free trade policy and the Dubai deal
David Ignatius's WaPo column today hits the nail on the head: The problem with the Dubai ports deal isn't contained to that particular deal and its parties.
It's part of a new trend of foreign acquisitions, brought on by this Administration's and Congress's irresponsible fiscal and tax policies. Keep gutting taxes, encouraging outsourcing, pushing the free-tradist policy agenda, and lowering interest rates, and what do you spur? Rampant domestic consumption of increasingly imported products.
This equals Trade Deficit, which equals Balance-of-Payments Problem: we're dumping lots and lots of dollars on foreign producers, who have to dispose of them quickly before the flood of dollars on foreign markets results in rapid devaluation.
Which means the foreign producers send their dollars back to the US, by buying up US bonds (China), prime real estate (EU today and 1990s Japan), and American companies (China, EU, now also UAE). The first strategy holds down interest rates, which spurs more American consumer spending. The second strategy swells the housing bubble.
The third strategy gives foreign companies a way of growing their wealth while keeping it contained within the dollar zone. But it also raises nativist fears, especially when the War on Terror is implicated. Ignatius thinks the terror fears are simply a xenophobic smokescreen for protectionism, but I'm not so sure. The WTO system recognizes national security as a legitimate protectionist concern, but the question is, how big a lever does it provide to turn back the tide of foreign acquisition?
It's part of a new trend of foreign acquisitions, brought on by this Administration's and Congress's irresponsible fiscal and tax policies. Keep gutting taxes, encouraging outsourcing, pushing the free-tradist policy agenda, and lowering interest rates, and what do you spur? Rampant domestic consumption of increasingly imported products.
This equals Trade Deficit, which equals Balance-of-Payments Problem: we're dumping lots and lots of dollars on foreign producers, who have to dispose of them quickly before the flood of dollars on foreign markets results in rapid devaluation.
Which means the foreign producers send their dollars back to the US, by buying up US bonds (China), prime real estate (EU today and 1990s Japan), and American companies (China, EU, now also UAE). The first strategy holds down interest rates, which spurs more American consumer spending. The second strategy swells the housing bubble.
The third strategy gives foreign companies a way of growing their wealth while keeping it contained within the dollar zone. But it also raises nativist fears, especially when the War on Terror is implicated. Ignatius thinks the terror fears are simply a xenophobic smokescreen for protectionism, but I'm not so sure. The WTO system recognizes national security as a legitimate protectionist concern, but the question is, how big a lever does it provide to turn back the tide of foreign acquisition?