Former U.S. Export-Import Bank Chairman Fred Hochberg recently made an appearance at the American Enterprise Institute to promote his new book, Trade Is Not a Four Letter Word: How Six Everyday Products Make the Case for Trade (Avid Reader Press, 2020). Readers who are familiar with the Competitive Enterprise Institute’s position on Ex-Im will know we are not fans of its operations (or existence), but we are fans of international trade, so I was eager to hear what Hochberg would say.
Hochberg makes a case for the advantages of open trade, using six different products to tell his story, including the infamous taco bowl that then-candidate Trump was photographed with on Cinco de Mayo 2016.
— Donald J. Trump (@realDonaldTrump) May 5, 2016
Hochberg mentions several imported food items, like avocados and bananas, during his presentation, emphasizing the affordable consumer bounty that Americans have available to them, thanks in large part to international trade. He also cites Boris Yeltsin’s famous visit to a Houston-area grocery store in 1989, during which the man who would soon become the first president of post-Soviet Russia was allegedly dumbstruck by the huge bounty and selection available to ordinary Americans. Hochberg tells us that in 1975, the average supermarket had around 9,000 items, but that that number is up to around 50,000 today.
But the attacks on trade today are not primarily about a perceived lack of consumer plentitude, and Hochberg goes on to cite some more politically relevant statistics.
On the subject of complex supply chains, he points out the international provenance—Switzerland, Rwanda, the Netherlands—of many of the components of an iPhone assembled in China. Less than $10 worth of iPhone components are apparently sourced from China itself, yet when billions of dollars’ worth of those finished phones are imported into the United States to be sold to consumers, the total value is calculated as a “Chinese import” for the purposes of calculating the U.S. balance of trade by the federal government, the World Trade Organization, and other entities. This method of accounting reinforces the inaccurate idea that complex goods like an iPhone are all (or even mostly) the product of one nation or another.
The author also cites another favorite of trade writers, the fact that the “most American” car in the world is the Honda Odyssey minivan, which, when assembled at a 4,500-employee plant in Lincoln, Alabama, ends up being 75 percent domestically sourced (the Ford F-150 only has 56 percent U.S. components.)
Hochberg also brings up an interesting, underexplored angle of the 21st century economy by describing higher education for international students as a service export, albeit one foreign consumers generally have to physically travel to the United States to consume. As the U.S. economy has moved from an economy dominated by manufacturing to one increasingly focused on services, many of the 20th century assumptions about economic policy and employment have been upended, and Hochberg is right that policy makers should be thinking about that shift in terms of trade as much as anything else. American students deciding what course of study will be most relevant to their future careers should keep that dynamic in mind as well.
It’s only at the end of his presentation that Hochberg gets to the concern about certain American communities have been “hollowed out” by the dislocations from international trade, but doesn’t offer any specific solutions, other than saying that it’s an issue that should receive more attention from policy makers. Hopefully, the optimistic outlook of Trade Is Not a Four Letter Word will be able to inform those discussions.