President-elect Donald Trump is considering imposing a 25-percent tariff on Canadian and Mexican imports because, he has stated, neither country has done enough to stem the flow of undocumented migrants and drugs entering the United States. This is in addition to his campaign promise to place a 60-percent tariff on imports from China and a 10-percent one on imports from other countries.  

This broad and promiscuous use of tariffs as a negotiating tactic is misguided and has serious consequences for the U.S. economy. Tariffs on Mexico and Canada will almost certainly result in higher prices, while tariffs on Chinese imports could not only raise costs but lead to shortages of critical goods. Economists estimate additional household costs will be at least $1,700 annually if Trump’s tariffs are enacted. Unfortunately, Trump rebuffed reports earlier this month that he would pare back the tariffs. “Fake news,” he said.  

The President-elect’s approach, an expansion of his first-term policies, is misguided, unfocused, and all too familiar. Rather than across-the-board tariffs, the incoming administration should use targeted tariffs to strengthen U.S. manufacturing. 

The tariffs Trump slapped on personal protective equipment during his first term exemplified an unfocused trade policy that’s only becoming more unruly. In 2018, his administration began a trade war with China, including Section 301 tariffs on PPE equipment such as masks, gloves, disinfectants, gowns, and other products. These 15-25 percent tariffs were a cause of rising medical supply costs and shortages during the COVID-19 pandemic. The price increase caused a decrease in imports and dwindling stockpiles. Even worse, Trump’s tariffs were not accompanied by any plan to build domestic industrial capacity until after the pandemic began in March 2020. His administration delayed using a 1950s law to compel manufacturers to take up the PPE slack. As a result, U.S. hospitals and consumers could not procure enough PPE equipment at the outset of the pandemic.  

The pandemic may have receded, but medicine remains a critical industry that would be affected by Trump’s blunderbuss tariffs in a second term—with alarming results. China supplies us with large amounts of Ibuprofen, hydrocortisone, acetaminophen, penicillin, and heparin. Chinese firms, for example, control 97 percent of the global production of antibiotics. Furthermore, China has control of the upstream materials, such as raw materials and active pharmaceutical ingredients needed for drug production. The Trump administration would be unwise to impose Chinese medical tariffs absent a surge in American capacity.  

The incoming Trump administration must take stock of our import dependencies and develop a convincing plan to overcome them. Although the Biden administration, unfortunately, continued some of Trump’s first-term tariffs and imposed its own, it provided a time window to scale domestic production of critical industries. 

For instance, in May, it placed a 100-percent tariff on Chinese-made electric vehicles while announcing that it would raise tariffs on EV batteries to 25 percent from 7.5 percent. These tariffs have a negligible impact in the U.S. as China’s largest EV manufacturer, BYD, has no market presence here. Even other Chinese-owned EV makers, such as Polestar and Volvo, have tiny market shares. Allowing Chinese EV makers into the U.S. market before domestic EV manufacturers can scale would be an “extinction-level event,” according to the Alliance for Automotive Innovation, a trade group. Chinese EV makers have had a head start on scaling production as they have benefited from government subsidies long before domestic U.S. competitors.  

In the May announcement, the Biden administration also targeted lithium-ion batteries, for which China controls two-thirds of the world’s manufacturing capacity. Continuing to allow Chinese manufacturers to monopolize U.S. battery markets would undermine our supply chain resiliency. Industrial policy measures are explicitly being used to shore up this production and address this vulnerability through a tax credit from the Inflation Reduction Act targeting EV batteries. These tax credits have been paired with loan programs to expand the EV industry. EV adoption has steadily increased in the U.S., and sales increased by 50 percent in 2023 compared to 2022. In 2024, sales increased by 7 percent compared to 2023, indicating increasing sales as brands focus on targeting mainstream consumers. Competition is growing as major automakers such as GM and Ford sold record levels of EVs in 2024. GM has begun to see an increase in EV sales, and this autumn, its CEO said it expects to earn a profit by the end of 2024. This competitive landscape characterizes the industry, as market leaders like Tesla have seen sales decline and lost market share. 

The Trump administration also targeted Chinese solar panels, imposing a 30-percent tariff on solar equipment in 2018, with a 5 percent decrease each year until 2022. These tariffs remained in place under President Biden. These tariffs were not accompanied by a plan to scale the production of solar panels in the U.S. As a result of the tariffs, solar panel production from China plummeted, but Chinese manufacturers moved production to Southeast Asian countries.  

To combat this circumvention, the Biden administration placed a 50-percent tariff on imports of solar panels from Chinese manufacturers in Cambodia, Malaysia, Thailand, and Vietnam. But, the administration allowed a two-year tariff exemption, which led to stockpiling and a glut of solar panels in the U.S. American firms that install solar panels have been stockpiling Chinese panels in U.S. warehouses and have enough for a year and a half of installations. With shortages of transformers and needed upgrades to aging electrical grids, there is no urgency to import foreign panels and modules rather than wait for domestic suppliers to scale their manufacturing. Domestic suppliers can scale production and take advantage of tax breaks two to three years from now. For example, due to domestic subsidies, the IEA expects the U.S. manufacturing capacity of solar panels to meet 35 percent of U.S. demand by 2028.  

The Biden administration, realizing manufacturers need time to scale, has provided a window for them. Last year, the administration announced plans to raise tariffs on Chinese goods, such as medical equipment, graphite, and magnets, to 25 percent by 2026. The administration has already taken measures, such as invoking the Defense Production Act, to incentivize domestic production of these goods to mitigate the risks of major, immediate supply chain disruptions.  

As Katherine Tai, the U.S. Trade Representative, has noted, “Tariffs are part of the solution,” but “just slapping them down doesn’t make them effective…you have to have a theory for what you’re trying to accomplish. And for us, it’s about strengthening the American economy with an eye to these critical industries.” 

The post Donald Trump’s Blunderbuss Trade Plans appeared first on Washington Monthly.

Click here for the Monthly‘s Presidential Accomplishment Index and more essays comparing Trump and Biden’s achievements in office.

For decades prior to the election of 2016, the leaders of both parties differed on many issues but adhered to what came to be known as “the Washington consensus.” Elite Democrats and Republicans bought into the idea that by dropping tariffs and other regulatory constraints to global trade, America would achieve broad prosperity while also securing its geopolitical interests. Imports might dry up U.S. factory jobs, they conceded, but that would allow more Americans to realize their comparative advantage as “knowledge workers.” 

