomestic groups’ and CCP influencers’ social media operations and funding
streams using public information as a rapidly available offensive measure.
Reinvigorate and expand the DHS crackdown on the CCP’s use of e-sellers(including third-party sellers) and the shippers and operators of major
warehouses such as Amazon, eBay, and Alibaba to flood U.S. markets withcounterfeit and pirated goods.
Compel the closure of all Confucius Institutes in the U.S., which serve as
propaganda arms of the CCP.
Significantly reduce or eliminate the issuance of visas to Chinese students or
researchers to prevent espionage and information harvesting.
Hold the CCP accountable for the COVID-19 virus, which almost certainly
originated as a genetically engineered virus from the Wuhan Institute ofVirology, and do so through the establishment of a presidential commission
or select congressional committee that would investigate the origins of
the virus; its various costs, both economically and in human life; and thepossible means of collecting damages from the CCP, which are likely to riseto the trillions of dollars.

If the new U.S. President wishes to defend this country against the serious existential threat posed by Communist China, that President will adopt all of these
proposals through the requisite presidential executive orders or memoranda.
Effective Trade Policy in the Real World. To conclude this analysis, it isuseful to offer brief reflections on a number of key obstacles to implementing thepolicy initiatives recommended in this chapter. These obstacles include:— 790 —

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l

l

l

l

The dogma of the Ricardian free-trade model, which has been used as
propaganda to thwart the adoption of measures that seek to level the global
trading field for American manufacturers, farmers, ranchers, and workers;
The politics of trade policy, which has led to a great divide that makes trade
policy reforms difficult to implement;
The economics of trade deficits, which are not adequately understood either
by the American public or by the policymaking intelligentsia; andThe crucial role of supportive White House and Administration personnel
in implementing effective trade policies.

The Dogma of Free Trade. Clearly, the fair and balanced trade orientationof this chapter runs starkly against the free trade grain of the globalist Ricardian
orthodoxy, which is predicated on the theory that free trade represents the best
path by which to achieve both American and global prosperity. This orthodoxy
is based on the ivory tower academic conclusion that if countries trade freely
among each other, each will pursue its own comparative advantages; production
will be most efficient around the world; the economic pie will be bigger bothfor the globe and for each free trading country; and (so long as workers wholose their jobs are fairly compensated from the gains from trade) everyone will
be better off.
The most obvious problem with this orthodoxy (there are many more) is that
nowhere is Ricardian free trade mirrored in the real world. Instead, America
trades in a world where the WTO’s MFN rules are stacked against us, scofflaws
like Communist China run roughshod over what meager WTO rules there are, andthe United States among all of the world’s developed nations is the biggest victimof the free trade Ricardian orthodoxy.
During his first term, President Donald Trump preached that there can be nofree trade without fair, reciprocal, and balanced trade. He was right then, and whoever is the next President in 2025 should heed this critical principle whenever theflag of free trade is waved to prevent the adoption of needed reforms.
The Politics of Trade Policy: Who Benefits? Today, there is a great divide
among Americans that stands in the way of constructive trade policy reforms. This
great divide is certainly not about a partisan desire for low taxes and a reduced
regulatory burden. Rather, it is over whether our borders should be open or secure
and whether it is prudent to offshore our manufacturing and defense industrial
base and associated supply chains.
Those who support secure borders and seek to onshore more of American production and supply chains do so to boost the real wages of American workers and to— 791 —

Mandate for Leadership: The Conservative Promiseenhance our national security. Some Americans historically have supported open
borders and offshoring under the flag of the Ricardian trade model, which assumes
the free flow of both labor and capital. Yet it is equally true that open borders andoffshoring also help American multinational corporations to maximize their profits
by minimizing their labor and environmental protection costs.
In particular, an open border policy, which allows for the unlimited migration ofcheap labor, depresses American wage rates and thereby boosts corporate profits.
At the same time, offshoring gives American corporations readier access to thesweatshops and pollution havens of Asia and Latin America. Our skies and water
may be cleaner, and our products may be cheaper, Main Street manufacturers andworkers bear the brunt of these policies.
The obvious political problem in adopting many of the policies proposed hereis that they will be opposed by the special-interest groups that benefit from open
borders and offshoring and that contribute lavishly to both political parties. These
special-interest groups range from the hedge funds of Wall Street and tech entrepreneurs of Silicon Valley to big-box retailers that stuff their aisles particularly
with cheap “Made in China” goods.
YES, TRADE DEFICITS MATTER[O]ur country has been behaving like an extraordinarily rich family thatpossesses an immense farm. In order to consume 4% more than we produce—
that’s the trade deficit—we have, day by day, been both selling pieces of the
farm and increasing the mortgage on what we still own.
Warren Buffett37
Historically, one line of attack against attempts to implement fair trade policies
in the name of reducing America’s massive and chronic trade deficit has been theclaim that “trade deficits don’t matter.” The intellectual tip of this spear has often
been think tanks that generate reams of analyses in support of a purely free trade(and open borders) American posture.38 Yet both common sense and several very
good reasons tell us that trade deficits matter a great deal.
Economic Security. The economic security argument that trade deficits matter
begins with the observation that growth in any country’s real, inflation-adjusted
gross domestic product (GDP) depends on only four factors: consumption, government spending, business investment, and net exports (the difference between
exports and imports). Reducing a trade deficit through implementation of the U.S.
Reciprocal Trade Act, the application of tariffs, or renegotiating a bad trade deal
like NAFTA all represent ways to increase net exports—and thereby boost the rateof economic growth.

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Suppose, for example, that under the USRTA the American President persuaded
India to reduce its very high protectionist tariffs and Japan to lower its formidable
nontariff barriers. America would surely sell more Florida oranges, Washington
apples, California wine, Wisconsin cheese, and Harley-Davidson motorcycles. The
resultant fall in the trade deficit would increase America’s GDP, and the real wagesof blue-collar America would rise from Seattle and Orlando to Sonoma and Milwaukee. But that’s not all.
Consider, too, the investment term in the GDP growth equation. When U.S.
companies offshore their production to chase cheap labor or manufacture in a“pollution haven” country like Communist China or India with lax environmental
regulations, the result is reduced nonresidential fixed investment—and a GDP
growth rate that is lower than it would be otherwise. Moreover, if such offshoredproduction results in more foreign exports to the U.S.—for example, an American
consumer buys a Made in Mexico Dodge Journey or Chevrolet Trax rather than avehicle assembled in Detroit—the trade deficit rises along with the fall in investment, further reducing GDP growth.
National Security. The national security argument that trade deficits matter
begins with America’s national-income accounting double-entry system and thisaccounting identity: Any deficit in the current account caused by imbalanced
trade must be offset by a surplus in the capital account, meaning foreign investment in the U.S.
In the short term, this balance-of-payments equilibrium may indeed “notmatter” as foreigners return our trade-deficit dollars to American shores byseemingly benignly investing in U.S. government bonds and stocks. Of course,
this infusion of foreign capital lowers American mortgage rates and keeps thestock market bullishly capitalized, which appears to be all to the good. Over time,
however, running large and persistent trade deficits leads to a massive transferof American wealth offshore into foreign hands. This wealth transfer happens asforeigners use their export dollars to buy American real estate, companies, andfinancial assets like the aforementioned stocks and government bonds.
The American investor Warren Buffett has referred to such wealth transfers
offshore as “conquest by purchase.” To Buffett, the big danger is that foreigners
will eventually own so many U.S. government bonds that Americans will wind up
working longer hours just to survive and service that foreign debt.
There is an even bigger national security danger, however, that Mr. Buffett has
missed: an alternative conquest-by-purchase scenario. Suppose, for example, that
one of the biggest holders of U.S. dollars is a rapidly militarizing strategic rival likeCommunist China that is intent on world hegemony. By buying up America’s companies, technologies, farmland, food producers, and key elements of the domestic
supply chain, Communist China can thereby gain more and more control of the
U.S. manufacturing and defense-industrial base.

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In this scenario, might America thereby lose a broader war for America’s freedom
and prosperity, not by shots fired but by American cash registers ringing up “Madein China” products? Might America even lose a broader hot war because it sent its
defense industrial base abroad on the wings of a persistent trade deficit? It follows
that for both economic and national security reasons, trade deficits do indeed matter.
It is therefore of critical importance that we bring America’s global trade back intobalance through free, fair, balanced, and reciprocal trade and that we do so throughthe kind of policy initiatives and reforms recommended in this chapter.
PERSONNEL IS TRADE POLICY

Having a clear set of trade and industrial policies to achieve one’s economic andnational security goals, while essential, is not enough. The lessons of the Nixon,
Reagan, and Trump Administrations teach us that “personnel is policy” or, in
this case, that “bad personnel will mean bad trade policy.”39 That is why it will beequally critical to the next President’s trade policy agenda to have key personnel
in place who not only have the skills to implement the policies, but also have thefirm commitment to do so.
During the Trump Administration, President Trump’s key policy advisers
and Cabinet officials clashed on the issues of international trade and combating
Communist China’s economic aggression. As much as President Trump did on
the trade front that was bold and innovative and as much as he achieved by challenging Communist China, too much of his trade policy was disrupted or derailed
by key personnel who did not share the President’s vision of fair, balanced, andreciprocal trade.
In thinking about the personnel positions that are most essential to effective
implementation of trade policy, the most obvious position to get exactly right isthat of the United States Trade Representative. The USTR is at least putatively
the top official on trade policy, and it is critical that this position be filled wisely.
Historically, during Republican Administrations, the USTR has been a free
trader who rarely challenged the protectionist and mercantilist policies of America’s trading partners and typically would seek to expand global trade. The Trump
Administration broke this globalist Republican tradition by appointing as USTR
attorney Robert E. Lighthizer, who not only had a keen understanding of the various legal levers a President can use to advance trade policy, but also was committed
to the President’s fair, balanced, and reciprocal trade agenda. The next Administration should make every effort to find someone with that understanding and thatcommitment to fill this position.
Less obvious—but almost as important—is the need to fill the position of Under
Secretary of Commerce for International Trade wisely. One of the most importantfunctions of the International Trade Administration, which is an agency in the
Department of Commerce, is to impose antidumping and countervailing duties— 794 —

