Trump Trolls for Trouble, but Trade Tricked him!

pigs at the trough

Ok, I promise I’ll stop quite the # of posts with “TR”, but this is a good counter to the bad news on trade we discussed last week.  On Friday of last week, the U.S. International Trade Commission dealt a blow to Cronyism, Mr. Trump and that largest of corporate cronies, the Boeing Corporation.

In a surprise decision, the U.S. International Trade Commission has ruled against aerospace giant Boeing in a bitter trade case it brought against Bombardier over passenger jets its Canadian rival sold to Delta Air Lines.  The 4-0 decision is defeat for Boeing, which had argued that Bombardier’s trade practices were illegal and harmful to its business and means that nearly 300 percent duties recommended by the Trump administration last year won’t be applied to the planes.

So first of all, let’s rejoice that Mr. Trump’s anti-competitive instincts can still be stopped by other parts of our government.  Despite some fears on the left, we have not elected a dictator.  Informed opposition to foolish policies can still make a difference.

But second, let’s consider that the applicant was Boeing.  Now one of the many special pleadings in favor of intervening in trade is to protect small and weak domestic producers.  But Boeing is the last company that ought to be asking for favors, and certainly ought to be the last company granted favors in trade.  That is, if those decisions were based on even the fallacious “infant industry” argument.  But we know why Boeing continues to gain favor, even if they didn’t win the victory in this case–they play the crony capitalist game very well.  A quick review over on Opensecrets reveals the magnitude of their financial giving and lobbying,  with ~ $20M in the 2016 election cycle, with some of the winners listed below:

Top Recipients

Recipient Total From Indivs From Orgs
 Clinton, Hillary $209,059 $209,059 $0
 Sanders, Bernie $98,293 $98,293 $0
 Democratic Congressional Campaign Cmte $72,387 $42,387 $30,000
 Republican National Cmte $55,350 $20,350 $35,000
 Democratic Senatorial Campaign Cmte $53,894 $23,894 $30,000
 Cruz, Ted $50,195 $50,195 $0
 Security Is Strength $50,000 $0 $50,000
 National Republican Congressional Cmte $44,321 $14,321 $30,000
 Murray, Patty $40,272 $40,272 $0
 Trump, Donald $39,424 $39,424 $0

 

Of course, Crony Capitalism is a bi-partisan pig fest, and likely the only reason Mr. Trump so trailed Mrs. Clinton is the low probability of his election (and to some degree the Boeing Corporation’s locations in Washington State and Illinois).  But this ought to give pause to progressives who have unending faith in government to help the “little guy.”  I continue to see that when government goes outside its biblical role of the bearer of the sword, it tends to gravitate to supporting the politically powerful at the expense of the politically weak.   Who are the politically weak in this case?  The millions of rationally ignorant flyers who won’t know why their tickets cost a few dollars more to make up for the higher costs of the Boeing aircraft.

And we haven’t even touched on the travesty that is the import-export bank, aka Boeing’s bank.  But let’s not think about that right now.  Rather, let’s celebrate the occasional rebuke when the pig at the trough gets a little too greedy.

23 thoughts on “Trump Trolls for Trouble, but Trade Tricked him!”

  1. It’s a very interesting case: Bombardier has been heavily subsidized already by the Canadian government and sold their planes under cost, which I believe was the source of Boeing’s complaint: Are you against anti-dumping legislation? I don’t know that this is a good case study in the practice, but usually we’re wary of these kinds of pricing policies out of fear of monopolization. It’s a bit of a bitter pill if we’re just trading one crony for another, albeit a much smaller one.

    1. I’m generally not against “dumping” because
      1) its so hard to tell if its really dumping
      2) “but usually we’re wary of these kinds of pricing policies out of fear of monopolization”; I’m not aware of a single case of this every happening in actuality–certainly not where they were able to keep this market after driving everyone out and then raising the price.
      3) If foreign governments insist on taxing their citizens to subsidize my consumption, who am I to complain? Should we repay their foolishness with our own?

      1. If I may add something, I think the problem with trying to gain a monopoly by dumping is that it leads the monopolist into a possible price trap. Sure, we may all start buying this good at the lower price and run the others out of business, but, unless the barriers to entry are particularly high, there’s no room for the monopolist to just jack up the price all of a sudden. If they did, competitors would see an entry opportunity, and they would then undercut the monopoly prices. Plus, the other thing to consider is that dumping can be difficult to maintain over the long-term. It’s just not a particularly advantageous strategy. It may hurt competitors in the short term, but businesses play the long-game.