Both parties also endorsed the idea that by opening up trade with China and other developing nations, the United States could help spread democracy and secure a peaceful global order. In explaining his decision to support China in becoming a member of the World Trade Organization, President Bill Clinton remarked in 1999, “If you believe in a future of greater openness and freedom for the people of China, you ought to be for this agreement. If you believe in a future of greater prosperity for the American people, you certainly should be for this agreement.”

To be sure, there were some voices in the Republican Party, and more in the Democratic Party, who dissented from this view. They pointed, variously, to mounting U.S. trade deficits; to the hollowing-out of America’s industrial base and the downward mobility of the working class; to unfair competition from deeply subsidized, tax-evading international corporations that flouted even minimal labor and environmental standards. Some of these critics even ran for president (Pat Buchanan, Richard Gephardt, Bernie Sanders). But none were able to convince a majority of their party’s voters.

That changed in 2016 when Donald Trump won the presidency. Trump promised that by tearing up treaties like the North American Free Trade Agreement (NAFTA), which had been proposed by George H. W. Bush and signed by Clinton, he would help restore America to greatness. “Under a Trump presidency, the American worker will finally have a president who will protect them and fight for them,” Trump promised. “We will stand up to trade cheating. Cheating. Cheaters, that’s what they are. Cheaters. We will stand up to trade cheating anywhere and everywhere it threatens the American job.”

Four years later, Democrats, too, elected a president who broke dramatically with the old Washington census. But as President Joe Biden completes his first term, the differences between how he and Trump have used public policy to manage America’s economic place in the world could not be more stark. Trump pursued what can fairly be described as “protectionist,” or “beggar-thy-neighbor,” policies, which favored some domestic industries but hurt others while damaging relations with key allies. His administration operated on the theory that if U.S.-based companies sold more stuff to a foreign country than its corporations sold to us, all Americans, including workers, consumers, and other U.S. companies, would be winners. Meanwhile, Trump’s strategy to bring back manufacturing jobs relied mostly on the idea that a large tax cut for corporations would lead to more capital investment in American factories. 

Biden, by contrast, while keeping in place some tariffs imposed by Trump, has operated from very different principles and deployed a much wider range of policies. Biden views trade policy as about more than the narrow, mercantilist measure of whether exports with any one country or another are greater than imports. He also views trade policy as part of a much larger suite of tools that governments should use to structure markets so they serve a broad range of public proposes, ranging from national security needs to the rights of labor and environmental protection. It’s an all-of-government approach that combines large public investments in key infrastructure and domestic industries with checks on monopolistic concentrations of political economic power, whether by foreign or domestic corporations or authoritarian governments. 

Congress long ago gave to American presidents the power to impose temporary duties and other trade measures in cases that involve certified threats to national security or the vitality of U.S. industry. This power was rarely wielded in the past, but early on in his administration, Trump used it to slap tariffs on imported washing machines and solar cells as well as on steel and aluminum imports, while also walking away from the big, multilateral Trans-Pacific Partnership deal negotiated by Barack Obama. The administration then used these tariffs as leverage as it renegotiated past deals, such as a replacement for NAFTA and revised bilateral agreements with Korea, Japan, and the European Union. It also provoked a full-fledged trade war with China by imposing tariffs on more than $300 billion in Chinese imports. 

Overall, these efforts did not achieve Trump’s aim of lowering the trade deficit, though, measured as a share of GDP, the deficit did decline slightly between 2017 and 2020. Many countries retaliated by imposing tariffs on products made in the United States, to the point that Trump signed off on massive subsidies to keep American farmers afloat. China did eventually commit to buying $200 billion in U.S. exports, but in the end bought none of the exports Trump’s deal had promised. Meanwhile, U.S. companies pulled some production out of China, but mostly shifted it to other Asian countries rather than returning it to the United States. During the first two years of the Trump administration, the number of manufacturing jobs in the U.S. increased at a rate no higher than during Obama’s last seven years in office before slowing sharply in 2019, and then collapsed in 2020 during the COVID-19 pandemic. 

Another hallmark of Trump’s trade record was his deference to a few, highly concentrated American industries. In negotiating a replacement for NAFTA, for example, Trump did the bidding of large digital tech companies by pressing for provisions that prevent Canada and Mexico from regulating the flow of digital data across their borders. Trump also deferred to the demands of large U.S. oil companies by carrying over provisions in NAFTA that benefited their bottom lines, such as the ability to move refined petroleum products across borders tax free. In general, the Trump administration pressed for trade provisions that limited the ability of both foreign governments and our own to impose restraints on international corporations and their investors, including through enforcement of domestic content or anti-monopoly laws. In other words, while using the language of populism, Trump pursued trade policy that continued to serve elite, corporate agendas. 

Trump promises that if he is returned to office he will bring much more of the same when it comes to trade. He is proposing 10 percent across-the-board levies on imports and threatening still higher tariffs on other countries. 

President Biden’s approach, by contrast, is informed by an entirely different conception of what went wrong with the Washington consensus and how to fix it. To begin with, during his first term, Biden passed landmark legislation that took direct aim at American industrial competitiveness through public investment. To date, legislation such as the CHIPS and Science Act, the Inflation Reduction Act, and the Infrastructure Investment and Jobs Act has led to the announcement of more than $640 billion in private-sector clean energy and manufacturing investments and over $200 billion in manufacturing construction spending. 

These direct, targeted investments in key U.S. industries contrast sharply with the Trump administration’s approach to industrial policy, which mostly involved across-the-board tax cuts for corporations. The other key difference is seen in the way the two presidents have handled traditional trade negotiations between nations.

Biden and his advisers are not just concerned with how the old “free trade” regime shifted production away from the U.S. to wherever wages and regulatory standards were lowest. They are also focused on how it concentrated production geographically in ways that left supply chains vulnerable to shocks from pandemics, climate change, and armed conflict as well as to cornering by monopolistic corporations. And they are focused on making sure that trade policy not only serves the interests of American workers but also advances what Biden’s trade representative, Katherine Tai, provocatively calls a “postcolonial” phase, in which poorer nations share more high-value production and are not forced to earn their living through sweatshop labor. 

Taken together, these factors cause the Biden administration to conclude that we need policies that spread production to more places around the world, including but not limited to the United States. Unlike Trump, who focused on re-shoring production, Biden is more about what Treasury Secretary Janet Yellen calls “friend-shoring”—or shifting production away from excessive concentration in China and unstable, despotic countries and spreading it instead among a resilient network of allies who share our political values and market rules. 

