A strange thing happened during World War I. As the western world set about trying to commit suicide in its pursuit of a needless war, U.S. exports to Scandinavian countries surged.
Why the sudden demand for U.S. products from that part of the world? The answer is that there wasn’t. What happened is that the U.S. had slapped a trade embargo on Germany. No big deal. Germans continued to import and consume U.S. goods and services; albeit from countries the U.S. hadn’t embargoed.
The simple truth is that if you’re producing, you’re importing. And to import, which is the sole purpose of production, you’re exporting. The trade could be with a producer on the other side of town, or on the other side of the world. This trade occurs among the productive, and without regard to wholly symbolic “embargoes.”
Which brings us to Donald Trump’s wholly inexcusable decision on Monday to block Broadcom’s attempted acquisition of Qualcomm. The president excused the inexcusable with the always empty claim that our “national security” was put at risk by the combination. Supposedly Singapore-domiciled Broadcom would favor Chinese telecom giant Huawei over U.S. players, and the latter would empower Huawei to somehow set the 5G wireless standard. Ok, but so what?
And while it dumbs down what is a ridiculous conversation to even mention this, the simple truth is that Broadcom is not a Singaporean company, nor is it Chinese. It’s largely based in San Jose, CA. Its executive team is 100% comprised of U.S. citizens. Eight out of ten board members are U.S. citizens, not to mention that Broadcom employs 8,600 Americans in over twenty-five U.S. states.
Broadcom is Singapore based for a good, pro-shareholder reason. It’s got a better tax environment. Conservatives used to properly cheer when corporations protected shareholder wealth from taxation (Broadcom’s top twenty shareholders are all American), but having bought Trump’s ludicrous nationalism hook, line and sinker, they now cheer on tax bills that force globalized U.S. companies to “repatriate” profits to the U.S so that they can be taxed. Who cares that those profits were already in the U.S. to the extent that there were worthy growth initiatives? Certainly not conservatives. They lust for rising tax revenues so long as one of their own is in the White House.
Sadly, Broadcom will redomicile stateside in the next month, and its reward will be hundreds of millions worth of taxes handed over to the federal government. The odd thing is that absent Broadcom’s proper focus on shielding shareholder wealth from the taxman, Republicans and conservatives likely wouldn’t have lost their minds over its attempted purchase of San Diego-based Qualcomm. Alas, we’ll never know.
Back to the land of reason, Broadcom wasn’t offering $117 billion for Qualcomm with an eye on controlling the 5G wireless standards to American detriment. Only in novels, movies and in the minds of the political class do businesses spend $100 billion+ in order to give the middle finger to the world’s largest market. Businesses around the world compete feverishly every day in order to gain market share in the U.S., so the idea that Broadcom would purchase Qualcomm with designs on weakening the U.S. is too silly for words.
After that, every single product in the world is the result of global cooperation. Absent the cooperation, the world would be a much poorer place. Not explained by the opponents of Broadcom’s intrepid attempt to acquire Qualcomm is why 5G technology is somehow unique such that “American” companies must be the standard setters. Forget that Broadcom is an American company by any reasonable estimation, and imagine if it were based in Beijing. What difference would it make? The Chinese are increasingly relevant economically precisely because they’ve persistently met the needs of the American consumer. Anyone who doubts the previous assertion need only walk into a Walmart on any given day. It’s useful to repeat over and over that if China didn’t exist, we would have to invent it.
As for “national security” concerns, interesting there is that the hysterics who called for blocking the deal could never articulate why. It’s hard to make reasonable what isn’t. Why would “China” or “Singapore” buy a U.S.-based company with an eye on weakening or warring with the U.S.? What could be gained? The latter speaks to the genius of trade; the very trade that Trump is skeptical about. Trade makes the very notion of war too impoverishing to contemplate. Applied to China vis-à-vis the U.S., why would it invade a country that is greatly enriching it through trade? Such a move would be the living definition of self-defeating.
But assuming war with the U.S. is the ultimate goal for the Chinese, the blocking of corporate combinations with national security in mind still makes no sense. That is so given the basic truth that there’s no accounting for the final destination of any good. So long as a country is producing, it’s importing. Going back to the example that began this piece, the U.S.’s embargo of Germany in no way kept the Germans from acquiring U.S. products. Trade between the U.S. and China would be no different. All war would do is needlessly weaken both countries through reductions in trade. Never forget that trade enriches. By its very name.
Reducing all of this to the absurd, readers might imagine a scenario in which the U.S. were totally bereft of steel. According to Trump, “IF YOU DON’T HAVE STEEL, YOU DON’T HAVE A COUNTRY!” More realistically, the U.S. could have nothing in the way of “American” steel, it could be 100% embargoed by every steel producing nation in the world, but its military and its businesses would have steel in abundance, and as though it had been milled right inside Pittsburgh. We would simply buy it from those whom the steel-producing countries sold it to, all at the market price. To produce is to once again import. Always. Steel isn’t unique. Neither is 5G technology that may or may not be the future standard.
Trump’s actions vis-à-vis Broadcom are shameful, and they speak to economic illiteracy. What’s worrisome is the lack of outrage on the right. The quietude is a reminder that the right’s belief in free markets and trade is somewhat situational, and only robust insofar as the occupant of the White House is a Democrat.
John Tamny is a Forbes contributor, editor of RealClearMarkets, Director of the Center for Economic Freedom at FreedomWorks, and a senior economic adviser to Toreador Research & Trading. He’s the author of Popular Economics (Regnery Publishing, 2015), Who Needs the Fed? (Encounter 2016), and then his next book, The End of Work (Regnery) about the ongoing explosion of jobs that don't feel like work, will be released in 2018.