      2. How low do you think the barriers to entry for airlines is? Our president couldn’t even successfully break into the industry. It’s not exactly an easy field to jump into…

        I think you’re not that studied on the industry. This is an easy one to lock control on because the major airlines buy their fleets in large orders and keep them for decades. With the C series, they’re pushing into a sector of the market that even established businesses like Boeing aren’t ready to compete with: That’s why they’re doing whatever they can to slow it down, because even with their massive market share and setup they’re not able to quickly pivot and put out a competitive model to Bombardier’s new planes. What happens here is a big determiner of how the next couple of decades of plane sales looks. It’s an unusual market, which is why Bombardier was determined to get into the North American market, even at the cost of selling planes for less than they cost to produce.

      3. Whether or not I’m well studied on the industry is irrelevant. The people who are well-studied have unanimously decided against Boeing.

  2. Fair. I can see there being ethical problems in situations that are very different from this, but Bombardier is in a unique place now, since they’ve essentially partnered with Airbus. The C series is a pretty promising development, one that will fill a niche that could really change the way we do flights. This is a huge win for Boeing’s competitors.

  3. On a side note: Is there a way we can submit feedback to the Bereans on things we want to hear about? I’d like to know what the Bereans think about the White House’s seeming reluctance to impose sanctions on Russia despite bipartisan legislation calling for it, but I don’t see a way to leave this kind of feedback.

    1. I’m not sure, but you can always do here as you did. Mark Smith also asks for things for the VLOG discussion, you could request it in this weeks VLOG post for next week. Or you can send any one of us an email.

  4. Is the trade commission set to give any kind of ruling upon the washing machine or solar panel tariffs that Trump has put out? It appears to be quite cut and dry that nothing illegal is going on; furthermore, some of the solar panel companies being protected are not even US companies, so it seems very contradictory for Trump to be protecting them.
    https://www.bloomberg.com/news/articles/2018-01-23/five-solar-firms-that-actually-stand-to-gain-from-trump-s-tariff

  5. This is a victory for the consumer and a loss for monopolies but is unfortunately far too infrequent. It makes me wonder what other costs consumers are bearing at the expense of large corporate profit. What are some other clear abuses that you can point to where this is occurring and the consumer is at loss?

  6. How much power does the Trade Commission have against the new laws Trump is putting in place regarding the tariffs? But this is a win for capitalism, companies can sell to whoever they want to and the free market needs to be left free, as that is how it functions the best. Even at cost, the fact the Boeing is donating so much to benefit in the long run seems unethical to me.

  7. Is it unreasonable to think that there could be more stories like this in the future, where the crooked corporations get what they deserve, or will this continue to be an “every once in a while” type of situation?

  8. It just seems wrong that companies like Boeing can have such influence based on how much money they strategically put into the political game. I’m glad that this case resulted in a win for consumers and am interested to see what type of trend arises in the future.

    1. There are some people who would argue that we should ban corporate lobbying and (among other things) overturn the ruling in Citizens United to weaken corporate power over our government. Generally speaking conservatives do not agree with that line of reasoning though. Food for thought.

  9. Good article. I particularly found it interesting to see the extent of the financial giving and lobbying in regard to the 2016 election cycle. It’s troublesome to see how a government supposedly focused on helping out the little guy can be so incentivized to give aid to companies already dominating their respective industries.

  10. I find it interesting that people speak of the “corporations” as if they were some independent organization or animal. If you have a 401k, pension, or life insurance, YOU are the corporation. The problem as I see it is we have built a government with a reach that affects the fortunes of too many of us. If the government were not in the business of running business, there would be no reason for the corporations to invest in the outcome of elections. We as voters need to hold our representatives accountable for encouraging businesses to contribute to their campaigns using laws or regulations.

    If a politician can directly affect your bottom line with some law then of course you will try to sway the outcome. Doing any less would be fiduciary malpractice. Vote against those politicians, Republican or Democrat, and then they will change their behavior.

    I work for an airline. It bugs me when my employer or union leadership push for protectionism because, when the winds change, we are left unprepared to compete.

    1. But the powers of government always affect business, even at their most basic. I don’t think you can avoid it, much less the incentive of powerful groups to control and strengthen it.

      1. You are right. It cannot be avoided. The desire though should be to protect the property rights using the least intrusive effort. I am essentially libertarian at heart, yet I would argue we had an obligation to bailout GM. We forced them to build cars via the CAFE standards that no one wanted to buy using expensive union labor. If the “government” had stayed out of the business decisions of GM, they probably would not have built those cars and may not have required a bailout and would not deserve one either.

  11. I am very thankful that this ended up being a win for the consumers. It really makes me think how many times consumers are getting screwed by these types of things. Thankfully Trump doesn’t have the power to make all the decisions or else this world would be a scary place.

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