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The Right Way to Bring Business Back Across the Border

It has been conservative orthodoxy for decades that free trade enriches nations and improves standards of living. Ever since Adam Smith published The Wealth of Nations in 1776, it has widely been accepted in free societies that free trade is essential to personal liberty. The Republican Party has defended free trade and free markets at least since the 1950’s, and expanded trade has been a net positive for America’s economy and American workers. Free trade, when it is fair, expands markets for U.S. goods and allows America to further diversify its economy.

At first blush, when Republican President-Elect Donald Trump talks about a border tax on goods former U.S. Companies send back across the U.S. Border, it smacks of protectionism and trade wars. It seems that the GOP is reverting back about a century in its ideology to when Presidents like William Howard Taft sought to protect American manufacturing with import tariffs (border taxes). It’s exciting to have an American president fighting for American jobs, but is a series of tariffs the right course of action? Many are wondering.

For me, Trump’s overall economic agenda is a net positive for America. Scrapping Obamacare, lowering taxes, and repealing overreaching regulations will be a sea change in America’s business environment and will be a boon to our economy. These steps will do more to improve the prospects of American manufacturing and labor markets than any protective tariffs ever would. That being said, Trump hasn’t proposed a tariff on foreign imports or domestic exports; he has proposed a border tax on U.S. companies that want to use tax inversions to take advantage of tax loopholes.

Trump’s proposal seems to be aimed only at domestic companies that retain their corporate headquarters in the U.S., then move their manufacturing across the border, and then seek to readmit their product duty-free back into the United States for domestic sale. The reason many companies have done this in recent years is that U.S. corporate tax rates are the highest in the industrialized world, and job-killing laws like Obamacare and outlandish regulatory regimes have made domestic manufacturing cost prohibitive. If Trump follows-through on his pro-growth tax and regulatory reform package, these tax inversion schemes will likely become a thing of the past.

By pursuing a free-market domestic agenda, and embracing free and fair trade with other nations, American companies will no longer have an incentive to move offshore. According to the Center for Automotive Research in Ann Arbor, Michigan, the U.S. has only 20 tariff free trade agreements with countries that make-up 9 percent of the global car market, while neighboring Mexico has 44 such trade agreements totaling roughly 50 percent of the global car market. By expanding America’s free-trade agreements in a fair and balanced fashioning (meaning that our trading partners eliminate import tariffs on American goods instead of it being one-sided), and improving our nation’s domestic business climate, we can become a manufacturing behemoth again.

I am hopeful that the incoming Trump Administration will make America’s economy great again. By pursuing a limited government, pro-growth tax reform agenda, and eliminating job killing regulations, we can recover our manufacturing base while maintaining our commitment to free trade. Based on the policy recommendations and cabinet appointments the president-elect has made, I am confident that he understands this reality very well.

The new Republican government should seek to pursue the dream of Thomas Jefferson who said “Peace, commerce and honest friendship with all nations; entangling alliances with none.” We should pursue free trade agreements, so long as they’re fair and in the best interest of America. We should also work to build the greatest economy in the world through maximizing economic freedom here at home, not retreating from free trade that is fair to us and the nations with whom we trade.

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