One expression of this philosophy is Biden’s decision to suspend the 25 percent tariff Trump imposed on European steel, and to pursue instead a new “Green Steel Club.” This trading bloc would require member countries to ensure that their steel and aluminum industries meet more stringent emissions standards and place tariffs on more carbon-intensive steel and aluminum. The plan would box out Chinese producers, who have flooded the market over the past decades and account for about half of the world’s capacity. To date, however, Biden has not persuaded the Europeans to sign on. One challenge with bringing this and other multilateral deals over the finish line is fear among trading partners that their economies will be hurt as investors chase subsidies the Biden administration has put in place for green-energy technology and microchips that are made in America. 

Another example of the “friend-shoring” approach is Biden’s pursuit of a trade agreement with various Asian countries known as the Indo-Pacific Economic Framework. IPEF aims to create a standard for policy coordination on supply chains, clean energy, the fair economy, and trade. If enacted, the agreement will result in a club of countries with similar standards on major trade issues, and is likely to exclude China. Currently negotiations are on hold, however, to allow Congress and the administration to deal with demands by Big Tech firms for special protections. Some Democrats are also worried that the administration will not push hard enough for enforceable labor standards in the deal. The administration has managed to sign a smaller deal with Taiwan and Japan. 

Meanwhile, Biden continues to use trade policy to take a hard line on China, reflecting a new bipartisan consensus that China’s mercantilist policies, human rights violations, and increasingly aggressive geopolitical ambitions make its continued integration with the rest of the global economy increasingly dangerous. Accordingly, the administration has retained all the tariffs that the Trump White House placed on Chinese imports in 2018 and 2019. It has also taken aim at China’s ability to compete in advanced digital technology by imposing sweeping restrictions on its ability to import semiconductor chips produced with American equipment. Biden has also signed an executive order aimed at restricting U.S. investment in Chinese semiconductors, quantum information technologies, and artificial intelligence. Similarly, Biden signed the Uyghur Forced Labor Prevention Act in 2021, which restricts the import of all goods made with forced labor in the Xinjiang Uyghur Autonomous Region in China. Xinjiang produces nearly half of the world’s solar-grade polysilicon, the key material in solar panels. 

As Biden stands for reelection, he can point to one of the strongest economies on record by many measures. This includes a sharp increase in manufacturing employment since 2020, even steeper increases in manufacturing investment, and a trade deficit that in 2023 contracted by the largest amount in 14 years. But many of Biden’s biggest initiatives, including the commitments for massive new spending on infrastructure and green energy, are only beginning to come online. Similarly, the profound changes in trade policy articulated by Biden and his advisers have not yet led to dramatic new trade deals, though they might if Biden gets a second term. One certain accomplishment that Biden can claim, however, and one that could define his place in history, is that he plotted a new course for America’s political economy that broke with failed policies of the past, including the neoliberal orthodoxy of the Washington consensus and Trump’s crude faux populism.  

The post Trump vs. Biden: Who Got More Done on Trade? appeared first on Washington Monthly.

Major establishment voices, including some who are otherwise fans of “Bidenomics,” have been lambasting the president in recent weeks for his opposition to the planned sale of U.S. Steel to Nippon Steel of Japan. The Washington Post editorial board, for example, has charged that Joe Biden is undermining his own economic program by opposing the deal, which it says will bring an infusion of badly needed capital into U.S. Steel’s aging mills. Similarly, The New York Times published a guest editorial by economics writer Roger Lowenstein, who argued that blocking the deal would be “destructive to American interests overseas and at home” and that Biden’s trade policy is “Trump-lite.” For its part, the Washington Monthly has run one piece supporting the merger, “Approve the Nippon-U.S. Steel Deal” by Mike Lofgren, author and career defense analyst for the House and Senate Budget Committees, as well as one by former Pittsburgh Mayor Bill Peduto (“Steel Can Lead the Green Revolution”) which noted that, while the purchase was being frowned upon in his hometown, also pointed to the upside if the Japanese steel giant invested in clean technology: “Nippon has the opportunity to create 21st-century mills powered by green hydrogen that can bring Pittsburgh back to the world stage in advanced and heavy manufacturing.”

Yet a closer look reveals that Biden’s decision is not lurching toward protectionism, let alone following Trump’s example. To be sure, Trump also opposes the Nippon-U.S. Steel deal, but for reasons rooted solely in primitive economic nationalism. Biden’s opposition, by contrast, is in line with his efforts to address concentrated and fragile global supply chains while decarbonizing the economy.

Start with the environmental piece. Globally, steel production is responsible for 11 percent of the world’s carbon emissions. Reducing this number is essential to any serious effort to slow and reverse climate change. Accordingly, the Biden administration is negotiating with other responsible governments to form a Global Arrangement on Sustainable Steel and Aluminum, commonly known as a “Green Steel Club.” The arrangement would set high tariffs on carbon-intensive steel imported from countries with unsustainable practices, which mostly means China.

China is not only the world’s largest steel producer, controlling 55 percent of global production, but also one of the dirtiest. Fully 90 percent of China’s steel is produced using blast furnaces, which require large amounts of coking coal. For every ton of Chinese steel produced, about half a ton of coking coal is used as an input. When it comes to producing steel with less carbon emissions, China remains a laggard, so shifting more production away from China will benefit the whole planet.

Yet another laggard in efforts to decarbonize steel production is Japan’s Nippon Steel, the world’s fourth-largest steelmaker. The company recently announced that it is “considering” a $733 million investment in green steel produced by hydrogen in Australia or Brazil. But, according to Industrious Labs, the company doesn’t have a legitimate plan to transition away from blast furnaces and incorporate zero-carbon technologies into its processes. The company has been ranked among the worst performers among its Asian counterparts in decarbonization.

So, what would Nippon do with U.S. Steel? If the deals go through, Nippon would gain control of six blast furnaces in the U.S., including three of the highest polluting steel mills in the Midwest. Would Nippon replace those plants or, at least, invest in making them cleaner? It’s possible, but nothing in the past behavior of this company (with a market capitalization of over $23 billion) suggests it would. Meanwhile, Nippon does not need to make such an investment because its dirty steel-producing facilities in the U.S. would be safely protected behind the Green Steel Club’s trade barrier.