2025 Presidential Transition Projectagainst trade cheaters who dump products below cost into American markets or
unfairly subsidize their exports. In fact, much of the cheating that does take placein the global trading arena can be addressed through such antidumping (AD) andcountervailing duty (CVD) cases.
Within the West Wing itself, it is equally critical that the National Security
Adviser, the Chairman of the Council of Economic Advisers (CEA), and the Directorof the National Economic Council (NEC) all be aligned on trade policy. During the
Trump Administration, with the notable exception of the President’s third National
Security Adviser, Robert O’Brien, and third CEA Chairman, Tyler Goodspeed, thisregrettably was not the case.
Finally, and perhaps surprisingly, the Secretary of Defense plays a key role intrade policy, at least when it comes to advancing Section 232 cases. Under Section
232 of the Trade Expansion Act of 1962,40 the President has the authority, throughtariffs or other means, to reduce imports from other countries “if the President
determines that such reduction or elimination would threaten to impair thenational security.” As a practical matter, the Secretary of Commerce spearheads
any Section 232 cases, but in order to proceed with a Section 232 case, Commercemust obtain signoff from the Secretary of Defense.
When President Trump wanted to implement steel and aluminum tariffs, he
had a willing servant in Secretary of Commerce Wilbur Ross. However, Secretaryof Defense James Mattis resisted. Mattis simply did not understand a key tenet of
the Trump Administration: Economic security is also national security. Without
vibrant steel and aluminum industries, it will be difficult for America to provide
the Pentagon with the kind of weapons it needs to defend the homeland.
CONCLUSION

A Harvard professor once told me during my doctoral thesis days that “if I tell
you how it is, I’ve told you why it can’t change.” Despite the obvious exploitationof American farmers, ranchers, manufacturers, and workers by the international
trading system and Communist Chinese aggression, powerful political forces nonetheless exist that profit from the status quo.
The stark lesson of this chapter is that America gets fleeced every day in the
global marketplace both by a predatory Communist China and by an institutionally unfair and nonreciprocal WTO. Addressing these two challenges would go along way toward restoring American greatness, both economically and militarily.
Ignoring these two challenges will simply continue the parasitic draining of theAmerican manufacturing and defense industrial base.
AUTHOR’S NOTE: The author alone assumes responsibility for the content of this chapter, and no views

expressed herein should be attributed to any other individual. However, the author would particularly like to thankJoanna Miller for her dedicated work and significant contribution to the chapter.

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Mandate for Leadership: The Conservative Promise

THE CASE FOR FREE TRADE
Kent LassmanTrade policy is about more than goods and services: It is a statement of American identity. Our trade policy choices reveal America’s values and where weput our trust. Do we place our trust in Washington elites to revive a declining country, or do we trust in America’s tradition of entrepreneurs and everyday people
blazing new trails? Do we follow China by copying its strong-arm trade policies,
or do we lead China and the rest of the world by forging our own path? Our trade
policy decisions will tell you what we Americans really think of ourselves.

A CONSERVATIVE VISION FOR TRADE

The policy recommendations in this chapter reflect a belief in the strength ofAmerica’s founding institutions, its economy, and its people. They are based on data
showing decades of American progress with all that this implies. They also reflecta realistic understanding of the fact that trade policy has limited capabilities andis vulnerable to mission creep and regulatory capture. Policymakers should bemodest about what they can accomplish through trade policy and need to exercise
constant vigilance against abuses. For example:lllTrade can lower consumer prices for ordinary Americans and open newmarkets for American businesses and their goods.
Trade can help American workers and businesses to specialize in what they
do best—which is how they outcompete the rest of the world in technology,
manufacturing, agriculture, and other areas.
In foreign policy, trade can help to preserve and strengthen alliances.

At the same time, sound trade policy requires humility. It is not a panacea forevery policy problem. Trade policy cannot favor one sector over another withoutcausing tradeoffs that outweigh the benefits.41 Neither free trade nor protectionism
will create jobs. Trade affects the types of jobs people have, but it has no long-run
effect on the number of jobs. Labor force size is tied to population size more thananything else. The American people are smart and sophisticated enough to hearthese truths.
It is not just conservatives who overestimate the power of trade policy. Recent
progressive attempts to use trade policy to advance whole-of-government initiatives on climate, equity, and other issues will fail for the same reason that a hammer
cannot turn a screw: It is the wrong tool for the job. Conservatives should be similarly skeptical of recent attempts on the Right to use progressive trade policy topunish political opponents, remake manufacturing, or accomplish other objectives— 796 —

2025 Presidential Transition Project

for which it is not suited. The next Administration needs to end the mission creepthat has all but taken over trade policy in recent years.
Trade policy works best when it sticks to trade and treats separate issues
separately. Trade agreements since the North American Free Trade Agreement(NAFTA) have been increasingly burdened by trade-unrelated provisions involving
labor, environmental, intellectual property, and other regulations. Where thesewere a side agreement to NAFTA in the 1990s, they were integrated into the main
text of the United States–Mexico–Canada Agreement (USMCA) in 2019. The
Indo-Pacific Economic Framework for Prosperity (IPEF) that the Biden Administration is currently pursuing consists entirely of trade-unrelated provisions:
Negotiations are steering clear of trade altogether.
Trade-unrelated provisions are routinely hijacked by progressives and rent-seekers and dilute otherwise worthwhile trade agreements. They also create additional
points of contention that make agreements unnecessarily difficult to pass. A conservative trade policy should limit trade-unrelated provisions in trade agreements.
This does not mean that conservatives should ignore international negotiations
on labor, environment, intellectual property, and other non-trade issues. It means
they are more likely to succeed by treating each of them separately rather thanletting them die in committee with each providing an additional sticking point
for delaying the others.
A conservative trade policy must also take seriously the reality that in a democracy, the other side holds power about half of the time, but progressives run mostagencies almost all of the time. A cardinal rule in public policy is not to give yourself
powers you wouldn’t want your opponents to have. That means building institution-level safeguards against mission creep to limit abuses.
Foreign policy considerations are not as separate from trade as are labor orenvironmental standards. China deserves special consideration, as does the World
Trade Organization (WTO) along with its possible successors or alternatives. While
trade is not the star of American foreign policy, it does play a supporting role. It
should be used to strengthen alliances to help counter China, Russia, and otherthreats while making economic and cultural inroads inside them. The next American President should use this aspect of trade to the nation’s advantage.
Drawing from America’s Roots. In 1776, nearly 90 percent of Americans werefarmers. For 10 people to eat, nine had to farm. That meant fewer people could
be factory workers, doctors, or teachers, or even live in cities, because they wereneeded on the farm. Accordingly, life expectancy was around 40 years, and literacy
was 13 percent.42
Today, fewer than 1 percent of Americans work on farms, yet America is a net
exporter of food. People have infinite wants, so as rising productivity pushed somepeople off of farms, there were countless other jobs they could do. In true American
fashion, many of these jobs were in brand new industries.

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Mandate for Leadership: The Conservative PromiseThis was possible because the same can-do cultural values that inspired theAmerican founding were accurately reflected in its new government. The U.S. Constitution created what was then the world’s largest free trade area, and it did so on
purpose.43 The combination of the American self-improvement ethos and the large,
free internal market guaranteed by the Constitution yielded intensive growth ona scale never before seen.
Many displaced farm laborers got jobs making the very farm equipment thatmade intensive agricultural growth possible, from railroad networks to cotton gins.
Each fed the other. Agriculture and industry are not separate; they are as interconnected as everything else in the economy. None of this could have happened
had the government enacted policies to preserve full agricultural employment.
Understanding Value. Just as communication is impossible without agreedupon definitions of words, coherent policymaking is impossible without coherent
categories. Policies are not likely to succeed when they try to separate an interconnected economy into arbitrary categories. The factory worker who builds a tractor
does as much to boost farm production as the farmers themselves, yet economicplanners put them in different categories. This problem is baked into industrial
policy, as progressive planners have learned again and again.
A conservative approach to economic policy should treat value as value, whether
it is created on a farm, in a factory, or in an office. A dollar of value created in
manufacturing is neither more nor less valuable than a dollar of value created inagriculture or services.
Pursuing Access to Growing Markets. American history holds lessons fortoday’s conservative trade policy. Some modern analysts see a correlation between
high tariffs and high growth and confuse it for causation,44 but 19th century America teaches a different lesson.
While the Constitution banned internal tariffs in the U.S., international tariffs
reached their highest levels in U.S. history during the 19th century, beginning withthe 1828 Tariff of Abominations.45 At their peak in 1830, the average tariff on dutiable goods was 62 percent.46 Fortunately, however, the tariffs’ distorting effects
were outweighed by market growth elsewhere. The 19th century saw Western
expansion and a growing population (including millions of immigrants) working
for the American dream. America’s growing internal free trade zone allowed forstill more specialization and more trade across state borders.
America’s geographic expansion ended long ago, but population growth, theU.S.-led rules-based international trading system, and the steady 75-year decline
in tariffs after World War II have made possible decades of continued prosperity.
Intensive growth requires specialization, and the larger the market, the more specialization is possible.
Fighting Pessimistic Bias. Farmers’ share of the population continued to
decline through this entire period, yet employment remained high, and the— 798 —

2025 Presidential Transition Project
CHART 1

U.S. Real GDP per Capita
REAL GROSS DOMESTIC PRODUCT PER CAPITA, IN CHAINED 2012 DOLLARS,SEASONALLY ADJUSTED ANNUAL RATE
$70,000$60,000$50,000$40,000$30,000$20,000$10,000$01950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020

SOURCE: Federal Reserve Bank of St. Louis, “Real Gross Domestic Product per Capita,”
https://fred.stlouisfed.org/series/ A939RX0Q048SBEA (accessed March 2, 2023).

A heritage.org

economy continued to grow. Factories were not the only beneficiaries of agriculture’s productivity boom and the labor it freed; services also grew. In fact,
service-sector employment surpassed manufacturing employment around 1890—
far earlier than most people realize.47
Pessimistic bias is one of the most important cultural problems that conservative policymakers need to address. In trade, as in most other areas, few people everzoom out to see the big picture, which is one reason why so many people mistakenly
believe that U.S. manufacturing and the U.S. economy are in decline.
The data do not show American economic carnage. They show more than two
centuries of intensive growth, made possible by a growing internal market throughout the 19th century and a growing international market in the post–World War
II era. The transition from farm to factory did not shrink the labor force or farm
output. Later, the transition from factories to services did not shrink the labor— 799 —

Mandate for Leadership: The Conservative Promise

force, factory output, or farm output. Both transitions affected the types of jobs,
not the number of jobs.
Americans today can more easily afford everything from air conditioning toflat-screen televisions and smartphones, and trade is one reason why. Bigger markets mean more specialization, more innovative ideas, more customers, and more
people from whom to buy.
America’s official unemployment rate went as low as 3.5 percent during 2022,
while real per capita gross domestic product (GDP) rose to an all-time record.
Clearly, people who wanted to work were able to find work that paid well even as
manufacturing jobs grew more slowly than service jobs.
IMPLEMENTING THE CONSERVATIVE VISION

Vision will be crucial for the next conservative Administration, but nuts-andbolts policies are also important. Making the conservative vision for trade a reality
will require several actions, some of which may prove to be more difficult to achieve
than others. Specifically:
l

l

l

l

l

Implement tariff relief to help counteract inflation by reducing prices
for affected goods as well as to strengthen supply chains and boost
manufacturing. End Section 232, 201, and 301 tariffs. Work with Congress
to pass legislation repealing those provisions so future Presidents
cannot abuse them.
Resist calls for more spending on trade adjustment assistance, which
is often hijacked for progressive ends. Technology and changing tastes
displace six times as many workers as does trade, yet those workers get nosuch special treatment. Displaced workers should receive the same benefits
regardless of the reason.
Remove never-needed supply chain restrictions, which give families fewer
places to which they can turn. The recent shortage of baby formula, forexample, was caused largely by heavily protectionist regulations. Strengthand resilience come from openness.
Enact mutual recognition policies with allies. If a product is safe enough forEuropean or Japanese consumers, then it is safe enough for Americans aswell—and vice versa. This can reduce regulatory costs and open new markets.
Close the Export–Import Bank, which serves mainly to subsidize foreign
buyers’ purchases of goods from a handful of well-connected American
manufacturers.

