You say ‘toe-may-toe’ and I say ‘toe-mah-to’. I say ‘poe-tae-toe’ and you say ‘po-tah-toe.’
Both are vegetables, just pronounced differently. But the very way they are pronounced can incite a “spirited” argument. In some cases, VERY “spirited”.
With the U.S. in the process of ‘re-jiggering’ the global trade structure two words have also caused quite a stir; FREE and FAIR.
Those words are eliciting “discussions” that threaten global economic chaos. Arguing over how to pronounce a brown spud seems trivial, but human passions run high whether its economic ruin or a potato.
So, with tariffs changing life around the world, what does FREE mean? And what does FAIR mean? Keep in mind, nothing’s free and nothing’s fair. It’s the law of the global trading jungle.
With that in mind, let’s start with FREE.
FREE trade means exactly that. A good example is when you make a commission free stock trade on an exchange. Both buyer and seller trade for no cost. Perfect. FREE trade among nations has a slightly(?) different meaning. It actually means goods and services can move “freely” among trading partners BUT there may be costs. In other words, not FREE. The U.S can trade “freely” with China, Canada, The EU, Mexico etc, BUT, again, nothing is truly free.
Of course everyone is in favor of FREE trade, but over time governments figured out they could make money off free trade. How? Tariffs. Yup, just like a toll gate. It’s relatively easy to trade with, say China, but what you want to trade may have a cost attached to it. Additionally, a whole lot of global governments also figured out that if they charged higher tariffs on their goods than the U.S charged on its goods that were sold to them, they could make a ton of money. All in the name of FREE trade. Sweet. Until recently.
With U.S. tariffs on imported foreign goods into the US extremely low (almost free trade) and foreign tariffs on exported American goods much higher (not free trade), the U.S. continually runs a huge trade deficit. To be fair, much of that money is invested in U.S. treasuries helping keep interest rates low, but that also encourages more U.S. government spending (again, nothing is free).
OK, so what would be FAIR trade?
Trump is calling for FAIR trade with nations which seems reasonable. However, getting countries to give up a nice source of revenue is a tough chore. Many countries know they have had a great deal for quite some time taking advantage of the U.S. and are eager to renegotiate. Nobody wants to lose access to the huge U.S. market. FAIR trade. Others, say China, do not. It’s tough to get someone to “play fair” if they are intent on NOT “playing fair.”
So, here we are. If a U.S. company wants to sell bicycles in Vietnam, then – it it’s going to be “fair” – don’t have Vietnam charge protectionist tariffs on our American-made bicycles. The reverse is also true. We don’t apply tariffs on Vietnamese-made bikes coming into the US. Or, around the globe, the same could applly to Harley Davidson motorcycles. Don’t charge tariffs on exported American made Harley Davidson motorcycles. And in return, the US won’t charge tariffs on foreign made motorcycles coming into the US like Honda or BMW Motorrad.
FAIR? Yeah. Seems easy, right? Defining FAIR is tricky. We know what FREE means. FAIR is negotiable.
You say ‘toe-may-toe’ and I say ‘toe-mah-to’. I say ‘poe-tae-toe’ and you say ‘po-ta-toe. Or, “lets call the whole thing off.”