Biden’s opposition to Nippon’s takeover of U.S. Steel is consistent with his efforts to lessen America’s dependence on insecure, over-extended supply chains. As one of the president’s closest economic advisors, Lael Brainard, the director of the National Economic Council, put it, “The purchase of this iconic American-owned company by a foreign entity—even one from a close ally—appears to deserve serious scrutiny in terms of its potential impact on national security and supply chain reliability.” The administration must also continue to address China’s massive and unfair steel subsidization and promote a global transition to green steel, which can help the environment, produce resilient supply chains, and create American steel jobs. In 2015 and 2016, the U.S. lost 16,000 steel jobs because of unfair trade practices. It needs to be addressed whether Nippon’s acquisition hinders America’s efforts.

If the deal goes through, Nippon might invest more in building up steel production in the U.S., or it might not, but regardless, a purchase of U.S. Steel will leave foreign investors controlling still more of America’s strategic industrial base, and not in a way likely to spur investment in green technology. Biden is hardly being protectionist, let alone a Trumpist, when he says that the last thing that we need to be doing is selling off more of our remaining industrial base to overseas investors with a history of being major polluters. As the president has clearly stated: “It is important that we maintain strong American steel companies powered by American steel workers.”

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On Tuesday, President Joe Biden will sign the CHIPS and Science Act. The $280 billion bill was passed with a solid bipartisan majority in both the House and Senate, which is a rare feat. But these are unusual times: A major shortage of semiconductors that has obstructed industrial production for two years has also underscored the nation’s dire situation regarding the chips that drive everything from cars to ovens to computers. The United States invented the microprocessor only to see its manufacture and development migrate to other nations.

The bill is, on balance, a benefit to the U.S. It is expected to ramp up the production of microchips by providing $52 billion to chip makers and subcontractors to build facilities in the U.S. The majority of the bill’s funding goes toward scientific research.

There are assorted guardrails in the bill to ensure that the semiconductor money only goes to the domestic production of chips. While guardrails tend to be overrun, this is, at least, a start. Without the federal infusion of cash, the U.S. will find it even harder to catch up to Taiwan and China.

Unfortunately, the act that Biden will sign doesn’t curb the tactics that have reduced our ability to produce vital goods.

It’s a familiar story. Manufacturers shutter plants in the U.S. and offshore much of their capacity to one or two locations, creating an extreme concentration of industrial production. When production is that concentrated, supply chains become impossibly fragile, which happens with semiconductors. During the pandemic, much of the used and new car shortages have been semiconductor shortages. Modern cars can have hundreds in a single vehicle; no chips, no car.

In particular, the chip industry, motivated by the goal of returning value to shareholders, took advantage of the liberalization of global trade, which made it easier to move production facilities to a few locations abroad.

Many of these corporations looked for single-source suppliers and employed just-in-time distribution to cut costs, increasing the fragility of the chip supply chain. A new report from the Open Markets Institute points out that a single source dominates critical nodes in the supply chain. (I work at OMI and worked on this report.)

Eighty percent of the coolants needed for the chip industry come from one plant in Belgium and 10 percent from one plant in Italy. Together, China and Taiwan account for at least 66 percent of the chip assembly, test, and packaging (ATP) market. Japan controls 90 percent of the market for photoresists, which create circuit patterns on chips. DuPont, with facilities in Taiwan and Japan, has 78 percent of the market for CMP slurry, which prepares microchips for lithography. The Dutch company ASML has a 90 percent market share in lithography needed for chip making, while 55 percent of the required sputtering process for chips is controlled by one company, JX Nippon, in Japan. NuFlare Technology has 50 percent of the market in electron beam mask writers and has one listed facility in Yokohama, Japan. Mycronic Technologies, based in Sweden, is the sole source supplier of laser mask writers. You get the point.

This dangerous concentration of production doesn’t just exist in the chip sector; it’s also in every other industry the Biden administration has identified as needing a resilient supply chain.

Take pharmaceuticals. In 1984, generic drugs made up 19 percent of prescriptions in the U.S., but by 2019 they accounted for 90 percent. The passage of the Hatch-Waxman Act in 1984 led to this rise in the use of generic drugs by streamlining the regulatory approval process. While the act increased competition and lowered drug prices, corporations such as Pfizer, GlaxoSmithKline, and Novartis moved production to Asia to take advantage of lower operating costs and government support. This shift had such an impact that, until this year, the last major facility that produced active pharmaceutical ingredients in the U.S. was built 30 years ago. Now, China and India produce, by some estimates, 80 percent of the active ingredients used to make generics sold in the U.S.

While the CHIPS Act’s emphasis on domestic production of semiconductors is welcome, Washington should also ensure that chip makers diversify production and suppliers in the U.S. and abroad as a condition for receiving taxpayer funds.

Additionally, restrictions on stock buybacks, executive payouts, mergers, and offshoring should be imposed. Since the 1980s, corporations’ investment in capital expenditures and labor as a percent of profits and debt has declined dramatically. Stock buybacks are reaching record levels, with $319 billion in March alone.Meanwhile, the Chinese semiconductor company SMIC announced last month that it had achieved production of 7nm microchips despite U.S. sanctions against the company. The advanced microchips will be the basis for emerging technology ranging from quantum computing to artificial intelligence. More concerning is that the American manufacturer Intel has yet to introduce 7nm chips. According to reports, SMIC copied the process technology of the Taiwanese manufacturer TSMC, which holds 90 percent of the market share in these advanced chips. So now, only two countries can manufacture 7nm chips, and the U.S. isn’t one of them. That’s why the CHIPS Act is a start—but only a start.

The post Two Cheers for the New CHIPS and Science Act appeared first on Washington Monthly.

This week, Russian forces, attempting to subdue Ukraine, launched missile strikes at its capital, Kyiv, beginning the largest military conflict in Europe since World War II. The U.S. and its allies have started sanctioning Russian financial institutions, oligarchs, and high-tech sectors, stopping Russia’s ability to raise debt in foreign markets. Allies also halted the approval of Nord Stream 2, a natural gas pipeline through Europe built by Moscow’s state-owned energy company Gazprom. 

President Joe Biden has signaled more severe sanctions are coming. One of these could include cutting off Russia from SWIFT, the Society for Worldwide Interbank Financial Telecommunication, over which 200 countries conduct financial transactions. This would mean Russia would be unable to engage in international trade. But that action comes with an even greater risk for the world economy. 

The problem with our sanctions regime is that Russia has crucial global monopolies, not only significant positions in energy, which are well known, but especially in the global fertilizer supply chain—which are considerably less well known. Any sanction has the potential to drastically influence the supply and price of fertilizer and, thus, food on the world market. 

“This is why monopoly is a problem. They’re in the dominant bargaining position now,” says Peter Rutland, a professor of Government at Wesleyan University and Russia expert. 