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2025 Presidential Transition Project

l

l

l

l

l

l

l

l

Repeal the Jones Act,48 a century-old “Buy American” maritime law thathas decimated the U.S. shipbuilding industry.
Work with Congress to restore the President’s Trade Promotion Authority,
which would expedite the negotiation of trade agreements with the United
Kingdom, Switzerland, Taiwan, the European Union, and other allies, andkeep trade-unrelated provisions out of trade agreements.
Restore the World Trade Organization’s dispute resolution process tofull strength.
Create a successor to the WTO (assuming that it has been fatally wounded)that is open only to liberal democracies. This would prevent authoritarian
countries like China from abusing the organization for their own ends.
Adopt a multi-pronged China strategy to convince the Chinese government
to reform its illiberal human rights and trade policies.
Rejoin the Trans-Pacific Partnership (TPP), whose 11 members aredeveloping institutional trade norms in an important geopolitical region
without U.S. input or involvement.
Reorient the proposed Indo-Pacific Economic Framework for Prosperity tofocus only on trade issues, which it currently ignores in favor of progressive
wish-list policies.
Strengthen diplomatic pressure (in concert with allies) against Beijing’s
abuses. Encourage cultural and intellectual engagement with the Chinese
people, remembering that blue jeans and rock ’n’ roll helped to win
the Cold War.

Tariff Relief. When people try something repeatedly and it still doesn’t work,
they should stop doing it—especially when the consequences turn out to be justwhat conservative economists have long predicted they would be.49 With tariffs,
the proper reform is not only to get rid of the individual tariffs that have backfired,
but also to build institutional safeguards against future abuse.
We are five years into the biggest experiment with tariffs since the Great Depression, and the results are in: The new tariffs raise consumer prices for ordinary
Americans by about $1,200 per household every year50 and benefit only a small
number of special interests. Steel and aluminum tariffs, enacted on national
security grounds, angered allies. Beijing made not a single substantive reform in— 801 —

Mandate for Leadership: The Conservative Promise

response to four rounds of tariffs plus an attempted Phase One agreement. The
Biden Administration has left the tariffs in place and is expanding them to pursue
progressive policy goals.
The first order of business for a new Administration that is focused on American
workers and consumers is to repeal all tariffs enacted under Section 232 of theTrade Expansion Act of 196251 and Sections 201 and 301 of the Trade Act of 1974.52
The President can do this unilaterally, and Congress can do it through legislation.
The second order of business requires Congress to pass legislation repealing
Sections 232, 201, and 301. The U.S. Constitution places all taxing authority with
Congress53 and none with the President. Congress used those provisions of law
to delegate some of its taxing authority to the President because it was having
trouble passing “clean” tariff legislation in the 1960s and 1970s. Unless and until
this constitutional question about delegation is addressed, important reforms areavailable to the next Congress and the next President.
Congress faced a problem of collective action in the 1960s and 1970s. As a whole,
Members generally wanted to lower tariffs, but few individual Members were willing to remove tariffs that benefited special interests in their districts. Trade bills
were invariably watered down through amendments and logrolling. The thinking
was that the President, whose constituency is the entire nation, would be less prone
to special-interest pleading than Members of Congress would be, so Congress delegated some of its tariff-making authority to the President in 1962 and 1974 tradelegislation.
Delegating tariff-making might have worked in the short run, but in the longrun, it was both constitutionally dubious and ripe for abuse. That came to pass in2018. The Section 232 steel and aluminum tariffs, invoked in 2018 against Canada,
Europe, and other allies on national security grounds, raised car prices by an average of $250 per vehicle and gave America the world’s highest steel prices. They
also harmed the construction, canned food and beverage, and other metal-using industries.
While this may have benefited the steel industry itself, each steel job saved costan average of $650,000 per year that had been taken from elsewhere in the economy.54 That is no way to strengthen American manufacturing. The New York Federal
Reserve estimated in 2019 that the Section 301 China tariffs cost the average household $831 per year,55 a figure that has likely increased with inflation.
The new tariffs have a clear record of failure—as conservative economists
almost unanimously warned would be the case. Job number one for the next
Administration is to return to sensible trade policies and eliminate the destructive Trump–Biden tariffs.
Strengthening American Manufacturing. The decline of American manufacturing is a common political trope in both parties, typically invoked before a callfor more government intervention. This narrative has several problems. One is that— 802 —

2025 Presidential Transition Project

American manufacturing output is currently at an all-time high. The record was
not set during World War II and not during the 1950s boom. Output did not peakwhen manufacturing employment peaked in 1979 or during the Reagan economic
revival in the 1980s. It is actually higher now than it has ever been.
American manufacturing is buoyant because each manufacturing worker’s productivity is also at an all-time high. The key to prosperity is doing more with less.
The next President should ignore special interests and populist ideologues whowant government to do the opposite through industrial policy, trade protectionism,and other failed progressive policies.
It takes surprisingly few people to achieve America’s record-high manufacturing output—currently about 13 million people out of a workforce of more than
160 million, compared to the 1979 peak of 19.5 million people out of a workforceof 104 million.56 Productivity growth has freed the time and talents of millions ofpeople for other, additional uses.
The belief that manufacturing has to shrink for services to grow is the zerosum fallacy against which sensible economists often warn. It is anathema to the
optimism, hope, and confidence that are the natural birthright of conservatives.
Growing productivity enables more output of both manufacturing and services.
That is why America continues to have sustained booms and record-setting real
GDP despite the long-run decline in manufacturing employment.
Economists distinguish between two types of growth: extensive and intensive.
Extensive growth is the Soviet and Chinese model for manufacturing: If you havemore people use more resources, they will create more output. Extensive growthis doing more with more; intensive growth is doing more with less. That is where
America’s superpower lies. The story of American manufacturing is one of intensive
growth dating back to our agricultural origins. Conservative leaders should draw
on this history to position America for continued success. With intensive growth,
it is not manufacturing or services; it is manufacturing and services.
Retaliatory Tariffs. Raising tariffs on another country almost always invites
retaliatory tariffs against the U.S. The latter tend to be directed at politically sensitive American exports. Retaliatory tariffs by both China and American allies in
response to the 2018 steel tariffs were targeted primarily at American agriculture.
According to the U.S. Department of Agriculture, those tariffs cost farmers $27
billion with losses concentrated particularly in heartland states.57
Retaliatory tariffs also targeted U.S. industries that were not protected by tariffs. Many imports become inputs into U.S. manufacturing. The motorcycle maker
Harley-Davidson was already facing higher production costs as domestic steel
producers raised their prices to accommodate the new steel tariff. A retaliatory
tariff on its motorcycles imposed by the European Union further raised its prices
and hurt its export business. Harm to such innocent bystanders was another unintended (though foreseen) consequence.

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Mandate for Leadership: The Conservative Promise
CHART 2

Total U.S. Industrial Production
INDEX 2017=100
120

100

80

60

40

20

0
1920

1930

1940

1950

1960

1970

1980

1990

SOURCE: Federal Reserve Bank of St. Louis, “Industrial Production: Total Index,”
https://fred.stlouisfed.org/series/INDPRO (accessed March 2, 2023).

2000

2010

2020

A heritage.org

Federal Reserve research shows that the tariffs have cost about 75,000 manufacturing jobs while creating only about 1,000 jobs in the steel industry—not including
the effects of the retaliatory tariffs described above.58 Higher steel prices added anaverage of $250 to the price of new cars, and larger trucks—the vehicle of choicein rural America—were hit even more dramatically.59
Trade is generally a win-win for both participants. Tariffs are a lose-lose-lose
game, with the tariff raiser losing affordable goods, the tariff target losing exports,
and the tariff raiser losing again from retaliatory tariffs. Tariffs also have an additional overlooked hidden cost: Companies redirect resources to dodge tariffs byredesigning products, switching to more expensive suppliers, using lower-quality materials, and lobbying. This might be good for lawyers, but it is bad for the
economy. These resources could have been used instead to make a better productmore cheaply.

