Trump’s 757 and Trade Deficit Realities

When Donald Trump goes shopping for large aircraft, which he does from time to time, there is one item at the top of his "non-negotiable" list. Trump insists on British-made Rolls Royce turbo fan jet engines. He doesn't need to worry much about the interior, or even the cockpit windshield when jet shopping, as those refinements can be redone after he buys. (Both were redone, in fact, on the Trump 757.)  However, the engines must be Rolls.

For the record, new 757s were offered to airlines and other buyers with either Pratt and Whitney turbo fans, produced by highly paid union members in Connecticut among other places, or with Rolls Royce engines produced by highly paid British union members. Certainly those American workers would want the Donald to "buy American," wouldn't you think? 

Moreover, when those British engines hit some port on American shores, they added big numbers to America's trade deficit figures, figures Trump slammed ubiquitously on the trail. After all, this particular verdict on international trade was cheered in places like Ohio, Wisconsin, Michigan and Pennsylvania, I'm told.

Don't let this get around, but the truth is, this deficit transaction was not bad at all. Deliciously ironic and a tad hypocritical, but not bad. The Rolls Royce engines are more expensive, and were the engine of choice by the customer. No one, not even President Donald Trump’s policies and his customs agents, should stand in the way of such customer/manufacturer decisions, made by anyone. 

Besides, the British engines were merely part of an even more massive American jetliner project, assembled by American workers, and sold by an American company, for an American profit. God only knows what other components are imported for 757s and other airliners, and every one of them added to our "trade deficit" on paper, unless they are later sold to an over seas owner.

In fact, in 2011 Rolls invested heavily in a jet engine component manufacturing facility in Prince George County, Virginia, and added a subsidiary to support that project again in 2014. Buying a few imported Rolls turbo fans has now been followed by the company making them on American soil with American workers.

Rolls-Royce engine component factory, Crosspointe, VA

A Trump-style tariff placed on Rolls in the 1990s might have been cheered, but it would have likely prevented the company from having many of the seven thousand employees they now have in this country. Government tampering always has unforeseen consequences. 

Besides, today this jet roars around the country buying American jet fuel, paying American landing fees, and employing American captains and crew. Trump's crew lives in America and spends their paychecks in America. Even with British engines, Trump's plane is a generator of American economic activity.

To be honest, trade deficits are mathematical facts, but they can be misleading, or meaningless, figures in the first place, as they only include a small part of the reality equation. To be even more honest, this transaction was not "America trading with Britain” anyway. It was Boeing, per their customer, trading with Rolls Royce. Everyone was tickled with the deal no doubt. As is the case in most deals, no one "lost."

Since most of us don't buy jets, let's boil this point down even further.

When a hundred million dollars’ worth of Chinese steel hits an American port, the trade deficit with China ticks up 100 million. It's a clean mathematical equation, as a hundred large goes into the debit column. If fifty million dollars worth of American goods hit a Chinese port the same day, the trade deficit would record that day as America minus 50 million. Obviously I'm simplifying here, but this is how trade balance accounting works.

Keeping this score is easy, but does the score really mean anything to you? Not per se.

The first thing that happens to that ship carrying Chinese steel is that a highly paid American Harbor Pilot takes control of the vessel, and guides the foreign ship into his harbor. Once the ship is in the port, highly paid American longshoremen off load the steel. Very highly paid longshoremen I might add.

The ship then purchases American fuel from the port -- in America -- for its return trip. The crew go on shore leave and spend money in American bars, restaurants, stores, and perhaps “adult" forms of entertainment.

The steel that started all these dominos tipping is then shipped by an American trucking firm to an American destination, while the longshoremen go home in a car they bought in America, to a house built in America, and they drink beer bought from an American grocery store. They may also use their paycheck to take their American kids out to an American yogurt shop, or an American little league game. And so forth.

The steel's value has barely been enhanced, and already a whole lot of Americans are making money off of this evil "trade deficit" event. You might say they're "winning." If this keeps up, they may get tired of winning.

And yet, none of these transactions are weighed against the fictional fifty million dollars worth of deficit, although they do go into America's GDP. 

Yet this steel is just getting started. When it arrives at a plant, in America, it might be turned into cars, trucks, lawn mowers, motor graders, cookware or even guns! Perhaps it's turned into a skyscraper built in....wait for it...AMERICA! These items (except for the building) then must be shipped by truck or rail to either a wholesale or retail destination. Americans are getting paid at every step along the way, and the manufacturer has made a profit. He may invest that profit in more American workers, or build a bigger American home.

Damn all this winning.

Then of course, all of the aforementioned Americans take the pay and spend it on cars, homes, health clubs, clothes, etc. The point is, this hundred million dollars worth of steel becomes billions of dollars worth of refined products and purchased services, and a lot of Americans make a lot of money every step of the way. All of this enhanced wealth is generated in America, yet none of it in our example is reflected in the trade "deficit" figures.