The global fertilizer industry includes three main categories: nitrogen, potash, and phosphorus fertilizers. Potash is a potassium-rich salt fertilizer that enhances plant quality and is responsible for 20 percent of global fertilizer demand. 

With its most fervent ally in Europe, Belarus, Russia has a 40 percent market share in global production and export of potash fertilizer. The two autocracies form an informal cartel in the potash market, made up of Uralkali and Belaruskali, with the Belarusian Potash Company being the latter’s export arm. Late last year, the U.S. imposed sanctions on Belarus Potash Company (BPC), the main export arm of producer Belaruskali. It claimed Belarus intentionally created a migrant crisis at the Polish border. The sanctions applied only to U.S. enterprises doing business with the Belarusian company. 

Earlier this year, Lithuanian Railways, encouraged by the U.S., halted shipments of Belarusian potash through its Klaipeda port which is Belarus’ main entryway for potash into Europe. Belarusian potash is now being reshipped through Russian railways, giving Russia greater control over a critical commodity; Russia may even buy the potash and resell it as it continues its exports. 

Before sanctions were imposed, global potash prices were already at a 13-year high. Prices have soared over the past year, alarming farmers across the world. Potash prices saw a 71 percent increase in 2021 from $350 per ton to $600 per ton; the spot prices last week showed that number has reached $815 per ton. U.S. sanctions on Belarus are likely to exacerbate the issue, with Belaruskali announcing last week that it wouldn’t be able to meet its contracts. One of the world’s largest fertilizer companies, Yara International, headquartered in Norway, announced it would reduce its sourcing of Belarusian potash by April. Other corporations in the potash industry are not planning on increasing production and would face challenges in their attempts. 

The ease with which Russia can impact the food market was demonstrated during the 2007-2008 global food price crisis. Russia and Belarus cut potash production to drastically raise prices and increase profits, with CFO Victor Belyakov stating at the time that “price was more important than volume.” Between January 2008 and October 2009, the price of potash increased by 400 percent while production dropped by 39 percent and shipments declined by 43 percent. Potash producer profits peaked at 480 percent in mid-2008. 

Russia is also a dominant player in the world nitrogen fertilizer market. While it only has a 16.5 percent market share of global exports, Russia manufactures ammonium nitrate, the key ingredient needed for the fertilizer and has a close to 66 percent global market share in the production of the chemical. 

Earlier this month, Russia decided to impose an export ban on the ammonium nitrate to ensure an affordable supply for its own farmers until April 2nd. This ban could raise the price of fertilizer in the U.S. at a time when the price of urea and diammonium phosphate (DAP), two fertilizers requiring ammonium nitrate, have been up90 percent and 30 percent in the past year. Additionally, Russia’s power in the export market for nitrogen fertilizer over the past few decades has meant having dominant market shares ranging from 60 to 100 percent in nitrogen fertilizer exports to key U.S. allies and NATO members.  

Russia also provides a key input needed for phosphate fertilizer. Through its company Uralchem, Russia provides ammonia to Morocco, the largest phosphate fertilizer producer in the world with 75 percent of phosphate reserves. The country’s government-owned phosphate fertilizer producer OCP has about a 34 percent market share globally and 49 percent in phosphoric acid needed for the fertilizer. Morocco sources more than half of their ammonia from Russia, and any disruption to this supply would roil the global market. Russian fertilizer companies have recently gained a monopolistic position over imports of phosphate fertilizer into Europe over the past year by supplying low cadmium fertilizer, which became required under a new EU directive in 2019. Morocco, Europe’s foremost supplier, has higher cadmium levels in their phosphate fertilizer, putting them at a disadvantage. 

In addition to fertilizer, Russia has weaponized its wheat production and become the world’s leading exporter of the grain, topping the list in 2016 and doubling its exports over the past decade. This is especially true for the Middle East and North Africa region, with Turkey supplying over 80 percent of the region’s wheat import needs at below-market prices. Even Turkey, for example, imports 75 percent of its wheat from Russia. The Russian boom in grain exports has even added pressure to a struggling industry in the U.S.

Russia sits at the fulcrum of the global food supply chain. That should be a lesson to foreign policy and security experts in Washington. Such dependence on monopolists is a significant impediment to efforts to ensure peace abroad and protect democratic allies. Going forward, the U.S. would do well to break upinstances of economic concentration abroad, using various trade tools and sanctions, before monopolies can be used as geopolitical weapons, like in the case of Russia. 

Over the past few decades, due to weak global antitrust enforcement against these monopolists, the world has suffered from high fertilizer prices and controlled supply. But these types of problems have also plagued the U.S. at home, contributing to rising costs for farmers and consumers. In North America, a cartel known as Canpotex, consisting of Mosiac and Nutrien, controls the U.S. potash market. Mosiac controls over 90 percent of the U.S. market for phosphorus fertilizers. Mosiac gained a monopoly position after the U.S., reliant on Morocco and Russia, imposed anti-dumping on the two countries late last year.

Whichever additional sanctions the U.S. takes against Russia, it will have to grapple with Moscow’s monopolistic role in supply chain chokepoints in major industries such as food. This may mean the U.S. and its allies enacting an industrial policy that involves building out enough capacity of fertilizer and chemicals to stabilize the world market and help allies diversify away from Russian sources. 

“It’s like buying insurance,” says Wesleyan’s Rutland. “It’s an economic decision not to invest in diversification and when the hurricane arrives, you wish you had more insurance but it’s too late.” 

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Last February, President Joe Biden issued an executive order commanding agencies throughout the government to report on ways to fix America’s supply chain mess. He ordered the secretary of the Department of Health and Human Services to tell him what to do about the country’s near-total dependence on China for the key ingredients needed to produce vital pharmaceuticals. He tasked the secretaries of the Energy and Defense Departments with finding solutions to our growing dependence on foreign corporations for the materials needed to make everything from electric vehicle batteries to computer-guided munitions.

And he ordered the secretary of the Department of Commerce to come up with solutions to what is perhaps the most urgent supply chain bottleneck of them all: the acute shortage of semiconductors that is driving up the prices and limiting the availability of a broad range of consumer goods, ranging from cars to TVs, laptops, phones, and even household appliances like washing machines and toasters.

When the reports came back 100 days later, the agencies listed a variety of different factors at work, but all agreed on one root cause. As the White House politely summarized it, the big problem was “misaligned incentives and short-termism in private markets.” Noting that America’s major corporations had spent the past decade distributing nearly all of their net income to shareholders in the form of stock buybacks and dividends, the White House concluded that “a focus on maximizing short-term capital returns had led to the private sector’s underinvestment in long-term resilience.” In other words, the ultimate explanation is Wall Street greed.