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Conservatives warned against retaliation from the beginning: It was exactly
what happened after the 1930 Smoot–Hawley tariffs that worsened the Great
Depression.60
Undoing the Normalization of Protectionism. Inertia is one of the strongest
forces in politics. Radical new policies can become the new normal very quickly andare extremely difficult to unwind if they backfire. This happened with the Trump
Administration’s progressive turn on protectionism. The Biden Administration
quickly undid the Trump Administration’s conservative regulatory reforms but
left its progressive, self-defeating trade policies in place—in many cases evenstrengthening them.
Two presidential Administrations is a long time in politics, and the next conservative Administration will have a tough time getting tariff relief past a bureaucracythat dislikes change and special interests that will fight hard to preserve their
special privileges. But given the stakes for future American prosperity, it will
be worth it.
Dealing with Disruption. It is true that trade is disruptive. Though its longrun effect on employment is approximately zero, in the short run it can cost jobs
and even depopulate towns.61 America’s resilience depends on its ability to adjust,but successful and timely adaptation is generally spontaneous in nature—the workof human action but not human design. Planned adjustment by governments has
a much poorer track record.
Context is also important to adjustment efforts. Technological change costs
approximately six times more jobs as does trade (though, again, only in the shortrun).62 Any argument made against trade’s disruptive effects applies even morestrongly to technological change, yet no one seriously argues for reversing thedramatic changes the Internet has wrought.
More than 11 million American jobs turn over through hirings, firings, retirements, layoffs, and resignations every month,63 and nearly 85 percent of alljobs turn over in the course of a year. Yet America has suffered only four boutsof double-digit unemployment during the past century. Two of them, the Great
Depression and the comedown from the 1970s stagflation, were due to monetarymismanagement, not trade.64 The third, the Great Recession, was due to a financial
crisis worsened by monetary mismanagement, not trade.65 The fourth was due to
COVID-19 lockdowns, not trade.66
Using trade restrictions to slow this churn is a mistake for two reasons: (1) trade
is at best a minor contributor to job churn compared to other factors like technology, changing consumer tastes, inflation, and business cycles, and (2) churn isevidence of a healthy economy. Agricultural economies have low job churn andlow living standards.
When people see better opportunities, they should be allowed to pursue them.
To do otherwise slows economic growth, harms individual dignity, removes— 805 —

Mandate for Leadership: The Conservative Promise

humanity from our policies, and can contribute to societal ills like depression,
addiction, and isolation.
Trade adjustment could be made easier by regulatory reforms to remove its
attendant friction. These include:lLess restrictive zoning and permit rules;l

Occupational licensing reform;lAutomatic sunsets for new regulations; andlA presidentially appointed Regulatory Reduction Commission that would
examine the Code of Federal Regulations each year and send repeal
packages to Congress that include old, obsolete, redundant, and harmful
regulations.67

People who need help should be able to get it. Progressive trade policies
help only special interests while harming the very people they are supposedly
intended to help.
Trade Adjustment Assistance. Trade adjustment assistance is a popular
policy for aiding displaced workers. Though flawed, it is a bargaining tool thatcan potentially help to get sound trade policy adopted. A conservative Administration should approach trade adjustment assistance with caution and use it as alast-resort political bargaining tool and not as a first-resort policy. Funding for job
training programs and the like will typically find its way to labor union slush funds,
left-leaning nonprofits, and other progressive causes that will not necessarily help
displaced workers.
A better approach to trade adjustment assistance, if it must be expanded, isdirect cash transfers. Not only would this prevent progressive hijacking of programs and their funding, but cash is the most flexible type of aid. It treats people asadults and lets them make their own choices about their next steps. Major life decisions should be made by individuals for themselves, not for them in Washington.
Trade adjustment assistance should treat workers who lose their jobs to international trade the same as workers who lose their jobs for any other reason aretreated. While that will not likely come to pass in the near future, steps in that
direction are possible. Technological change displaces six times as many workers
as trade displaces, yet workers displaced by technology get no special treatment.
Nor should they. Unemployment remains low because it grows alongside population, and real wages continue to rise over time. Trade-displaced workers
should be eligible for the same benefits for which anyone else is eligible, no moreand no less.

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Supply Chain Lessons from the Baby Formula Debacle. Protectionism
builds weaknesses into supply chains. This was demonstrated vividly by the baby
formula shortage, which may have peaked in 2022 but remains an ongoing concern.
Domestic baby formula producers benefit from a decades-old tariff that averages
17 percent, which is effectively high enough to shut imports out of the market. As
if tariffs were not enough, other requirements also help to keep competition outof the market: ever-evolving labeling requirements and nutritional standards that(conveniently for domestic manufacturers) are always just slightly different frominternational standards. As a result, before the formula shortage in 2022, approximately 98 percent of the country’s baby formula was produced domestically.
With foreign competition out of the way, other government policies helped toconcentrate almost the entire domestic formula industry into four firms. Roughly
40 percent of baby formula purchases are made by state-level food assistance programs, which typically do not let families choose their own formula brands. Instead
they must buy from a single producer, which guarantees producers large market
shares in states where they win contracts. This situation gives incumbent producers a cozy existence but puts consumers at risk. Like all protectionist policies,
the benefits are concentrated in the hands of a few producers while the costs andrisks are widely distributed.
With so many eggs in so few baskets, whenever something goes wrong—whichis inevitable even when nobody is at fault—families find themselves scrambling.
That happened early in 2022 when contamination entered a Michigan facility thatmakes about 40 percent of America’s baby formula. Trade protectionism all but
eliminated other options for many parents, who suddenly found empty shelves andsky-high prices for an essential item that many of them were already struggling toafford—while families in other countries were unaffected.
In response, Congress passed the Formula Act68 in the summer of 2022. The act
eased formula tariffs and loosened never-needed labeling requirements and otherimport restrictions, but it was temporary. It expired at the end of 2022, leaving
families still vulnerable to the cascading consequences that ensue if one thing
goes wrong at only one plant.
The baby formula debacle has two lessons for the next Administration.
ll

The Administration needs to attack the root of the problem. Temporary
fix-it bills are better than nothing, but they leave the rot in place. The
President needs to encourage bold liberalization.
Strength comes from openness. In the real world, markets fail. Factories will
get contaminated, and health inspectors will not always be as thorough as
they should be. The baby formula market is essentially a natural experiment
in self-sufficient industrial policy. When something went wrong, that single— 807 —

Mandate for Leadership: The Conservative Promise

failure point crashed the whole system. It should not be that way, and thenext President can change it.
Part of the problem is that the supply chain analogy itself causes sloppy thinking.
In a chain, a link is connected only to the link ahead of it and the link behind it andnot to any other links. Real-world supply chains are more like networks in which
each point connects directly to countless others and is rarely more than six degrees
of separation from nearly anywhere on Earth. Because market failures happen
all the time, it is important to have as many connections as possible. Americans
need access to more ways to adapt and reroute around failure points, especiallyfor essential products like baby formula.
Trade protectionism makes us more vulnerable, but free trade makes our families and communities more resilient. Loosening restrictions similar to the ones
that stunt the baby formula market would make it easier to navigate future crises
while preventing the progressive and rent-seeking power grabs that come withevery crisis, whether it is as isolated as a baby formula shortage or as expansive
as a pandemic.
Mutual Recognition. A simple way to reduce friction in supply networks ismutual recognition of other industrialized countries’ regulatory standards. Thiscan be done either in a larger trade agreement or independently. For baby formula, this would mean allowing in brands that meet European Union standards
even if they do not meet Food and Drug Administration (FDA) labeling requirements. Infants’ nutritional needs do not change across borders. If a formula isdeemed healthy for European babies, then it is also healthy for American babies.
The reverse is equally true.
Mutual recognition could help to open new markets for American producers incountless industries and give American consumers access to countless new products on more competitive terms. For example, U.S. regulations require washingmachine power cords to be at least six feet long, while the U.K. requires them to beat least two meters.69 The difference (about six inches) affects neither safety nor
performance, but it does keep American-made washing machines out of an important foreign market. A mutual recognition policy would circumvent the problem.
Given the recent interest in increased antitrust enforcement, conservatives
should embrace policies like mutual recognition that have the double benefit ofincreasing market competition while decreasing government’s regulatory footprint.
The U.S. should enact mutual recognition agreements for a wide variety goods
with the United Kingdom, European Union, Japan, South Korea, Australia, andother governments with high standards comparable to our own. This would haveespecially large benefits for pharmaceuticals, because America’s FDA drug approval
process is both slower and more expensive than those of other countries without being any safer. Americans would gain access to more and lower-cost medical— 808 —

2025 Presidential Transition Project

treatments, and American pharmaceutical companies could defray development
costs and innovate faster by gaining access to more markets, all while cutting prices.
The Jones Act. The Jones Act (Merchant Marine Act of 1920)70 requires thatships traveling between U.S. ports must be U.S.-built, U.S.-owned, and U.S.-crewed.
In practice, this is an “America last” policy that has decimated the American maritime industry.71 Because of Jones Act regulations, American-built ships cost three
to four times more to build than foreign-built ships cost. As a result, the entire
Jones Act fleet is down to just 92 ships, many of which are old and obsolete. In fact,
Jones Act–compliant shipping is so expensive that it is often cheaper for East Coast
ports to import oil from Vladimir Putin’s Russia than it is to send it up the coastfrom Houston or New Orleans. The national security (to say nothing of energy
security) implications of reliance on Russia for oil and gas are obvious.
The Jones Act’s original national security justifications are just as dubious. The
act’s goal was to guarantee a sizable fleet of American ships that could be pressed
into war service if needed. Aircraft carriers and other post-1920 naval innovations
have made this argument obsolete. An $800 billion defense budget has plenty ofroom to maintain a Navy to defend American security interests around the world.
The U.S. Navy would likely prefer not to use Jones Act ships anyway, because theytend to be older and in poorer condition than its own ships or similar foreign-madebut domestically owned commercial ships that could also be pressed into service.
As with many other industries, U.S. shipbuilding could be the envy of the world if
it could operate in a free market, but the maritime lobby prefers a quiet, cozy existence on the dole even as it harms American consumers and national security. The
next conservative Administration should unleash American potential by unilaterally enacting Jones Act exemptions wherever allowed, as currently happens mostyears during hurricane season, and working with Congress to repeal the Jones Act.
Trade and Inflation. The post-COVID inflation spike may be over long before
the next Administration takes office, but keeping it under control should remain
a high priority. Free traders should not oversell their case by saying that liberalization would solve inflation. Inflation is predominantly a monetary phenomenon,
not a trade phenomenon, but tariff relief can help at the margin by immediately
lowering prices on tariffed goods and slightly boosting long-term growth.72 While
this would not affect the money supply, which is inflation’s key variable, even rolling back the tariffs enacted since 2017 would likely have a positive effect on theConsumer Price Index.
The easiest way to curb inflation (or to create it) is for the Federal Reserve towork the monetary side of the equation, but the real output side has a similar effecton prices. Lifting trade barriers is one way to boost output. It also has the added
benefit of requiring no additional spending. At the very least, this can make theFederal Reserve’s job easier as the spending excesses of Congress and President
Biden continue unabated in the coming years.

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Mandate for Leadership: The Conservative Promise

It is important not to oversell trade’s inflation benefits as a cure-all, but at themargin, it can help. The next Administration should keep this in mind as it tries
to cope with this politically volatile issue.
Trade and Foreign Policy. We have seen how trade liberalization would boost
the domestic economy and make American businesses more competitive, butconservative trade policies also benefit America’s foreign policy interests. Policymakers should therefore:
l

l

l

l

Negotiate multilateral and bilateral trade agreements.
Reform the World Trade Organization or build a successor organization
with membership limited to liberal democracies.
Repeal the Jones Act to replace Russian energy imports withdomestic production.
Develop a multifaceted, long-term China policy that takes seriously
America’s biggest foreign policy threat and deals with it on several fronts.