In other words, neither importing Chinese steel, or importing Trump's foreign made jet engines, are necessarily a bad thing for the country. Quite the opposite, yet the positive impact, which is very widespread, is not as easily seen.

You might say but wait, why don’t American factories buy American steel in the first place? For the same reasons Trump insists on the Rolls -- it's what the customer wanted. The particular reason, be it price, quality, completion date or image, is moot. Supply, demand and price are realities, and world history is replete with disasters when governments try to manipulate them. (Remember the seven thousand Rolls employees).  And if Pratt & Whitney wants to catch Trump’s eye, then they should up their game, and not hide behind tariff protection. In fact, competition has forced Pratt & Whitney, Rolls and General Electric to improve their jet products. 

Besides, why is a steel worker's job more important than a longshoremen's job, or a Boeing job? It's the 800 pound gorilla question whose answer doesn't fit neatly on a baseball cap. 

The bottom line is that manufacturing overall is not being "hollowed out" by trade. In fact, in places like South Carolina and Texas and Alabama, it is booming, largely due to trade. BMWs made in Greenville, SC sell all over the world , and exporting them involves all of the aforementioned truckers, longshoremen, and bunker oil vendors in reverse order from the Chinese steel example. A trade war would bankrupt South Carolina virtually overnight, given the impact of the Port of Charleston, the upstate manufacturing sector, and the resulting synergies.

America actually manufactures more than ever today, but it simply requires fewer people. We could "blame" technology, but what can you do about that? We can't deny tech advances to protect the buggy whip industry, so to speak. We would really lose then. 

So what to do? First, stop obsessing over China, Mexico and Japan. Focus on making the rust belt areas more like the booming South. In fact, make all 50 states a low tax low regulation haven, make unions optional, and watch the winning really take off everywhere! 

Thankfully, President-elect Trump has sent signals that he is going to head in this direction. His choices to run the EPA and HHS are fabulous first steps. However, no one can deny the reality that his campaign focused more on threats and tariffs, and those were the very talking points that super charged many of his supporters. If the Trump administration can do the former, then in time no one will care about the latter, or about China, or Mexico. That would help make America great again indeed. 

Edmund Wright is a contributor to Breitbart, American Thinker, Newsmax TV and Talk Radio Network, and author of numerous political books.

When Donald Trump goes shopping for large aircraft, which he does from time to time, there is one item at the top of his "non-negotiable" list. Trump insists on British-made Rolls Royce turbo fan jet engines. He doesn't need to worry much about the interior, or even the cockpit windshield when jet shopping, as those refinements can be redone after he buys. (Both were redone, in fact, on the Trump 757.)  However, the engines must be Rolls.

For the record, new 757s were offered to airlines and other buyers with either Pratt and Whitney turbo fans, produced by highly paid union members in Connecticut among other places, or with Rolls Royce engines produced by highly paid British union members. Certainly those American workers would want the Donald to "buy American," wouldn't you think? 

Moreover, when those British engines hit some port on American shores, they added big numbers to America's trade deficit figures, figures Trump slammed ubiquitously on the trail. After all, this particular verdict on international trade was cheered in places like Ohio, Wisconsin, Michigan and Pennsylvania, I'm told.

Don't let this get around, but the truth is, this deficit transaction was not bad at all. Deliciously ironic and a tad hypocritical, but not bad. The Rolls Royce engines are more expensive, and were the engine of choice by the customer. No one, not even President Donald Trump’s policies and his customs agents, should stand in the way of such customer/manufacturer decisions, made by anyone. 

Besides, the British engines were merely part of an even more massive American jetliner project, assembled by American workers, and sold by an American company, for an American profit. God only knows what other components are imported for 757s and other airliners, and every one of them added to our "trade deficit" on paper, unless they are later sold to an over seas owner.

In fact, in 2011 Rolls invested heavily in a jet engine component manufacturing facility in Prince George County, Virginia, and added a subsidiary to support that project again in 2014. Buying a few imported Rolls turbo fans has now been followed by the company making them on American soil with American workers.

Rolls-Royce engine component factory, Crosspointe, VA

A Trump-style tariff placed on Rolls in the 1990s might have been cheered, but it would have likely prevented the company from having many of the seven thousand employees they now have in this country. Government tampering always has unforeseen consequences. 

Besides, today this jet roars around the country buying American jet fuel, paying American landing fees, and employing American captains and crew. Trump's crew lives in America and spends their paychecks in America. Even with British engines, Trump's plane is a generator of American economic activity.

