in

How Would U.S. Trade Look If We Pivoted Away From China?

Last month, I introduced you to the concept of “Freedom Trade,” which Craig Fuller, the founder and CEO of FreightWaves, a supply chain data media company, says can change American trade for the better. Fuller should know; with a lifetime spent in the trucking industry and the last five years of having his finger on the pulse of the supply chain, he knows what he’s talking about.

I had the pleasure of having a conversation with Fuller about Freedom Trade. He and I started talking about one of the most obvious effects of Freedom Trade: that it would lessen, if not eliminate, our dependence on China.

Fuller mentioned three reasons why we need to pry ourselves out from China’s grasp: economic concerns, national security issues, and other external factors.

For starters, he said, we “can’t trust that China is operating as a capitalist system like the U.S. and most of the West.” The Chinese government interferes with market dynamics and inflates trade for its own benefit.

And there are more nefarious activities that China takes part in. The Chinese have shut down their own economy to control their population (see: COVID-19), manipulated its currency, seized property, and stolen from American innovation and technology for their own purposes.

Fuller told me that the national security issues surrounding trade with China are worrisome in their own way. China possesses massive shipyards where they build 40% of the world’s commercial ships. The Chinese use the same yards and expertise to build their own warships.

“As we consume Chinese goods, we’re indirectly funding their military — the second largest in the world,” he mentioned to me. “That threatens our own interests.”The other troublesome factors of trade with China include the country’s dismal record on environmental issues and human rights. China is “basically reckless” when it comes to air quality, carbon emissions, and water quality, and its human rights record is alarming.

Fuller believes that there are plenty of reasons why we shouldn’t be supporting China based on the American view of human rights and the social responsibility of capitalism.

“We hold U.S. companies accountable for these things, so it’s hypocritical that we don’t do the same with China,” he said.

The flip side of Freedom Trade is that it strengthens our relationships with and increases the prosperity of nations that are aligned with us ideologically. Freedom Trade helps the United States drive its own economic interests and count on more dependable supplies at all cycles of the economy.

“Ultimately, the greatest thing about capitalism is that, as long as a country and businesses allow trade with parties that operate under the same values, it rewards countries that operate in the free market system,” Fuller told me. “This kind of trade helps build up economies and production and increases the dependability and availability of products and raw materials.”

Another benefit to Freedom Trade is finding trading partners that aren’t just close to us in an ideological sense but are also geographically close. Not having to ship goods as far to get to and from the U.S. helps develop a more resilient supply chain.

“In supply chains and logistics, what causes expense and disruptions is the distance of travel and potential failure points — the safety of oceans and trade lanes,” Fuller said. “Trading with nations in the Americas like Mexico, Brazil, Argentina, and Chile eliminates some of the need to move goods via [sea] and allows us to move to land transport.”

Changing over to smaller ships and smaller ports means less strain on domestic capacity. One of the challenges of our heavy trade with Asia — particularly China — is that we must rely on large ships. There are only a couple of ports where such large ships can berth, concentrating much of Asian imports and exports at a handful of West Coast ports, particularly in Southern California. We’ve seen the bottlenecks that this phenomenon creates.
Fuller says that sourcing more locally lowers the cost of transportation because it’s cheaper to haul over land and short ship distances. This type of hauling and shipping helps American businesses.

 

“The U.S. doesn’t own any of the top 100 international container lines!” he pointed out to me. “We don’t participate in global ocean lines, and because of that, we’re sending lots of money to non-U.S. companies, many of which are owned directly or indirectly by their governments.”

“Closer partners benefit American operators,” he added. “The cost is cheaper, and the businesses we would be supporting are much more affordable.”

Immigration could get better as a result of Freedom Trade as well. Fuller says that the border crisis is related to economic viability, and sourcing countries in Central and South America makes it less likely for those citizens to cross our border for job opportunities. He also notes that trading with Mexico and other nations south of us could hurt the cartels because people would have more opportunities to work outside the drug trade.

Add to that that Mexico is our biggest export market, and investing in the Americas is a winning strategy.

“Anytime we can support businesses that provide opportunities to our neighbors to the South helps our economic interests, so we should be supporting that,” Fuller said.

When I asked him how feasible a trade policy based on the idea of Freedom Trade is, Fuller expressed optimism.

“The market would work it out,” he replied. “That’s the great thing about capitalism — it will find a way.”

What will help us move closer to Freedom Trade, Fuller says, is an honest conversation about our policy toward China as it relates to trade. He pointed out that most Trump supporters would be shocked to know that many of his tariffs are still in place, and he believes that it’s worth taking a look at tariffs and policies that support trade. The Trump-era U.S.–Mexico–Canada Agreement (USMCA) was a good start.

“We need to invest in countries that will support us,” he told me.

A change in American energy policy will help Freedom Trade as well. Fuller tells me that the Environmental, Social, and Governance (ESG) movement that is sweeping U.S. corporations these days discourages domestic production of oil, but American oil is cleaner than most oil from elsewhere, mainly because the U.S. takes environmental regulations seriously.

We discussed what potential partners would be amenable to Freedom Trade with the United States. Fuller reiterates that we should be thinking about strong trade relations with the Americas, particularly Mexico and Brazil because we don’t have to traverse oceans or move freight far. The cost savings, lower emissions, and immigration benefits are clear.

Other non-China partners in Asia would include South Korea, Japan, Singapore, and Taiwan. We can trade for higher-end goods with those nations and trade for lower-cost items with the Americas. As far as other nations go, Fuller points out that most countries want to work with the United States.

“They understand the economic power of America,” he said. “The dollar is the reserve currency, after all.”

India is on the sidelines of late, but they’re shifting more toward China and Russia, partially out of geographical convenience. Fuller says that we should look at Europe as a partner rather than as a rival, noting that they have reasons to support a system that’s built on post-Cold War realities.
“China and Russia have woken people up,” he told me. “China’s not friendly, not Western, and we’ve been reminded of that. One of the best things is how the world is lining up against Communism and authoritarianism after the invasion of Ukraine.”

 

“We need to work together with the nations we’re trading with to solve problems,” he added. “And we probably shouldn’t encourage trade with the Middle East. They’re not our friends.”

Fuller admits that, even though Freedom Trade is more of a concept than a policy, there’s already a movement that drives the United States toward doing business and encouraging investment with countries friendly to Western-style capitalism.

“Companies are already near-shoring and moving from overseas back to the Americas,” he said. “As we go through the next decade, we’ll see an acceleration of this.”

Some things will need to change to make Freedom Trade truly work for the American economy. Fuller states that the U.S. will have to have some honest conversations about ESG and energy policy.

“We need oil; oil is life,” he told me. “Modern society would collapse without energy, and we need to think about our energy production and where we’re going to get it.”

This will take investing in energy to grow our economy. Costs will continue to be a problem, as will inflation, as long as we pretend that we don’t need to produce our oil.

“I’m an environmentalist, and I’m all for sustainability, but you can’t move to a carbon-free economy,” Fuller stated unequivocally. “We have to accept that.”

He also told me that the conversation about electric vehicles has been blown out of proportion as well.

Freedom Trade is an exciting concept that we’re beginning to move toward. Who knows? In the near future — probably after this administration is out of power — we can move even further in that direction and reap the benefits of Freedom Trade.

The State of Logistics in a Supply Chain Crisis and Struggling Economy

Pa. Democrat Congresswoman Goes Full Nazi, Says GOP Must Be Cleansed