Yet strangely, when it came to proposing solutions, the White House had nothing to say about reining in the power of financiers over American business. Instead, the administration called for more government spending on science and technology, plus a wide range of new direct and indirect corporate subsidies for computer chip makers. Since then, with White House encouragement, a bipartisan coalition has passed a bill in the Senate, the U.S. Innovation and Competition Act, that takes the same approach. It offers more than $50 billion in subsidies to domestic semiconductor manufacturers, for example, but without taking any measures to ensure that the companies don’t continue to offshore production or use the funds to increase CEO pay or buy back their own stock. On November 15, Senate Majority Leader Chuck Schumer announced plans to push the bill through the House by attaching it to a must-pass defense policy bill.

There’s nothing wrong per se with government using corporate subsidies to achieve public purposes. But this legislation doesn’t address the core problem the administration itself identified. Over the past 40 years, financial deregulation combined with lax antitrust enforcement and poorly conceived trade policies have shifted power away from people who know how to invent, manufacture, and deliver products and toward people who know how to make money through financial manipulation. Until we take on that problem, our country’s ability to ensure uninterrupted access to the microprocessors and other vital components and raw materials on which our security and prosperity depend will become only that much more vulnerable to disruption and even collapse.

To see how this dynamic works, consider the fate of a company that not so long ago was a symbol of America’s absolute technological dominance of the digital age, from its inception in the early 1950s well into the first decade of the 21st century. The decline of Intel nicely illustrates what happens when a tech corporation pays more attention to raising its stock price than coming up with better products.

Many of the first chip technologies were pioneered by Intel. They included the 8088 microprocessors released in 1979, which long served as the foundation of personal computers. They also included the first commercially available dynamic random access memory chip, released in 1970, the basis for storing data on computer hard drives.

The personal computer revolution of the 1980s and ’90s created a boom in demand for Intel’s products, and for years the corporation prospered. But as time went by, Intel increasingly used its resources to focus on protecting its monopoly profits in the microprocessor market for PCs and on buying back its own stock to boost the price.

To protect its monopoly, Intel used illegal tactics such as loss leading and subsidizing the advertising costs of PC makers that used Intel chips. Through such maneuvers, Intel so weakened its one remaining U.S. rival, Advanced Micro Devices, that AMD was forced to sell off its own manufacturing facilities to the semiconductor firm Global Foundries, which was controlled by a state-owned investment firm in the United Arab Emirates. With AMD knocked down, Intel could deliver even more of the short-term profits Wall Street demanded.

To further boost its stock price, Intel purchased $48.3 billion of its own stock from other investors between 2001 and 2010 rather than put the money to work making more advanced chips for the mobile revolution, or building new foundries. Intel even spent $10.6 billion on stock buybacks in 2005, the same year it successfully lobbied the government for increased subsidies for its nanotechnology research. In all, 113 percent of Intel’s net income during that decade went to stock buybacks and dividend payouts.

Then the process actually accelerated. Between 2011 and 2015, Intel spent $36 billion in buybacks and $22 billion in dividends to shareholders. From 2016 to 2020, these numbers increased to $45 billion and $27 billion respectively.

Meanwhile, Asian chip makers such as TSMC and Samsung focused mainly on reinvesting their profits in capital expenditures, eclipsing Intel in this spending starting in 2015. TSMC and Samsung also focused on emerging technologies. While Intel was monopolizing the market for PC microprocessors and servers, other new semiconductor companies were breaking into the newly emerging smartphone and tablet market and utilizing TSMC’s and Samsung’s foundry services to make more advanced chips. The manufacturing expertise of these two companies benefited immensely from making the smaller, more efficient chips needed for tablets and phones. TSMC now has a market share of more than 80 percent in these smaller chips, which are also being used to power the highest-end PCs, while Intel is still a year away from developing them.

TSMC and Samsung are not likely to give up their lead. TSMC is moving fast to protect its technological prowess, with plans to spend $28 billion on capacity to keep up with demand for 200mm wafers, the chips used in appliances and automobiles, and to expand production of more advanced process technologies, which so far only TSMC and Samsung have mastered. To compete with TSMC, Samsung has announced plans to spend $151 billion just on logic-based non-memory chips, the main chips used in computers and electronics and the largest segment of the semiconductor market.

The numbers are causing a growing innovation gap. TSMC’s 2021 capital expenditures are expected to be 133 percent greater than Intel’s. With that investment, TSMC is planning to produce highly advanced 3-nanometer chips by next year while also starting construction on a facility to make even smaller, more advanced chips. Even Apple, which long used Intel chips in its computers, is now contracting with TSMC for the production of the super-advanced M1 chips that drive its latest generation of Macs. As Bloomberg recently summarized the situation, “As chip rivals struggle, TSMC moves in for the kill.”

Intel’s decline was foreshadowed by the sad fate of Motorola. For years, the company was a pioneer of technological innovation, and a foundation of U.S. economic strength. Motorola created the first pager and the first handheld mobile phone, and its semiconductors helped power the first Macintosh computers. By the 1990s, Motorola led the market in the sale of cellular products.

Motorola became such an innovative company because for most of its history it was led by engineers who interacted with one another through highly decentralized systems of R&D and manufacturing. Indeed, it was long known as a “loose confederation of warring tribes,” with the engineers in each division having control over major decisions. This approach to corporate governance largely worked, until Wall Street began to ratchet up the pressure in the 1990s. Motorola was still profitable, but investors began to push the company to pump up share prices. The result was a plan to restructure Motorola’s priorities around marketing rather than manufacturing. When Motorola’s automobile chip business then came under fierce price competition from TSMC, which was able to loss-lead its products thanks to heavy subsidies by the Taiwanese government, Wall Street demanded that Motorola executives break their company into parts.

In 1998, Motorola sold off part of its semiconductor division to a consortium of private equity firms. Then, in 2001, Motorola began to shut down additional plants, lay off workers, reduce capital investment, and contract with outside manufacturers. Finally, in 2003, with pressure from Wall Street still mounting, Motorola spun off the remainder of its semiconductor division. The spin-off included the sale of its fabrication plant in Tianjin, China, to a Chinese corporation.