National Security. The most persuasive arguments against a market-oriented
trade policy come from another national objective: national security. Protectionism and similar progressive policies tend to weaken American security, but tradecreates peace. The more countries trade, the less likely they are to fight one anotherand the more robust their supply networks will be. Going to war with customers
is bad for business.
Without a strong economic interest in continued U.S. investment and exports,
for example, China’s behavior would likely become increasingly less predictable
and more dangerous. Anyone who thinks Chinese Communist Party (CCP) General
Secretary Xi Jinping and the government in Beijing are bad actors now—which they
are—should consider what would happen if the Chinese convinced liberal countries
like the United States to decouple from them, leaving them free to pursue whateverpolicies they wish without the significant counterweight that America can provide.
That is one reason for Xi Jinping’s emphasis on centralization and self-sufficiency. He does not like international pressure about his government’s humanrights violations and bad-faith trading policies, and decoupling from trading partners like America is one way to avoid that pressure. A less constrained China would
be poorer but much more unstable and dangerous to its neighbors and to America
than it would be if it still had to engage regularly with the rest of the world.
Trade Promotion Authority. Trade agreements can take years to negotiate.
One way to accelerate the process is for Congress to grant the President Trade
Promotion Authority (TPA). It was first granted under the 1974 Trade Act, which— 810 —

2025 Presidential Transition Projectcontains the Sections 201 and 301 tariff delegations. TPA, then called fast-track,
has aided several trade agreements, including NAFTA and the USMCA, which tookeffect in 2020. TPA has lapsed before during slow periods in trade policy, mostrecently in July 2021, and remains lapsed today.
The President should work with Congress to renew TPA to rationalize negotiations for upcoming trade agreements with the United Kingdom, the European
Union, and others.
Both supporters and critics have questions regarding TPA’s implications for theconstitutional separation of powers, and policymakers should take those questions
seriously. As things currently stand, Congress has some oversight powers over the
President’s negotiations under TPA, but they are limited. Congress can increase
its oversight by passing new legislation superseding relevant provisions of the1974 Trade Act. However, that is a double-edged sword. A Congress that largely
favors free trade could exercise oversight to keep the President on the straight andnarrow in trade negotiations. A progressive Congress would instead insist that the
President negotiate for as many trade-unrelated provisions as possible to benefit
labor and green constituencies while pushing progressive policies on the U.S. andits trading partners.
On balance, a single voice at the negotiating table that is subject to congressionaloversight is the best posture for American workers and consumers. A fractious
Congress has yet to demonstrate the capacity to negotiate with other nations, but
it can help to hold the Administration accountable.
Trade Agreements with the United Kingdom, European Union, andOthers. Even with a renewed TPA, trade agreement negotiations will likely takeyears. The Trump and Biden Administrations were not inclined to start the process,so that job may well fall to the next Administration. In that sense, the delays may
end up being worth it.
If there is one lodestar to follow, it is to restrict these agreements to trade issues
only. Ever since NAFTA, trade-unrelated provisions have taken on a greater rolein trade agreements. These create sticking points and are routinely hijacked byrent-seeking special interests and progressive ideologues who demand subsidies,
carve-outs, and economically distorting labor and environmental standards thathave nothing to do with trade. If governments are to negotiate these issues, theyshould do so in separate agreements so they do not torpedo efforts to liberalize
and engage with allies. Trade agreements should lighten burdens, not create newones by attempting to address non-trade issues.
Policy leaders in the United States and the United Kingdom, including
experts from The Heritage Foundation and the Competitive Enterprise Institute, have prepared a model trade agreement along these lines.73 Along with TPA
renewal, this would greatly reduce negotiating costs. This template is also readily
adaptable for agreements with Europe and any other allies that are willing to— 811 —

Mandate for Leadership: The Conservative Promise

liberalize their economies and build a stronger alliance with America. The draft
U.S.–U.K. agreement includes an accession chapter to allow others to join on
the same terms.
Restoring or Replacing the WTO Dispute Resolution Process. The World
Trade Organization as we know it may be mortally wounded. This deprives the U.S.
of the WTO’s dispute resolution process, under which the U.S. it won 85 percent of
the cases it brought. The WTO’s slow death began under the Obama Administration, which refused to allow appointees to the WTO’s appellate board, which as aconsequence is now nonfunctional. Both the Trump and Biden Administrations
have continued the Obama Administration’s approach.
That means that every case in the dispute resolution process will sputter toa halt as parties file appeals that cannot be heard. If the WTO is no longer fit forthat purpose, it may be better to look in a different direction. More than 20 years
ago, a Heritage Foundation senior fellow proposed that America and other freeeconomies should form a Global Free Trade Alliance that is open to all countries
that adhere to a truly free market system with appropriate safeguards such as
property rights, lack of corruption, and enforcement of contracts.74 Alongside ageneral agreement on low to zero tariffs, the alliance would move to reduce theeffect of nontariff barriers (such as the previously noted baby formula ingredientand labeling barriers) by basing trade around the principle of mutual recognition.
Such an alliance could be started by a trade agreement between the United Statesand, for example, the United Kingdom with an accession chapter allowing others
to join if they meet the criteria.
It would be essential for a Global Free Trade Alliance to avoid the WTO’s mostserious problem: the exemptions from its rules that are granted to developing
countries. When China joined the WTO in 2001, it was granted developing-nation status, which it continues to use to dodge rules that should apply to it. Other
countries have used that status to delay needed reforms. Rule exemptions givesome countries a perverse incentive to remain poor and autocratic.
A Global Free Trade Alliance would allow the U.S. to enjoy the benefits of a rulesbased international trading system without the WTO’s shortcomings. Negotiation
costs would be lower because the countries would already be allied on many issues.
In addition, there would be no separate tiers with different rules, and this would
give developing countries an incentive to liberalize. In addition to being good for
its own sake, liberalization would give them entry into a prestigious club that tilted
toward America’s orbit and away from China’s.
Closing the Export–Import Bank. The Export–Import Bank (EXIM) is anunusually clear example of how vulnerable trade protectionism is to being hijacked
by special interests.75 In most years, about half of EXIM’s business benefits a single
company, Boeing. Their relationship is so cozy that EXIM’s nickname around
Washington is “the Bank of Boeing.”— 812 —

2025 Presidential Transition Project

Unlike most other agencies, EXIM has a charter that expires. Congress must
renew it periodically, or else the agency will permanently close. Its current charter
expires at the end of 2026. Closing this New Deal–era legacy agency would be aconservative victory on a number of fronts. It is also a winnable battle: Congressjust needs to do nothing.
Conservatives have both foreign policy and economic reasons to oppose
EXIM. EXIM has a long history of providing financing for authoritarian governments in China, Russia, and the Middle East that often oppose U.S. foreign policy
interests, and its deals often oppose U.S. economic interests. EXIM financing
also harms domestic airlines. Many EXIM financing deals enable foreign staterun airlines to buy Boeing jets at a discount. These foreign airlines, subsidized
by the U.S. government, then compete directly with U.S. airlines on international routes.
More recently, the Biden Administration has expanded EXIM’s mission toadvance progressive policy goals, including limits on financing for projects thatinvolve fossil fuels or contribute to climate change, preferential treatment for
renewable energy projects, and quotas for projects that benefit women-owned andminority-owned businesses. All of these could raise EXIM’s default rates, putting
taxpayer dollars at risk.
The strongest argument in EXIM’s favor is that it boosts U.S. exports by financing projects that would otherwise never receive financing. We now have evidence
that this argument is false: EXIM does not finance additional exports; instead, itlargely substitutes for other forms of export financing that would occur anyway.
EXIM’s authorization lapsed in 2014–2015 because of conservative opposition
to renewing its charter. During this lapse, EXIM maintained its existing portfolio but was unable to take on new business. Boeing reported no trouble finding
alternative financing and even reported record profits during EXIM’s lapse whileworking to fulfill a seven-year backlog of orders.76
EXIM boasts an extremely low default rate, but that is because of selection
bias. EXIM overwhelmingly takes on low-risk projects that private banks would
be happy to finance, although this admittedly could change somewhat with EXIM’s
Biden-era mandates to finance climate and other policy-focused projects.
EXIM is also a textbook example of regulatory capture.
l

It has a long record of deals with authoritarian governments.

l

It subsidizes direct foreign competitors of domestic businesses.

l

It has been hijacked by progressives to advance their climate and otherpreferred policies.

— 813 —

Mandate for Leadership: The Conservative PromiselIts beneficiaries have proven they can get adequate financing fromprivate banks.

EXIM’s charter expires at the end of 2026. The agency will close automaticallyunless Congress and the President decide to extend it. Closing EXIM should be
one of the next Administration’s easiest decisions.
Adopting a Multi-Pronged China Strategy. An effective American policy
toward China needs to take a realistic view of the country, its leaders, theirstrengths, and the serious challenges they face. It should be comprehensive andflexible. A threatened CCP is dangerous, perhaps now more than at any time since
Mao Tse-Tung, as Xi Jinping continues to use strong-arm tactics to consolidate his
power and saber-rattling to challenge the international order.
At the same time, recent revelations about China’s official statistics overstating
its GDP by 30 percent track well with other problems that were already known.77
These include one of the world’s worst demographic aging curves thanks to China’s
one-child policy; a population that may already be declining; an unsustainable debt
load that is already causing problems; countless failed boondoggles, from empty
cities to its underwhelming Belt-and-Road Initiative, that are wasting significant
resources; Xi Jinping’s authoritarian turn; increasing state control of the economy;
and a zero-COVID policy that has sabotaged the economy and driven away foreign
investment.78
America has its problems, but it is in better shape than China on nearly every
measure, especially in the long run. While the facts on the ground should inoculate
the next Administration against the most strident China fearmongering circulatingin the media and in Washington, that does not mean that the government in Beijing
is no threat to American interests. The question is: What should we do about it?
A serious China policy will require American policymakers to integrate doctrines, institutional prerogatives, expertise, and realistic objectives. Traditional
Cabinet-level bureaucracies like those at the Departments of Defense, State, andCommerce will need to work together to pursue a comprehensive American strategy. Scores of incremental, narrowly targeted policies are necessary. They will notmake for good soundbites on cable news, and many will operate slowly and out ofsight from most news cycles even as progress is made.
An effective China policy must also allow for adaptation because the CCP will
not sit idly by. As people react to developments, America needs flexible options.
Trade isolationism is inherently inflexible because it reduces the number of contact points with China.
This is a tougher political sell than loud, simplistic jeremiads, but going the extra
mile to solve these difficult coordination problems is vital to America’s interests.
Trade and engagement with China are necessary if we are to contain the threatsthat China poses to its neighbors and to the U.S. The next Administration should:— 814 —

