Sen. Ron Johnson
Source: Kate Patterson for the EU Delegation to U.S.
Johnson is the latest lawmaker to suggest there could be pushback on Capitol Hill by fellow Republicans to some of the most hawkish rhetoric on trade expressed so far by Trump, such as using high tariffs to punish companies that move production overseas.
“It really doesn’t make a whole lot of sense for America to churn out high-labor content products when we’ve got 7 billion people [around the world] that want to increase their living standards and are willing to work a whole lot cheaper and then provide these products to American consumers a whole lot cheaper than if we were to throw up protectionist barriers, for example, and have to pay $200 for a shirt versus buying one for $10 or $15 at Walmart,” the former businessman said during a lunch speech at an event on trans-Atlantic relations organized by the European Union delegation to the United States and other groups.
“I know it’s a messy system. I know there definitely are winners and losers in that equation. And the problem you have in really promoting free trade is the losers are very visible. It’s very visible when a plant shuts down because they have to compete globally,” he said.
Johnson said his sense, after meeting with Commerce Secretary-nominee Wilbur Ross, is that the Trump administration is most interested on cracking down on gross violations of trade rules by other countries that have taken advantage of America’s open market policy.
It takes years, under the current challenge system in the World Trade Organization, to resolve complaints of unfair trade practices and companies can go out of business by the time a dispute settlement panel issues a decision, Johnson complained.
He recounted how his plastic sheeting company had to compete against Finnish sheet products being sold in America at under the cost of the resin his manufacturing company had to buy.
The senator said he favored steps to speed up adjudication of trade cases, especially ones where violations are obvious and damages are easy to calculate. He expressed hope that targeted, aggressive enforcement will coexist with free-trade principles during the Trump presidency.
“Is it better for every farmer to raise 10 crops inefficiently or each farmer to raise 10 crops efficiently?” Johnson rhetorically asked in making the case for the economic theory of comparative advantage.
“Does anyone in this room think it would be a good thing if America went back 150 years when a large percent of the American workforce was involved in agriculture? We can bemoan the loss of those farming jobs, but what’s happened is we’ve become unbelievably productive,” with a small percentage of the population producing enough food for America as well as the rest of the world, he said. “That’s a good thing.”
The same dynamic has happened in manufacturing, Johnson said, with less developed countries offering lots of cheap labor.
Protectionism would only serve to raise costs for American consumers, Johnson explained.
“It’s not a zero-sum game. You got to look at both sides of the equation,” he said.
Johnson, who won re-election in November, said he spoke to Trump over the phone prior to the Wisconsin primary last spring and suggested the candidate tone down his criticism of trade when campaigning in the state.
“You got to be a little careful here in Wisconsin,” Johnson said. “We have a zero trade balance in Wisconsin. It’s incredibly important that overseas markets remain open to our agricultural and manufacturing products. And, by the way, those imports create a lot of jobs too,” he said.
House Speaker Paul Ryan has not expressly criticized Trump’s threat of a 35 percent tariff on companies that outsource, but has repeatedly stated in recent interviews that the best way to get companies to stay home is to pass legislation lowering the business tax to 15 percent.
House Majority Whip Kevin McCarthy, R-Calif., and Ways and Means Committee Chairman, Rep. Kevin Brady, R-Texas, have also signaled their opposition to higher import tariffs.
In a speech Dec. 1 before the Heritage Foundation, a conservative Washington-based think tank, Brady touted his “Built for Growth” tax plan and said ending the “Made in America” tax makes U.S. companies more competitive globally.
“One, it levels the playing field for American-made products. Competition going forward in the future will not be based on the tax code – competition will be based on price and service and quality. Whenever you do that, consumers win.
“Secondly, it allows us to dramatically simplify the international tax code, which is stunningly complex today,” he said.
“Thirdly, and perhaps most importantly, combined with lower rates in a territorial system, this provision ensures that we have eliminated every tax incentive to move jobs, innovation, or headquarters overseas. In fact, our goal is not simply to stem the tide and stop businesses in America from locating overseas. Our goal is to bring those investments back. We will become a 21st century magnet for new investment on this planet.”
