Koch Brothers Challenge Trump on Trade. That’s Good.
(Bloomberg Opinion) -- Never in a million years did I expect to write these words:
Thank goodness for the Koch brothers!
I know, I know: Their political and policy networks were enthusiastic funders of Tea Party candidates. They back climate-change deniers. They oppose government aid across the board — even when that aid might create jobs or help the impoverished. Their bought-and-paid-for think tanks have helped move Congress and the country significantly to the right.
But unlike so many people who once viewed themselves as principled conservatives — unlike, say, Larry Kudlow — the Kochs and their network's key executives have not abandoned their principles to curry favor with this unprincipled president. One of the few areas where President Donald Trump has long-standing, consistent views is trade. Those views are so utterly wrong-headed that they will lead to economic disaster if they can't be stopped. With most Republican representatives and senators sadly supine, the Kochs seem to me the only ones out there with the clout and the money to act as a countervailing force.
On Sunday, during the Koch network's annual gathering of major donors, Charles Koch, 82, gave a rare news conference, which he used in part to criticize Trump's obsession with tariffs. (His younger brother David has been more or less nudged aside from the political operation.) According to Bloomberg News, he told reporters that the greater the level of trade restrictions, the greater the risk of severe economic fallout. "Every nation that's prospered is one that didn't engage in trade wars," he said.
Then on Monday, Tim Phillips, the president of Koch's primary political organization, Americans for Prosperity, announced that it would not support Kevin Cramer, a Republican congressman from North Dakota who is running for Senate against a vulnerable Democratic incumbent, Heidi Heitkamp. Although the refusal to back Cramer was not linked to Trump's trade policies, Phillips's point could hardly be missed: Candidates who supported Trump policies over the Kochs' objections won't get the group's money. They'll have to decide whether to side with free trade — or with Trump.
I can't remember a time when free trade wasn't Republican dogma. It was the Democrats — at least some of them — who sought protectionist policies like tariffs to keep jobs from moving to China or Mexico. But the Republicans were right; free trade has been a boon to the world, creating prosperity and a robust middle class in countries that were once basket cases. Why, for instance, has the number of unauthorized immigrants coming from Mexico fallen so drastically over the past 15 or 20 years? Because, thanks to the North American Free Trade Agreement, Mexico now has an economy that provides good jobs. Mexicans no longer feel that they have to move to the U.S. to have a decent life.
What's more, for all the talk about the hollowing out of manufacturing jobs, free trade has also helped the U.S. The obvious benefit is low prices. The less obvious benefit is jobs. Yes, jobs have been lost in the Midwest. But they have been more than made up for as U.S. exports have increased. I spent some time last year in McAllen, Texas, and was struck at the city's economic revival — a revival that is the direct result of Nafta and the economic ties with Mexico it made possible.
What Trump doesn't understand — and Koch does — is that low tariffs are the foundation of the modern world economy. It's true that every country has a sector it wants to protect for political reasons: lumber in Canada, agriculture in Europe, cars in Japan, internet companies (among other industries) in China, tobacco (yes, tobacco) in the U.S.
But it is even truer that over the last quarter century or more, every country has drastically lowered tariffs on all sorts of goods, making possible complex international supply chains that are now commonplace. Trump believes that erecting tariffs on, say, steel will force manufacturers to turn to American steelmakers. But it won't; the supply chain infrastructure can't be easily untangled — if it can be unwound at all. The only thing it will do is force companies from Coca-Cola to Caterpillar to charge more.
To the surprise of absolutely no one, Trump lashed back against the Koch brothers Tuesday morning in a pair of tweets, borrowing from the Steve Bannon playbook to label them "globalists."
But unlike far most Republican politicians, I doubt the Kochs will be deterred by a few insulting tweets from the president. The Koch network has already announced a major media campaign on behalf of free trade that will start soon. During his news conference, Charles Koch noted that the U.S. was far from a worst case scenario, largely because an out-and-out trade war was still a long ways off — and was still preventable.
True enough. Last week, European Commission President Jean-Claude Juncker met with Trump and appeared to talk him out of a trade war with Europe, at least for now. But there is still China, where talks are underway but which is as likely as not to engage in a trade war.
A major trade war will wreak havoc on our economy, and would likely lead to a major recession. So join me please in rooting for the Kochs, no matter what your politics. If they can use their money and power to force Republicans to abandon the president and stand with free trade, they will have done the country a very big service.
To contact the editor responsible for this story: Stacey Shick at firstname.lastname@example.org
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Joe Nocera is a Bloomberg Opinion columnist covering business. He has written business columns for Esquire, GQ and the New York Times, and is the former editorial director of Fortune. He is co-author of “Indentured: The Inside Story of the Rebellion Against the NCAA.”
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