2025 Presidential Transition Project

l

l

l

End China’s developing-nation status in the WTO and otherinternational organizations. China is an advanced manufacturing
economy and should be treated as such, even if its political and legal
institutions remain those of a developing nation, to prevent it from
exploiting its status to gain special privileges.
Use a target, not a blanket. There should be actions against Chinese firmsthat are known to have engaged in unfair trade practices such as intellectual
property theft. Rather than blanket tariffs or non-tariff barriers aimed
at entire Chinese industry sectors, firms that act in bad faith should betargeted individually. This policy was employed to good effect early in the
Trump Administration but was abandoned in favor of a less effective blanket
tariff policy.
Rejoin the Trans-Pacific Partnership. Dropping out of the Trans-PacificPartnership agreement might have been the Trump Administration’s
biggest trade policy mistake. The TPP was already negotiated and would
have strengthened an alliance against China, including most of its biggest
trading partners in East Asia and the Americas. America’s departure createdtensions and infighting, distracting the U.S. and its allies from the goal at
hand: countering China. The other 11 TPP countries continue, without
American input or influence, under the Comprehensive and Progressive
Agreement for Trans-Pacific Partnership (CPATPP) to develop a modern
institutional framework to contain Chinese commercial imperialism.
Rejoining this alliance should be a top priority in the next conservative
Administration’s China policy. Accession negotiations are likely to bedifficult, given that the CPATPP suspended several clauses that were
important to the United States (such as provisions relating to patents andaspects of investor-state dispute resolution) when the U.S. pulled out of the
TPP agreement in 2017.
Diplomatic and economic pressure against Beijing will be more effective
when its largest trading partners work in concert. Beijing’s diplomats will
have a hard time employing a divide-and-conquer policy against a united
front of the sort that the TPP offers.

l

Refocus the Indo-Pacific Economic Framework for Prosperityon trade. President Biden began the process to create IPEF in 2022,
but any agreement will likely still be under negotiation when the next
Administration takes office. IPEF is similar to the TPP, but its member— 815 —

Mandate for Leadership: The Conservative Promise

countries are mostly China’s neighbors in Asia. Like the TPP, it seeks tocreate an alliance to push China toward the rule of law, but the Biden
Administration so far has left trade entirely out of the agreement. Instead,the IPEF negotiations are focusing entirely on non-trade issues like climate
and labor policy—issues that give progressives opportunities to impose theirpolicies on other countries and provide rent-seeking opportunities for labor
unions and politically connected businesses in renewable energy and otherfavored industries.
IPEF has the potential to be a powerful diplomatic tool that helps to bringcountries into America’s orbit and away from China’s. Beijing’s chauvinistic
approach to foreign policy has alienated most of China’s neighbors andallies. They follow along because they lack alternatives. IPEF and the TPP
could offer them a way out and make it easier for China’s smaller neighbors
to stand up for themselves in a united front as they move toward Americanstyle institutions that protect civil, political, and economic liberties.
IPEF could do all that, and so could the TPP, but America currently has
no voice in the TPP, and IPEF risks becoming little more than another
tool that progressives can use to force their policy wish list on countries
that don’t want it. From the perspective of IPEF’s members, the Biden
Administration’s approach is little different from Beijing’s. The next
Administration can give China’s neighbors a better choice by refocusing
IPEF on trade, dropping most of its non-trade issues, and turning it into aforum to promote democracy and strengthen alliances while pressuring
Beijing to make needed reforms.
lPlay the long game. It took two generations to win the Cold War, andthere were many reasons for that success. The fact that the planned
economy is inherently inferior to free-market capitalism played a role. So
did diplomatic, military, and economic pressure from free countries. But
culture was just as important, and it did not come from any government.
Blue jeans and rock ’n’ roll helped to win the Cold War as much as any
deliberate policy did. So did images of fashion and prosperity in American
movies and television shows like Dallas.
Such informal bottom-up processes will also play a vital role in helping toturn China from an authoritarian threat into a freer and less hostile power.
It will take a long time, and the slow process will garner few headlines, but
it can work. A conservative Administration will support efforts by ordinary
Americans to engage with ordinary Chinese people through social networks,— 816 —

2025 Presidential Transition ProjectInternet memes, fashion, movies, student exchange programs, tourism,and more. China’s leaders are set in their ways, especially with Xi Jinping
presumably now in power for life, but the younger generation is more open
than their parents were—more individualistic and open to change.
Effective outreach to the Chinese people will need the same humility that
other sound trade policies require. Government-directed cultural andeconomic outreach risks being heavy-handed and could backfire. Everyone
involved needs to know that the process is generational in scope and will
not work overnight. At the very least, Washington should stay out of the way
as much as possible when regular people want to contact each other acrossnational, language, and cultural divides.
Each of these many components, from tariffs to trade agreements to culture,
is a small part of a larger China policy. Many are not attention-grabbing
and cannot be put into sound bites. Cultural engagement is not something
Washington can plan. China’s own demographic and debt problems, alongwith aging leadership and growing discontent over the zero-COVID policy,
might even cause an internal collapse. American policy must therefore beprepared to face any contingency.
CONCLUSION

A conservative trade policy needs a conservative vision. America’s founding institutions, based on free trade and entrepreneurship, have made America
the world’s leading economy and will help keep America strong through thenext century.
However, recent departures from those principles have hurt America’s economy and weakened alliances that are necessary to contain threats from Russia andChina. Reaffirming those principles through policies of openness, dynamism, andfree trade will boost America’s economy, make us more resilient against crises, andremove opportunities for progressives and rent-seekers to use the levers of government for their own purposes. Rediscovering conservative principles on trade
policy and embracing America’s long history as the world’s leading commercial
republic are an important part of restoring a government of, by, and for the people.

AUTHOR’S NOTE: The preparation of this analysis could not have been completed without the valuable

support of a small, sturdy, and principled community of trade policy experts. Among them, my colleagues at theCompetitive Enterprise Institute, Ryan Young, Iain Murray, and Ivan Osorio were essential. The author alone is
responsible for this report. No views herein should be attributed to any other individual or institution.

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Mandate for Leadership: The Conservative Promise
ENDNOTES

1.

Warren E. Buffett and Carol J. Loomis, “America’s Growing Trade Deficit Is Selling the Nation Out from
Under Us. Here’s a Way to Fix the Problem—And We Need to Do It Now,” Fortune, November 10, 2003,
https://money.cnn.com/magazines/fortune/fortune_archive/2003/11/10/352872/index.htm (accessed
February 25, 2023).
2. 2017 Annual Report to Congress of the U.S.–China Economic and Security Review Commission, 115th Congress,
1st Session, November 2017, p. 24, https://www.uscc.gov/sites/default/files/2019-09/2017_Annual_Report_to_
Congress.pdf (accessed February 25, 2023).
3. JayEtta Z. Hecker, Associate Director, International Relations and Trade Issues, National Security andInternational Affairs Division, U.S. Government Accountability Office, “China Trade: WTO Membership andMost-Favored-Nation Status,” Testimony before the Subcommittee on Trade, Committee on Ways and Means,
U.S. House of Representatives, GAO/T-NSIAD-98-209, June 17, 1998, p. 1, https://www.gao.gov/assets/tnsiad-98-209.pdf (accessed February 25, 2023).
4. News release, “U.S. Trade in International Goods and Services, December and Annual 2022,” U.S. Departmentof Commerce, Bureau of Economic Analysis, February 7, 2023, https://www.bea.gov/news/2023/usinternational-trade-goods-and-services-december-and-annual-2022 (accessed February 25, 2023); “Table
1. U.S. International Trade in Goods and Services: Exports, Imports, and Balances,” U.S. Department ofCommerce, Bureau of Economic Analysis, last updated November 3, 2022, https://www.bea.gov/sites/default/
files/2022-11/trad-time-series-0922.xlsx (accessed February 25, 2023).
5. U.S. Department of State, “Fact Sheet: Activity at the Wuhan Institute of Virology,” January 15, 2021,
https://2017-2021.state.gov/fact-sheet-activity-at-the-wuhan-institute-of-virology/index.html (accessed
February 25, 2023); Interim Report, An Analysis of the Origins of the COVID-19 Pandemic, Minority Oversight
Staff, Committee on Health, Education, Labor and Pensions, U.S. Senate, October 2022, https://www.help.
senate.gov/imo/media/doc/report_an_analysis_of_the_origins_of_covid-19_102722.pdf (accessed
February 25, 2023).
6. Barmini Chakraborty, “China Hints at Denying Americans Life-Saving Coronavirus Drugs,” Fox News,
March 13, 2020, https://www.foxnews.com/world/chinese-deny-americans-coronavirus-drugs (accessed
February 25, 2023).
7. Jim Garamone, “Trump Announces New Whole-of-Government National Security Strategy,” U.S. Departmentof Defense, December 18, 2017, https://www.defense.gov/News/News-Stories/Article/Article/1399392/
trump-announces-new-whole-of-government-national-security-strategy/ (accessed February 26, 2023).
Emphasis added.
8. “Remarks by President Trump in State of the Union Address,” The White House, February 5, 2019, https://
trumpwhitehouse.archives.gov/briefings-statements/remarks-president-trump-state-union-address-2/(accessed February 25, 2023).
9. White House Office of Trade and Manufacturing Policy, The United States Reciprocal Trade Act: Estimated
Job & Trade Deficit Effects, May 2019, https://www.wsj.com/public/resources/documents/RTAReport.
pdf?mod=article_inline (accessed February 26, 2023); United Nations Conference on Trade and Development,“Trade Analysis Information System,” https://databank.worldbank.org/source/unctad-%5E-trade-analysisinformation-system-(trains) (accessed February 26, 2023); Trefor Moss, “China to Cut Import Tariff on
Autos to 15% from 25%,” The Wall Street Journal, updated May 22, 2018, https://www.wsj.com/articles/
china-to-cut-import-tariff-on-autos-to-15-from-25-1526980760 (accessed February 26, 2023); U.S.
International Trade Commission, Harmonized Tariff Schedule (2019 Revision 3), https://hts.usitc.gov/view/
release?release=2019HTSAREV3 (accessed February 26, 2023).
10. This code is commonly used to determine customs duty classifications for goods internationally.
11. White House Office of Trade and Manufacturing Policy, The United States Reciprocal Trade Act: Estimated Job& Trade Deficit Effects, p. 15.
12. H.R.764, United States Reciprocal Trade Act, 116th Congress, introduced January 24, 2019, https://www.
congress.gov/116/bills/hr764/BILLS-116hr764ih.pdf (accessed February 26, 2023).
13. Harvard Center for American Political Studies and Harris Poll, “Monthly Harvard–Harris Poll: February 2019,”
https://harvardharrispoll.com/wp-content/uploads/2019/02/HHP_Feb2019_RV_topline.pdf (accessed
February 26, 2023).