Other American semiconductor makers experienced much the same fate, and for the same reasons. LSI Logic, for example, was once a major player in the microprocessor market for data storage and consumer electronics. Its day of reckoning came in 2005 when its CEO, Abhi Talwalkar, decided to shutter its chip-fabrication plants—called “fabs”—and outsource production. Talwalkar emphasized the importance of cutting costs to please Wall Street, saying, “The adoption of a fabless model … is the right manufacturing strategy … to enhance value for [LSI’s] shareholders.”

Much the same story even played out at IBM, the company that invented modern computing. In 2014, under the leadership of CEO Ginni Rometty, the corporation announced a “strategic realignment” that meant retreating from any lines of business that might require increased funding to compete, like semiconductor fabrication. IBM, which once had the world’s third-largest maker of semiconductors, sold its semiconductor plants to Global Foundries for $1.5 billion, citing the division as unprofitable. That same year, the corporation engaged in billions in stock buybacks.

Justifying her actions later, Rometty said, “When it comes to managing for the long term, we sold our semiconductor manufacturing operations last year. We did it in order to move to higher value.”

Why did America’s most innovative tech companies become primarily focused on pleasing shareholders rather than pursuing innovation and long-term growth? A series of policy mistakes, some familiar and others obscure, provide the answer.

One lesser-known yet consequential policy change came in 1982 when the Securities and Exchange Commission (SEC) quietly issued a new rule that established so-called safe harbor protections for executives against charges of stock price manipulation. This policy change led to a radical shift in how CEOs are compensated—with traditional salaries being largely replaced by stock options. This change meant that CEOs now personally profited when they took measures to jack up short-term stock prices. “If you keep earnings up and pump up stock prices, you’re a success,” says Bill Reinsch, former undersecretary of export administration at the Department of Commerce.

Another key policy change came in 1992, when the SEC issued proxy rules that for the first time made it legal for shareholders to communicate freely with one another and to make public statements. What this meant in practice was that powerful financiers and large institutional investors could form cartels that concentrated both financial and political pressure on executive teams to cut costs and raise stock prices.

Then, in 1996, came the National Securities Markets Improvement Act. The bill allowed hedge funds to pool unlimited funds from institutional investors, ushering in the era of private equity. As financiers became able to take bigger stakes in corporations, stock “raiders” like Carl Icahn and Daniel Loeb found that they could exert even more direct pressure on managers and board members.

Meanwhile, trade agreements made by presidents of both parties weakened the federal government’s ability to pursue a coherent industrial policy by surrendering sovereignty to entities like the World Trade Organization. Because of such agreements, when China, Taiwan, and South Korea began using direct state subsidies to ramp up their own semiconductor industries in the 1990s and target American firms, the U.S. government was largely powerless to respond.

These measures, in combination with a relaxation of antitrust enforcement that began in the early 1980s, led to what is now often called the “financialization” of the U.S. economy. During this period, many “thought leaders” defended these measures to give Wall Street more power over other sectors of the economy as a way to more efficiently allocate capital, labor, and other resources. What we got instead was an industrial system controlled by a few highly predatory Wall Street bosses who demanded short-term profit maximization. In the real world, the result was the destruction of many of our most important industrial capacities and arts, and a fundamental undermining of our economic and national security, as demonstrated over the past two years in the long series of industrial production failures and supply chain collapses.

What’s to be done? It may be too much to ask Congress and the Biden administration to undo 40 years of bad trade and competition policy with a single stroke. But it’s not too much to ask that they at least not throw unconditional subsidies at the same people who engineered this mess. Under the current rules of the game, there is a good chance that many, if not most, of the subsidies we offer to tech firms will just flow to self-dealing CEOs and the Wall Street bosses they serve.

Minimally, the semiconductor bill the Senate is about to send to the House needs to be redrafted to impose firm conditions on the corporations that receive these public monies. For example, the bill could mandate that they not engage in buying back stock, in sending jobs offshore, or in paying executives more than 50 times what their median worker earns. If we are going to pay corporations to build factories in the U.S., we might even, as Vermont Senator Bernie Sanders has called for, demand in return that the public get some equity in those companies.

More broadly, why shouldn’t we push for legislation that would require any company selling essential finished goods in the United States—whether it’s prescription drugs or personal protection equipment, or cars or components needed for national defense—to document that they have multiple, geographically diverse suppliers? We don’t need all supply chains to be domestically sourced, but we do need to make sure, as a matter of public health, national security, and, ultimately, sustainability, that our supply chains do not become too concentrated in a single nation or region or under the control of a single corporation.

If there’s good news, it’s that key players in Washington finally appear to be waking up to this threat. Earlier this year, the Pentagon’s Office of Industrial Policy published its annual report on industrial policy and critical technologies, which strongly highlighted the dangers of the shareholder-activist philosophy and the threat the financial industry poses to sectors critical to our national security.

“Together, a US business climate that has favored short-term shareholder earnings (versus long- term capital investment), deindustrialization, and an abstract, radical vision of ‘free trade,’ without fair trade enforcement, have severely damaged America’s ability to arm itself today and in the future,” the Pentagon warned. “Our national responses—off-shoring and out-sourcing—have been inadequate and ultimately self-defeating.”

Or, as the industrial expert Bill Lazonick puts it, “Americans ought to know that what [Wall Street] is being allowed to do is the real enemy of America.”

The post To Fix the Supply Chain Mess, Take on Wall Street appeared first on Washington Monthly.

The assassination of Haitian President Jovenel Moïse in his home near the capital city of Port-au Prince earlier this month rocked the already beleaguered Caribbean nation, which is the poorest in the Western Hemisphere and has a history of political violence

According to Haitian authorities,  mercenaries stormed the president’s gated compound and shot and killed the 53-year-old former businessman, seriously injuring his wife, Martine. Moïse, a member of the center-right PHTK party, was a polarizing politician, accused in a 600-page report prepared by a panel of judges that he embezzled foreign aid from Venezuela. Moïse came to power as the chosen successor of President Michel Martelly, a popular musician who goes by the stage name Sweet Micky. He won office in the heavily disputed 2016 election amid claims of voting irregularities, intimidation, and violence.

Now more violence threatens to engulf the Caribbean nation of 11 million people, with leaders of the nation’s powerful criminal gangs calling for civil war. Adding to the chaos, Moïse has no clear or elected successor because the current Prime Minister’s term was set to expire this week, and its supreme court president died of Covid-19 days before the assassination.

