According to interviews and media profiles of President-elect Donald Trump, when he goes shopping for large aircraft, there is one item at the top of his “nonnegotiable” list: Rolls-Royce engines.
He doesn’t need to worry much about the interior or even the cockpit windshield when jet shopping, as those refinements can be redone after he buys, but Trump always insists the engines be from Rolls-Royce.
New 757s are offered to airlines and other buyers with either Pratt and Whitney turbo fans, produced by highly paid union members in Connecticut, or Rolls-Royce engines, produced by highly paid British union members. One would assume those American workers would want Trump to “buy American.”
Investing in America
Contrary to the assumptions of many, this and many other so-called trade deficits are not bad for the United States or its workers. Every component imported in a Boeing 757’s construction adds to the trade deficit with another country, but those components are only one part of a U.S. jetliner project, which is assembled by American workers and sold by an American company.
In 2011, Rolls-Royce invested heavily in a jet-engine-component manufacturing facility in Prince George County, Virginia, adding a subsidiary to support the project in 2014. Trump’s decision to buy a few imported Rolls-Royce turbo fans helped to finance the company’s manufacturing operations on American soil. A Trump-style tariff placed on Rolls-Royce in the 1990s might have been cheered by many, but it would have prevented the company from employing the 7,000 or so U.S. employees it does now. Government tampering always has unforeseen consequences.
Trump’s American-made jet roars around the country, buying American jet fuel, paying American landing fees, and employing American captains and crew. Trump’s private airplane staff lives in America and spends their paychecks in America. Even with foreign-made parts, Trump’s plane generates U.S. economic activity. And, besides, as is often the case with international purchases, the Rolls-Royce transaction was not “America trading with Britain”; it was Boeing, at the request of its customer, trading with Rolls-Royce. Everyone was happy with the deal’s outcome, and no one lost.
Trade deficits are mathematical and economic facts, but facts can be misleading or meaningless if they include only a snapshot of the larger economic picture.
Imports Creating U.S. Jobs
Since most of us don’t buy jets, another analogy might be useful.
When $100 million in Chinese steel hits a U.S. port, the trade deficit with China increases by $100 million. When $50 million in American goods enter a Chinese port the same day, the trade deficit records that day as “America, minus $50 million.” But does the score really mean anything to you? No, it doesn’t.
The ship carrying Chinese steel into the U.S. port is captained by a highly paid American harbor pilot, who guides the foreign ship into its berth. Once the ship is in the port, highly paid American longshoremen offload the steel. The ship purchases U.S. fuel from the port, in America, for its return trip. The crew spends money in American bars, restaurants, stores, and entertainment venues.
The Chinese steel is then shipped by an American trucking firm to an American destination, and the American longshoremen go home in a car they bought in America to a house built in America, and they drink beer bought from an American grocery store. They may also use their paycheck to take their American kids out to an American yogurt shop or an American little league game.
The steel’s value has barely changed, but many Americans are making money off this evil “trade deficit” event, and all this economic activity was created and is counted toward Americans’ gross domestic product, but none of these transactions is weighed against the $50 million trade deficit.
The steel’s journey is just the beginning. When it arrives at an American plant, it might be turned into American cars, trucks, lawn mowers, motor graders, cookware, or even guns. It might be turned into a skyscraper built in America. These items must be shipped by truck or rail to either a wholesale or retail destination. Americans are getting paid at every step along the way, and the manufacturer has made a profit.
The manufacturer may invest that profit in hiring more American workers or building a bigger American home with the labor of other workers in America.
Damn all this winning.
Taking the Shackles Off
Instead of carrying out threats to tax and impose tariffs on international trade, Trump should stop obsessing over China, Japan, and Mexico and should instead focus on making the Rust Belt areas in the Midwest more like the booming South. Or, better yet, he should work to make all 50 states a low-tax, low-regulation haven and make union membership optional.
Instead of talking about this proven recipe for success on the campaign trail, Trump’s campaign focused more on threats and tariffs. If the Trump administration can do the former, then in time no one will care about China or Mexico, and America will be great again, indeed.
This article was originally published by American Thinker and is available at http://www.americanthinker.com/articles/2016/12/trumps_757_and_trade_deficit_realities_.html. Reprinted with permission.