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14. Adam Behsudi, “Duffy Finds 18 Co-sponsors for Bill to Increase Trump’s Tariff Powers,” Politico, January 24,
2019, https://www.politico.com/story/2019/01/24/duffy-finds-18-co-sponsors-for-bill-to-increase-trumpstrade-powers-2555509 (accessed February 26, 2023).
15. FTAs like NAFTA represent a carve-out from the WTO’s unconditional MFN rule and generally lead to tariffs
that tend to be set at more reciprocal levels.
16. H.R.764, United States Reciprocal Trade Act, § 3(b)(1) and (b)(2).
17. Damian Paletta, “Speaker Ryan Admits Defeat, Giving up on Border Adjustment Tax,” The Washington Post,
July 27, 2017, https://www.washingtonpost.com/news/wonk/wp/2017/07/27/paul-ryan-admits-defeat-givingup-on-border-adjustment-tax/ (accessed February 25, 2023).
18. This section draws on analyses in White House Office of Trade and Manufacturing Policy, How China’s
Economic Aggression Threatens the Technologies and Intellectual Property of the United States and the World,
June 2018, https://trumpwhitehouse.archives.gov/wp-content/uploads/2018/06/FINAL-China-TechnologyReport-6.18.18-PDF.pdf (accessed February 25, 2023).
19. Bloomberg News, “Xi’s Vow of World Dominance by 2049 Sends Chill Through Markets,” October 26, 2022,
https://www.bloomberg.com/news/articles/2022-10-26/xi-s-vow-of-world-dominance-by-2049-sends-chillthrough-markets?leadSource=uverify%20wall (accessed February 25, 2023).
20. Executive Office of the President, United States Trade Representative, 2017 Report to Congress on China’s
WTO Compliance, January 2018, https://ustr.gov/sites/default/files/files/Press/Reports/China%202017%20
WTO%20Report.pdf (accessed February 25, 2023).
21. White House Office of Trade and Manufacturing Policy, How China’s Economic Aggression Threatens theTechnologies and Intellectual Property of the United States and the World.
22. The National Medium- and Long-Term Program for Science and Technology Development Plan (2006–2020):
An Outline, The State Council, The People’s Republic of China, p. [55], https://www.itu.int/en/ITU-D/
Cybersecurity/Documents/National_Strategies_Repository/China_2006.pdf (accessed March 21, 2023).
23. Commission on the Theft of American Intellectual Property, Update to the IP Commission Report: The Theftof American Intellectual Property: Reassessments of the Challenge and United States Policy, February 2017,
pp. 2, 11, and 12, http://www.ipcommission.org/report/IP_Commission_Report_Update_2017.pdf (accessed
February 25, 2023).
24. The laws, which have been put in place for national security purposes, have been promulgated under theArms Export Control Act (AECA), 22 U.S.C. Ch. 39, §§ 2751–2756, 2761–2781, 2785, and 2791–27999aa-2,
https://www.law.cornell.edu/uscode/text/22/chapter-39 (accessed February 25, 2023) and the International
Emergency Economic Powers Act (IEEPA), 50 U.S.C. Ch. 35, §§ 1701–1708, https://www.law.cornell.edu/
uscode/text/50/chapter-35 (accessed February 25, 2023).
25. Ministry of Education, People’s Republic of China, “Statistics on Studying in China in 2018,” http://www.moe.
gov.cn/was5/web/search?searchword=Statistics+on+Studying+in+China+in+2018&channelid=254028&page=1(accessed March 21, 2023).
26. Michael Brown and Pavneet Singh, “China’s Technology Transfer Strategy: How Chinese Investments in
Emerging Technology Enable a Strategic Competitor to Access the Crown Jewels of U.S. Innovation, Updatedwith 2016 and 2017 Data,” Defense Innovation Unit Experimental (DIUx), January 2018, https://admin.govexec.
com/media/diux_chinatechnologytransferstudy_jan_2018_(1).pdf (accessed February 25, 2023). The DIUx
describes itself as “the only DOD Organization focused on accelerating the adoption of commercial and dualuse technology to solve operational challenges at speed and scale.” Defense Innovation Unit Experimental,“About,” https://www.diu.mil/ (accessed February 25, 2023).
27. Brown and Singh, “China’s Technology Transfer Strategy: How Chinese Investments in Emerging Technology
Enable a Strategic Competitor to Access the Crown Jewels of U.S. Innovation, Updated with 2016 and 2017
Data,” p. 18.
28. Ingrid Lunden, “Huawei Puts $1M into a New AI Research Partnership with UC Berkeley,” TechCrunch, October
11, 2016, https://techcrunch.com/2016/10/11/huawei-puts-1m-into-a-new-ai-research-partnership-withucberkeley/ (accessed February 25, 2023).
29. Press release, “President Trump Announces Strong Actions to Address China’s Unfair Trade,” Office of theUnited States Trade Representative, March 22, 2018, https://ustr.gov/about-us/policy-offices/press-office/press-releases/2018/march/president-trump-announces-strong (accessed February 25, 2023).

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Mandate for Leadership: The Conservative Promise
30. “From China with Love: AI, Robotics, AR/VR Are Hot Areas for Chinese Investment In US,” CB Insights, August
1, 2017, https://www.cbinsights.com/research/chinese-investment-us-tech-expert-research/ (accessed
February 25, 2023).
31. “Remarks by President Obama and President Xi of the People's Republic of China in Joint Press
Conference,” The White House, September 25, 2015, https://obamawhitehouse.archives.gov/thepressffice/2015/09/25/remarks-president-obama-and-president-xi-peoples-republic-china-joint (accessed
February 25, 2023).
32. Ankit Panda, “It’s Official: Xi Jinping Breaks His Non-Militarization Pledge in the Spratlys,” The Diplomat,
December 16, 2016, https://thediplomat.com/2016/12/its-official-xi-jinping-breaks-his-non-militarizationpledge-in-the-spratlys/ (accessed February 25, 2023).
33. Press release, “USTR Issues Tariffs on Chinese Products in Response to Unfair Trade Practices,” Office of theUnited States Trade Representative, June 15, 2018, https://ustr.gov/about-us/policy-offices/press-office/pressreleases/2018/june/ustr-issues-tariffs-chinese-products (accessed February 25, 2023).
34. Yen Nee Lee, “‘New Consensus’ Reached on US–China Trade, Says Chinese Vice Premier Liu He,” CNBC,
updated April 5, 2019, https://www.cnbc.com/2019/04/05/us-china-trade-new-consensus-reached-sayschinas-liu-he.html (accessed February 25, 2023).
35. Reuters, “China Backtracked on Nearly All Aspects of US Trade Deal: Sources,” CNBC, May 8, 2019, https://www.cnbc.com/2019/05/08/china-backtracked-on-nearly-all-aspects-of-us-trade-deal-sources.html(accessed February 25, 2023).
36. Fact Sheet, “Economic and Trade Agreement Between the United States of America and the People’s Republicof China,” Office of the United States Trade Representative, January 15, 2020, https://ustr.gov/sites/default/
files/files/agreements/phase%20one%20agreement/US_China_Agreement_Fact_Sheet.pdf (accessed
February 25, 2023).
37. Warren Buffett, “Warren Buffett: Here’s How I Would Solve the Trade Problem,” Fortune, April 29, 2016, http://
fortune.com/2016/04/29/warren-buffett-foreign-trade/ (accessed February 25, 2023).
38. See, for example, Jeffrey Miron, “Forget the Wall Already, It’s Time for the U.S. to Have Open Borders,” Cato
Institute Commentary, July 31, 2018, https://www.cato.org/publications/commentary/forget-wall-alreadyits-time-us-have-open-borders (accessed February 25, 2023); Scott Lincicome and Alfredo Carrillo Obregon,“The (Updated) Case for Free Trade,” Cato Institute Policy Analysis No. 925, April 19, 2022, https://www.cato.
org/sites/cato.org/files/2022-04/PA-925_2.pdf (accessed February 25, 2023); Katheryn Russ, “Yes, US
Trade Agreements Led to Economic Gains, Especially in Services, New Report Says,” Peterson Institute forInternational Economics, Trade and Investment Policy Watch Blog, July 20, 2021, https://www.piie.com/blogs/
trade-and-investment-policy-watch/yes-us-trade-agreements-led-economic-gains-especially (accessed
February 25, 2023); Monica de Bolle, “Why Remittance Taxes to Finance a Border Wall Are a Bad Idea…for theUS,” Peterson Institute for International Economics, Realtime Economics Blog, January 10, 2017, https://www.
piie.com/blogs/realtime-economic-issues-watch/why-remittance-taxes-finance-border-wall-are-bad-idea-us(accessed February 25, 2023).
39. This is a key theme of the author’s White House memoir Taking Back Trump’s America: Why We Lost theWhite House and How We’ll Win It Back (New York and Nashville: Bombardier Books, 2022).
40. 19 U.S.C. § 1862, https://www.law.cornell.edu/uscode/text/19/1862 (accessed February 27, 2023).
41. For a historical example, see Douglas A. Irwin, “Did Late-Nineteenth-Century U.S. Tariffs Promote InfantIndustries? Evidence from the Tinplate Industry,” Journal of Economic History, Vol. 60, No. 2 (June 2000),
pp. 336–360, https://www.jstor.org/stable/2566374 (accessed February 21, 2023). For a recent example, see
Gary Clyde Hufbauer and Eujin Jung, “The High Taxpayer Cost of ‘Saving’ US Jobs Through ‘Made in America,’”Peterson Institute for International Economics, Trade and Investment Policy Watch, August 5, 2020, https://www.piie.com/blogs/trade-and-investment-policy-watch/high-taxpayer-cost-saving-us-jobs-through-madeamerica (accessed February 21, 2023).
42. Stephen J. Dubner, “Were Colonial Americans More Literate than Americans Today?” Freakonomics,
September 1, 2011, https://freakonomics.com/2011/09/were-colonial-americans-more-literate-thanamericans-today/ (accessed February 21, 2023).