To be honest, trade deficits are mathematical facts, but they can be misleading, or meaningless, figures in the first place, as they only include a small part of the reality equation. To be even more honest, this transaction was not "America trading with Britain” anyway. It was Boeing, per their customer, trading with Rolls Royce. Everyone was tickled with the deal no doubt. As is the case in most deals, no one "lost."

Since most of us don't buy jets, let's boil this point down even further.

When a hundred million dollars’ worth of Chinese steel hits an American port, the trade deficit with China ticks up 100 million. It's a clean mathematical equation, as a hundred large goes into the debit column. If fifty million dollars worth of American goods hit a Chinese port the same day, the trade deficit would record that day as America minus 50 million. Obviously I'm simplifying here, but this is how trade balance accounting works.

Keeping this score is easy, but does the score really mean anything to you? Not per se.

The first thing that happens to that ship carrying Chinese steel is that a highly paid American Harbor Pilot takes control of the vessel, and guides the foreign ship into his harbor. Once the ship is in the port, highly paid American longshoremen off load the steel. Very highly paid longshoremen I might add.

The ship then purchases American fuel from the port -- in America -- for its return trip. The crew go on shore leave and spend money in American bars, restaurants, stores, and perhaps “adult" forms of entertainment.

The steel that started all these dominos tipping is then shipped by an American trucking firm to an American destination, while the longshoremen go home in a car they bought in America, to a house built in America, and they drink beer bought from an American grocery store. They may also use their paycheck to take their American kids out to an American yogurt shop, or an American little league game. And so forth.

The steel's value has barely been enhanced, and already a whole lot of Americans are making money off of this evil "trade deficit" event. You might say they're "winning." If this keeps up, they may get tired of winning.

And yet, none of these transactions are weighed against the fictional fifty million dollars worth of deficit, although they do go into America's GDP. 

Yet this steel is just getting started. When it arrives at a plant, in America, it might be turned into cars, trucks, lawn mowers, motor graders, cookware or even guns! Perhaps it's turned into a skyscraper built in....wait for it...AMERICA! These items (except for the building) then must be shipped by truck or rail to either a wholesale or retail destination. Americans are getting paid at every step along the way, and the manufacturer has made a profit. He may invest that profit in more American workers, or build a bigger American home.

Damn all this winning.

Then of course, all of the aforementioned Americans take the pay and spend it on cars, homes, health clubs, clothes, etc. The point is, this hundred million dollars worth of steel becomes billions of dollars worth of refined products and purchased services, and a lot of Americans make a lot of money every step of the way. All of this enhanced wealth is generated in America, yet none of it in our example is reflected in the trade "deficit" figures.

In other words, neither importing Chinese steel, or importing Trump's foreign made jet engines, are necessarily a bad thing for the country. Quite the opposite, yet the positive impact, which is very widespread, is not as easily seen.

You might say but wait, why don’t American factories buy American steel in the first place? For the same reasons Trump insists on the Rolls -- it's what the customer wanted. The particular reason, be it price, quality, completion date or image, is moot. Supply, demand and price are realities, and world history is replete with disasters when governments try to manipulate them. (Remember the seven thousand Rolls employees).  And if Pratt & Whitney wants to catch Trump’s eye, then they should up their game, and not hide behind tariff protection. In fact, competition has forced Pratt & Whitney, Rolls and General Electric to improve their jet products. 

Besides, why is a steel worker's job more important than a longshoremen's job, or a Boeing job? It's the 800 pound gorilla question whose answer doesn't fit neatly on a baseball cap. 

The bottom line is that manufacturing overall is not being "hollowed out" by trade. In fact, in places like South Carolina and Texas and Alabama, it is booming, largely due to trade. BMWs made in Greenville, SC sell all over the world , and exporting them involves all of the aforementioned truckers, longshoremen, and bunker oil vendors in reverse order from the Chinese steel example. A trade war would bankrupt South Carolina virtually overnight, given the impact of the Port of Charleston, the upstate manufacturing sector, and the resulting synergies.

America actually manufactures more than ever today, but it simply requires fewer people. We could "blame" technology, but what can you do about that? We can't deny tech advances to protect the buggy whip industry, so to speak. We would really lose then. 

So what to do? First, stop obsessing over China, Mexico and Japan. Focus on making the rust belt areas more like the booming South. In fact, make all 50 states a low tax low regulation haven, make unions optional, and watch the winning really take off everywhere! 

Thankfully, President-elect Trump has sent signals that he is going to head in this direction. His choices to run the EPA and HHS are fabulous first steps. However, no one can deny the reality that his campaign focused more on threats and tariffs, and those were the very talking points that super charged many of his supporters. If the Trump administration can do the former, then in time no one will care about the latter, or about China, or Mexico. That would help make America great again indeed. 

Edmund Wright is a contributor to Breitbart, American Thinker, Newsmax TV and Talk Radio Network, and author of numerous political books.

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