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Friday, May 10, 2019

Ugly Trade Policy Means Things Could Get Ugly for U.S. Businesses, Including Disney

by Ray Keating
May 10, 2019

Trade – indeed, free trade – matters. It matters to American consumers. It matters to U.S. businesses and their workers. And it matters to the Walt Disney Company.

In an August 2018 article, DisneyBizJournal.com gave a rundown on trade, and why protectionist measures – imposed and threatened – are negatives for the U.S. economy, and for Disney. As we noted:

History and economics make clear that advancing free trade makes for sound policymaking. The way to deal with China, for example, and its challenges is not to hurt U.S. consumers and businesses with tariffs and a trade war, but instead to constructively engage with the Chinese in an effort to work toward a free trade agreement.

So, protectionism is a wildcard working against sustained strong economic growth. And it certainly is troubling for a company like Disney. Obviously, any barriers to and reductions in trade will hurt The Walt Disney Company given its sizeable international footprint. 

Indeed, near the start of the Trump administration, Disney CEO Robert Iger warned, “An all-out trade war with China would be damaging to Disney’s business and to business in general. It’s something I think we have to be very careful about.”

And if a trade war expands, it must be recognized that U.S. intellectual property industries, including the entertainment business, rank among our top exporters, and could come to be a target of retaliation. In addition, Disney will be hurt at home due to increased costs resulting from U.S. tariffs.

Unfortunately, things just seem to keep getting uglier in terms of trade policy, with the latest problem being President Trump’s increasing tariffs on a wide array of goods coming from China from 10% to 25%, with threats of more tariffs (i.e., taxes on imports) being imposed.

Politicians often make silly statements about free trade, how trade works, and tariffs – either out of ignorance, due to political pandering, or both. But during much of the post-World-War-II era, the U.S. fortunately led the globe toward reducing government barriers that raise costs for individuals and businesses to trade across borders. However, that started to change during the Obama administration, with the U.S. sitting on the trade sidelines during much of President Obama’s time in office, and then the U.S. turning hostile toward freer trade under President Trump.

Moments like these point to the reason why I originally became an economist, and why, much more recently, I started doing the “Free Enterprise in Three Minutes Podcast.” Following are episodes dealing with trade. Please take a few minutes to listen, and if you see value, please pass on to others, including any politicians you might know.

Link to the general “Free Enterprise in Three Minutes Podcast” page.

And here are direct links to trade topics...

Free Trade Rocks!

Protectionism Sucks!

The Real Deal on the Trade Deficit

Mercantilism – Wrong in the 18th Century, Wrong Today

Trade, Investment and the Balance of Payments

In the end, the protectionist agenda of the Trump administration ironically works directly against the administration’s tax and regulatory policies. Namely, while the tax and regulatory policies have been pro-growth – by reducing governmental burdens on entrepreneurs, businesses and workers – the Trump trade agenda has been explicitly anti-growth by increasing such burdens.

Ray Keating is the editor, publisher and economist for DisneyBizJournal.com, and author of the Pastor Stephen Grant novels, with three books - Reagan Country: A Pastor Stephen Grant NovelHeroes and Villains: A Pastor Stephen Grant Short Story and Shifting Sands: A Pastor Stephen Grant Short Story – published in 2018. In addition, the second edition of Warrior Monk: A Pastor Stephen Grant Novel was published in January 2019. He can be contacted at  raykeating@keatingreports.com.

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