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43. Randy E. Barnett and Andrew Koppelman, “The Commerce Clause: Common Interpretation,” National
Constitution Center, https://constitutioncenter.org/the-constitution/articles/article-i/clauses/752 (accessed
February 21, 2023); Randy E. Barnett, “The Original Meaning of the Commerce Clause,” University of Chicago
Law Review, Vol. 68, No. 1 (2001), pp. 101–147, https://chicagounbound.uchicago.edu/cgi/viewcontent.
cgi?article=5074&context=uclrev (accessed February 21, 2023).
44. Wells King, “Rediscovering a Genuine American System,” American Compass, Rebooting the American System,
May 4, 2020, https://americancompass.org/rediscovering-a-genuine-american-system/ (accessed February 21,2023). See also Phillip W. Magness and James R. Harrigan, “Henry Clay’s ‘American System’ Is Bad News for theAmerican Economy,” American Institute for Economic Research, December 8, 2022, https://www.aier.org/article/
henry-clays-american-system-is-bad-news-for-the-american-economy/ (accessed February 21, 2023), and Iain
Murray, “The Founding Fathers and Free Trade,” Competitive Enterprise Institute, Open Market Blog, September
20, 2022, https://cei.org/blog/the-founding-fathers-and-free-trade/ (accessed February 21, 2023).
45. Douglas A. Irwin, Clashing over Commerce: A History of U.S. Trade Policy (Chicago: University of Chicago Press,
2018), pp. 147–154.
46. Ibid., p. 125.
47. Michael Urquhart, “The Employment Shift to Services: Where Did it Come From?” U.S. Department of Labor,
Bureau of Labor Statistics, Monthly Labor Review, Vol. 107, No. 4 (April 1984), p. 16, https://stats.bls.gov/opub/
mlr/1984/04/art2full.pdf (accessed February 21, 2023).
48. H.R. 10378, Merchant Marine Act of 1920, Public Law 66-261, 66th Congress, June 5, 1920, https://govtrackus.
s3.amazonaws.com/legislink/pdf/stat/41/STATUTE-41-Pg988.pdf (accessed February 22, 2023.
49. Tori K. Smith, “The Proof Is In: Tariffs Are Hurting the U.S.,” Heritage Foundation Commentary, August 27, 2019,https://www.heritage.org/trade/commentary/the-proof-tariffs-are-hurting-the-us.
50. Congressional Budget Office, The Budget and Economic Outlook: 2020 to 2030, January 2020, p. 33, https://www.cbo.gov/publication/56073 (accessed February 21, 2023).
51. H.R. 11970, Trade Expansion Act of 1962, Public Law No. 87-794, 87th Congress, October 11, 1962, https://www.
govinfo.gov/content/pkg/STATUTE-76/pdf/STATUTE-76-Pg872.pdf (accessed February 22, 2023).
52. H.R. 10710, Trade Act of 1974, Public Law No. 93-618, 93rd Congress, January 3, 1975, https://www.congress.
gov/93/statute/STATUTE-88/STATUTE-88-Pg1978-2.pdf (accessed February 22, 2023).
53. U.S. Constitution, Article I, Section 8, https://constitution.congress.gov/constitution/article-1/ (accessed
February 22, 2023).
54. Gary Clyde Hufbauer and Eujin Jung, “Steel Profits Gain, but Steel Users Pay, Under Trump’s Protectionism,”Peterson Institute for International Economics, Trade and Investment Policy Watch, December 20, 2018,https://www.piie.com/blogs/trade-and-investment-policy-watch/steel-profits-gain-steel-users-pay-undertrumps (accessed February 21, 2023).
55. Mary Amiti, Stephen J. Redding, and David E. Weinstein, “New China Tariffs Increase Costs to U.S. Households,”
Federal Reserve Bank of New York, Liberty Street Economics Blog, May 23, 2019, https://libertystreeteconomics.
newyorkfed.org/2019/05/new-china-tariffs-increase-costs-to-us-households/ (accessed February 21, 2023).
56. Federal Reserve Bank of St. Louis, Federal Reserve Economic Database (FRED), Series CLF16OV, “Civilian
Labor Force Level,” https://fred.stlouisfed.org/series/CLF16OV (accessed February 21, 2023).
57. Stephen Morgan, “Retaliatory Tariffs Reduced U.S. States’ Exports of Agricultural Commodities,” U.S.
Department of Agriculture, Economic Research Service, Amber Waves, March 7, 2022, https://www.ers.usda.
gov/amber-waves/2022/march/retaliatory-tariffs-reduced-u-s-states-exports-of-agricultural-commodities/(accessed February 21, 2023).
58. Aaron Flaaen and Justin Pierce, “Disentangling the Effects of the 2018–2019 Tariffs on a Globally Connected
U.S. Manufacturing Sector,” Board of Governors of the Federal Reserve System, Finance and Economics
Discussion Series No. 2019-086, December 23, 2019, https://www.federalreserve.gov/econres/feds/
files/2019086pap.pdf (accessed February 21, 2023); U.S. Department of Labor, Bureau of Labor Statistics,“Data Tools: Industries at a Glance: Primary Metal Manufacturing: NAICS 331,” data extracted February 17, 2023,
https://www.bls.gov/iag/tgs/iag331.htm (accessed February 21, 2023).
59. Ryan Young, “Lessons from the GM layoffs: End the Tariffs and the Subsidies,” Fox Business, November 28,
2018, https://www.foxbusiness.com/markets/lessons-from-the-gm-layoffs-end-the-tariffs-and-the-subsidies(accessed February 21, 2023).

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60. Irwin, Clashing over Commerce, pp. 400–410. For a book-length treatment of Smoot–Hawley, see Douglas A.
Irwin, Peddling Protectionism: Smoot–Hawley and the Great Depression, (Princeton, NJ: Princeton University
Press, 2011).
61. Kevin D. Williamson, Big White Ghetto: Dead Broke, Stone-Cold Stupid, and High on Rage in the Dank Wooly
Wilds of the “Real America (Washington: Regnery, 2020).
62. Stephen J. Hicks and Srikant Devaraj, “The Myth and Reality of Manufacturing in America,” Conexus Indiana
and Ball State University Center for Business and Economic Research, June 2015 and April 2017, https://conexus.cberdata.org/files/MfgReality.pdf (accessed February 21, 2023).
63. Economic News Release, “Job Openings and Labor Turnover Summary,” U.S. Department of Labor, Bureauof Labor Statistics, February 1, 2023, https://www.bls.gov/news.release/jolts.nr0.htm (accessed February 21,2023). The release reports “Job Openings and Labor Turnover—December 2022.”
64. Allen H. Meltzer, A History of the Federal Reserve, Volume 1: 1913–1951 (Chicago: University of Chicago Press,
2004); Allen H. Meltzer, A History of the Federal Reserve, Volume 2, Book 2, 1970–1986 (Chicago: University of
Chicago Press, 2014).
65. John B. Taylor, Getting Off Track: How Government Actions and Interventions Caused, Prolonged, andWorsened the Financial Crisis (Stanford, CA: Hoover Institution Press, 2009); Scott Sumner, The Money
Illusion: Market Monetarism, the Great Recession, and the Future of Monetary Policy (Chicago: University of
Chicago Press, 2021), pp. 267–284.
66. Federal Reserve Bank of St. Louis, Federal Reserve Economic Database (FRED), Series Unemployment Rate
(UNRATE), updated February 3, 2023, https://fred.stlouisfed.org/series/UNRATE (accessed February 21, 2023).
67. Ryan Young, “How to Make Sure Reformed #NeverNeeded Regulations Stay That Way,” Competitive
Enterprise Institute, Open Market Blog, July 8, 2020, https://cei.org/studies/how-to-make-sure-reformedneverneeded-regulations-stay-that-way/ (accessed February 21, 2023).
68. H.R. 8351, Formula Act, Public Law No. 117-160, 117th Congress, July 21, 2022, https://www.congress.gov/117/
plaws/publ160/PLAW-117publ160.pdf (accessed February 22, 2023).
69. Iain Murray, “A New Kind of Trade Agreement,” Competitive Enterprise Institute, Open Market Blog,
September 19, 2018, https://cei.org/opeds_articles/a-new-kind-of-trade-agreement/ (accessed
February 21, 2023).
70. See note 8, supra.
71. Mario Loyola, “America Last: The Grim Reality of the Jones Act,” Competitive Enterprise Institute Issue
Analysis 2020 No. 5, June 2020, https://cei.org/sites/default/files/Mario_Loyola_-_America_Last.pdf(accessed February 21, 2023); Patrick Tyrell, “Permanent Repeal of the Jones Act Would Be a Winning
Response to COVID-19,” Heritage Foundation Commentary, April 7, 2020, https://www.heritage.org/trade/
commentary/permanent-repeal-the-jones-act-would-be-winning-response-covid-19.
72. Bryan Riley, “Better Trade and Regulatory Policies Are Key to Battling High Prices,” National Taxpayers Union
Blog, January 12, 2023, https://www.ntu.org/publications/detail/better-trade-and-regulatory-policies-are-keyto-battling-high-prices (accessed February 21, 2023).
73. Daniel Ikenson, Simon Lester, and Daniel Hannan, eds., “The Ideal U.S.–U.K. Free Trade Agreement: A
Free Trader’s Perspective,” Initiative for Free Trade and Cato Institute, 2018, https://www.cato.org/sites/
cato.org/files/pubs/pdf/ideal-us-uk-free-trade-agreement-executive-summary-update.pdf (accessed
February 21, 2023).
74. John Hulsman, “The World Turned Right-Side Up: A New Trading Agenda for the Age of Globalization,”
Heritage Foundation Report, January 24, 2000, https://www.heritage.org/trade/report/the-world-turnedright-side-new-trading-agenda-the-age-globalization.
75. Diane Katz, “Export–Import Bank: Propaganda Versus the Facts,” Heritage Foundation Issue Brief No. 4430,
July 13, 2015, http://thf_media.s3.amazonaws.com/2015/pdf/IB4430.pdf; Ryan Young, “Ten Reasons to
Abolish the Export–Import Bank: Eighty Years Is Enough,” Competitive Enterprise Institute OnPoint No. 195,
July 15, 2014, http://cei.org/sites/default/files/Ryan%20Young%20-%20Top%2010%20Reasons%20to%20
Abolish%20Ex-Im%20%282%29.pdf (accessed February 21, 2023).
76. Veronique de Rugy, “Boeing Isn’t Exactly Pleased with Ex–Im’s Liquidation,” National Review Online, The
Corner, September 1, 2015, https://www.nationalreview.com/corner/ex-im-bank-boeing-liquidation/ (accessed
February 21, 2023).

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77. Luis Martinez, “How Much Should We Trust the Dictator’s GDP Growth Estimates?” Becker–Friedman Institutefor Economics at the University of Chicago, Working Paper No. 2021-78, July 2021, https://bfi.uchicago.edu/
wp-content/uploads/2021/07/BFI_WP_2021-78.pdf (accessed February 21, 2023).
78. Nicholas R. Lardy, The State Strikes Back: The End of Economic Reform in China? (Washington: Peterson
Institute for International Economics, 2019); Elizabeth C. Economy, The Third Revolution: Xi Jinping and the
New Chinese State (Oxford and New York: Oxford University Press, 2018).

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