Trump’s ‘Art of the Deal’: a free-market framework

Second question, why is Question #1 of paramount importance today?

When “the butcher, the brewer and the baker,” as Adam Smith wrote in The Wealth of Nations, are allowed to compete in the free market and sell their goods at the most competitive prices, we all win with better products and services at the best rates. That is how free-market capitalism and Adam Smith’s “invisible hand” work to make our lives safer, better and more prosperous.

But what happens when capitalism is thwarted, when foreign governments intervene and give huge subsidies to their corporate “beggars” who “depend chiefly upon the benevolence of [their] fellow citizens”? In the long run, we’re all worse off. This was one of the lessons we wanted the millions of our CPAC viewers all over the world to learn a couple of weeks ago. And it is a lesson we want our elected officials to apply as they pursue free and honest trade deals.

President Donald Trump was greeted by cheering activists, enthusiastic studen
ts and grateful elected officials at CPAC. As part of his America-first themed address, he pledged to fix “broken and embarrassing” trade deals and protect our economic freedom by carefully constructing future deals. And he continued, “if they misbehave, we terminate the deal.”

Conservatives love economic freedom, but many in our broader coalition are still trying to figure out what is best for our country. Some argue for buying American only (called “autarky” by economists). I’ve heard others argue for one-page trade deals summarized in two words: “anything goes” (the fancy word for that is “anarchy”). As we press on with the enthusiasm and momentum of CPAC, we must apply actual conservative principles and ideals to get the best trade deals that benefit everyone.

In the basic framework of good trade agreements, both sides must develop and agree to a set of terms that will guide their operations, prohibiting conduct that offends competition but otherwise allowing both sides to exploit their respective competitive advantages.

There are scores of ways trade deals are manipulated to distort free-market capitalism, but the latest example relates to the breaches of the Open Skies agreements impacting over 100 airlines around the world. These agreements are supposed to set the framework to allow the free market to work, limiting government involvement so that carriers and their customers can freely negotiate terms—from pricing, to routes, and everything in between.

Until it doesn’t.

For four years, the Obama administration failed to enforce these Open Skies agreements. While kowtowing to the wishes of other countries and putting their priorities ahead of free trade principles, the UAE and Qatar poured gargantuan subsidies in
to their respective airlines. These Gulf carriers, comprised of Qatar, Etihad and Emirates, are the beggars of an unprecedented $50 billion in government subsidies and benefits, a sum so vast that it mocks the very idea of Adam Smith’s beggar who “chooses to depend chiefly upon the benevolence of his fellow citizens.” The subsidy allows the state-owned carriers to fly where and when they want, without regard to free-market signals, incentives or discipline.

Last week, Emirates added another notch to its state-subsidized belt when it began its non-stop flight from Athens to Newark. We must not allow this state-sponsored predatory behavior to go unchecked. Failure to take action will be seen as rewarding rule breakers and will undoubtedly result in further erosion of free-market capitalism, a serious threat to the American economy.

At only two weeks into his administration, President Trump acknowledged the issues facing the aviation industry with a meeting in the Oval Office. From the start, he quickly understood that American businesses were a low priority for the Obama administration. He saw it on the campaign trail, through the rust belt and in so many communities outside the beltway. “The forgotten man” (a popular theme at CPAC), could be further impacted by inaction: for every long-haul route lost as a result of subsidized Gulf carrier predation, more than 1,500 American jobs are lost. By bringing these issues to the forefront, President Trump has given renewed hope to many families across the country impacted by the harmful neglect of the previous administration.

We at the American Conservative Union believe that the free market must be protected, not from competition but from rule breakers who mock capitalism’s principles. When we stand up for free market principles, everyone benefits. Conservatives understand the importance of trade and genuine free-trade agreements, but we must also recognize the importance of enforcing free-trade deals if we want the ultimately benefit of the bargain.

Adam Smith’s “invisible hand” rewards the best butchers, brewers and bakers while disciplining those who don’t measure up. It should equally apply to the airlines in America, the UAE and Qatar, without favoritism. But the only way to ensure that is to prevent anti-competitive behavior and state-sponsored subsidies. We need to reinforce free trade principles and put an end to the massive Gulf carrier subsidies if we are to see a healthy market again.

Daniel Schneider serves as Executive Director of the American Conservative Union (ACU), America’s oldest and largest grassroots conservative organization. He has served in the White House, the U.S. Department of Labor, the U.S. Department of Health and Human Services and as an adviser to Sen. Mitch McConnell.

If you would like to write an op-ed for the Washington Examiner, please read our guidelines on submissions here.