The power vacuum and dangerous instability in the Francophone nation result from many factors, but the American media ignore big ones, including state capture by elites, a grim monopolism that characterizes the country’s economy, and neoliberal policies imposed by the United States and international institutions. These factors have played a significant role in creating a country characterized by a 14 percent unemployment rate and 60 percent of the population in poverty. Regardless of how the assassination unfolds, if Washington is serious about helping to stabilize Haiti’s government and lift its citizens out of misery, it should use its aid and influence to promote economic democracy through competition and anti-monopoly enforcement.

In Haiti, the wealthiest one percent controls almost half of the country’s wealth. Just over 600 families control 345 corporations. Groups of elite families have monopolistic control of broad swaths of industries through conglomerate structures. Three major banks—Unibank, Sogebank, and BNC—control 83 percent of Haiti’s banking assets and 75 percent of its loan portfolio. An astounding 70 percent of the loans are in the hands of a mere 10 percent of borrowers. In telecom, Digicel has an 85 percent market share in subscribers and acquired the second-largest provider Voilà in 2011. Even in the food industry, supermarkets and prepackaged foods are monopolized by few businesses. This has contributed to food prices 30 to 77 percent higher than other countries in Latin America. Some 38 percent of the import value in areas such as petroleum, food, and consumer goods, are imported into highly concentrated markets.

Furthermore, these companies engage in collusion and non-competitive policies by offering different products that don’t overlap, according to a 2018 report by the Famine Early Warning System, a leading provider of famine information created by the U.S. Agency for International Development in 1985.

The lack of competition in many industries means inputs in upstream and downstream markets for products are not priced competitively. It also hinders efficiency and productivity in the value chain. In Haiti, monopoly is a major deterrent to development because it creates barriers to entry and sustains anticompetitive practices. Many of these companies benefit from low import duties, import monopolies, tax write-offs, and the awarding of government contracts and state loans.

These monopolies mar Haiti’s history but have been particularly strong during the past few decades. Following Haitian independence from France in 1804, two groups competed for power: the military who amassed political power and were of African ancestry and the merchants who controlled commerce and were of mixed French and African ancestry. Haitian society has traditionally been a symbiotic relationship between these two powerful groups.

The merchant elite gained political power only to have it stripped away by the Haitian army after American troops left the country in 1934 after a 19-year occupation. Dictator Francois Duvalier (“Papa Doc”) made powerful enemies in Haiti’s business community, attacking the elite’s economic control and promoting black nationalism during his rule from 1957 to 1971. Duvalier, at the time, only allowed monopolies if businesses owners’ interests were aligned with those of his government. The dictator created monopolies in mineral and petroleum exploration, television, fertilizer, casinos, hotels, sugar, and agriculture. An anti-communist, Duvalier had the military backing of the U.S. by serving as an ally against Fidel Castro’s Cuba. Following his death in 1971, his son and successor Jean Claude (“Baby Doc”) reestablished relations with Haiti’s old elites and gave them control of the economy in the 1970s and 1980s. By 1985, 19 families in the country had exclusive rights for importing essential products.

In the 1980s and 1990s, neoliberal policies advocated by international institutions and the U.S. promoted economic and trade liberalization in Haiti, resulting in removing tariffs for over a hundred products. This free-but-not-fair trade led to the importation of subsidized American rice through President Ronald Reagan’s Caribbean Basin Initiative. Many self-sufficient farmers became unable to compete with cheap U.S. imports and migrated to the cities. The influx helped create notorious shantytowns and slums that exist today. During the 1990s, rice imports continued with U.S. corporation Erly Industries, whose chairman had ties to the Reagan administration, establishing monopolistic control of the rice industry.

This policy of importing rice continued under the Clinton Administration, although the former Democratic president apologized in 2010, stating he had made a “devil’s bargain” that contributed to continued Haitian poverty. “So, we genuinely thought we were helping Haiti when we restored President [Jean-Bertrand] Aristide,” Clinton told Haiti Liberté,“We made a commitment to help rebuild the infrastructure through the Army Corps of Engineers there, and do a lot of other things. And we made this devil’s bargain on rice. And it wasn’t the right thing to do. We should have continued to work to help them be self-sufficient in agriculture.” Haiti still imports 80 percent of its rice from the U.S.

The influx of rice and decreased livelihood of farmers in Haiti helped Aristide, a socialist, win the 1990 election with backing from rural voters galvanized by his pro-poor platform and vow to tackle monopolists. These same monopolists would later help finance a coup against the Aristide to protect their business interests. The Clinton Administration and U.S. Armed Forces helped restore him to power.

Many of these elites in Haiti were singled out by U.S. Congressional Task Force on Haiti during the 1990s. The panel detailed how many of these monopolists lobbied in Washington to develop policy on Haiti. Additionally, some groups such as the International Republican Institute (IRI) are connected with this group of elites and have influenced policy in Haiti for decades.

Many of these same oligarchs that gained control of the economy over these past few decades are still in control of monopolies in Haiti to this day. These elites would later finance the political party PHTK and the campaign of President Moïse and his predecessor Michel Martelly.

After Moïse was elected, one of his key goals was to reform the Haitian energy sector promising 24-hour electricity in a country plagued by rolling blackouts and fuel shortages. Roughly 80 percent of the electricity in Haiti is produced through imported diesel fuel. Many businesses and households use diesel generators for reliable electricity because the national electrical grid is too small. An oligopoly of just three independent power companies–Sogener, E-Power, and Haytrac—dominates energy imports. These companies then sell the fuel back to the Haitian state-run electricity provider Electricite d’Haiti. In 2019, the Moïse government suspended contracts with these companies, took control of Sogener, and arrested its executives on charges of overbilling the state. The slain president may have made the situation worse, as the electricity production in Port au Prince dropped from 130 megawatts to less than 50 megawatts.

By attempting to reform the energy sector and go after other monopolies, Moïse was biting the hand that fed him. He was making enemies of former allies. Over the past few years, Moïse began to rail against elites in Haiti, arguing that they had controlled the nation. “The Haitian state is being held hostage, and the only way we can talk about development is to free the captured state,” he stated in a speech in 2019.

Although Moïse’s attempts at reform failed, U.S. foreign policy could help. Washington has coddled monopolists abroad for too long through its trade policies, invitation to engage in lobbying, and lack of promoting anti-monopoly and competition policy. The U.S. has been providing Haiti aid and advising their governments for decades, yet the country has no laws or regulations on competition. If Washington wants to avoid further political instability in Haiti and other countries, it should send ideas as well as aid. Promoting economic democracy through an anti-monopoly policy and conditioning at least some economic aid on anti-monopoly reform would be an essential first step.

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