A praying mantis in Kona, Hawaii (Photo Tam Hunt)

US Unfair Trade Practices: Applying Navarro’s Framework to US Trade Practices

Peter Navarro seems to be providing the intellectual heft behind Trump’s instinctual anti-trade sentiments about other nations “ripping off” the US, but this framing is based on fundamental misunderstandings and obfuscations; if we apply Navarro’s own framework to US trade practices we see that the US has actually been “ripping off” the world for many decades now, not the other way around

Peter Navarro’s 2006 paper “The Economics of the ‘China Price’” published in the journal China Perspectives offers a seemingly compelling framework for analyzing unfair trade practices. In this analysis, which formed the basis for a number of later books by Navarro, including Death By China, he meticulously identified eight economic drivers behind China’s ability to “significantly undercut prices offered by foreign competitors over a wide range of products.”¹ Navarro has since become one of the primary intellectual architects behind Trump administration trade policies, providing academic justification for aggressive tariffs and trade restrictions aimed primarily at China.

Navarro’s work has resonated with both populist politicians and manufacturing workers who have seen jobs disappear over recent decades. His framing places blame squarely on foreign nations for “ripping off” the United States through various unfair trade practices. However, this perspective contains fundamental misunderstandings and obfuscations about the nature of global trade relationships.

While Navarro aimed his analytical lens at China, I believe his framework can be valuably applied to examine the United States’ own trade advantages — particularly those that our trading partners might consider unfair. This exercise isn’t meant to cast blame but rather to foster a more balanced understanding of global trade dynamics and to demonstrate that if we apply Navarro’s own framework to US trade practices, we see that the US has actually been “ripping off” the world for many decades now, not the other way around.

Navarro’s Original Framework

Navarro’s analysis identified eight key drivers of China’s competitive advantage, categorizing them into “fair” and “unfair” components:

Fair Trade Components:

1. Lower labor costs (39% of price advantage) — Navarro acknowledges this as China’s legitimate comparative advantage
2. Industrial network clustering (16%) — The efficiency gained from geographic concentration of related industries
3. Foreign direct investment (3%) — Capital flows that enhance productive capacity

Unfair Trade Components:

1. Currency manipulation — China’s alleged deliberate undervaluation of the yuan to boost exports
2. Export subsidies — Government support that artificially lowers export prices
3. Counterfeiting and piracy — Intellectual property theft that reduces R&D costs
4. Environmental regulatory laxity — Avoidance of pollution control costs
5. Worker health and safety regulatory laxity — Bypassing workplace protections

Combined, these unfair practices account for approximately 42% of China’s price advantage according to Navarro’s calculations.² This framing has provided intellectual ammunition for those seeking to impose tariffs and other trade barriers against Chinese goods, under the premise that these measures merely counterbalance China’s unfair advantages.

Flipping the Analytical Lens

When we apply Navarro’s methodological framework to analyze US export advantages, we uncover a different but equally important perspective on trade inequities. The US enjoys several competitive advantages that could be classified as “fair” under traditional trade theory:

Fair US Trade Advantages:

• High productivity through technological advancement
• World-class infrastructure and logistics
• Strong innovation ecosystems
• Highly developed capital markets
• Skilled labor force

However, several US advantages fall into what trading partners might reasonably classify as “unfair” practices:

Potentially Unfair US Trade Advantages:

1. Dollar’s Reserve Currency Status (10–12%)

The dollar’s position as the world’s primary reserve currency, a prized position that gives the nation who controls the global reserve currency massive economic advantage, creates significant export advantages through lower transaction costs, reduced exchange rate risk, and the ability to run persistent trade deficits without typical currency depreciation. This “exorbitant privilege,” as former French Finance Minister Valéry Giscard d’Estaing called it, effectively subsidizes US trade by allowing Americans to purchase imports with currency that foreigners hold rather than spend.³

The economist Michael Hudson has extensively documented how the dollar-based financial system allows the US to run persistent trade deficits that would bankrupt any other nation.⁴ For example, when oil-producing nations attempted to move away from dollar pricing in the 1970s, the US secured a deal with Saudi Arabia to ensure oil remained dollar-denominated, effectively forcing other nations to hold dollars to purchase energy. The resulting “petrodollar” system has forced the world to finance US deficits for decades.⁵ According to economist Jeffrey Sachs, this represents “a form of tribute from the rest of the world to the United States.”⁶

2. Agricultural and Industrial Subsidies (5–7%)

The US maintains extensive subsidy programs, especially in agriculture, that distort global markets. US agricultural subsidies total billions annually, allowing American farmers to export at artificially competitive prices that devastate farmers in developing nations.⁷

The cotton industry provides a particularly stark example: US cotton subsidies, which totaled more than $35 billion between 1995 and 2020, depressed world prices by approximately 10%, directly impoverishing farmers in West Africa where cotton is a major export.⁸ Similarly, US corn subsidies have flooded Mexican markets with artificially cheap maize, displacing over 2 million Mexican farmers since the implementation of NAFTA.⁹ The World Trade Organization has repeatedly ruled against various US subsidy programs, including a $4 billion ruling against US cotton subsidies, yet the programs largely continue.¹⁰

3. Intellectual Property Maximalism (3–5%)

While IP protection is legitimate, the US has pushed for increasingly stringent international standards through trade agreements that extend beyond balanced IP regimes, effectively taxing innovation in developing countries while preserving US advantages.¹¹

The pharmaceutical industry represents one of the most aggressive examples of this approach. Through trade agreements, the US has forced developing nations to accept patent terms that far exceed WTO requirements. For instance, provisions in bilateral agreements have extended patent protection beyond 20 years, restricted access to generic medicines, and prevented developing nations from utilizing compulsory licensing even during public health emergencies.¹² Economists estimate that these extensions cost developing countries billions annually in higher medicine prices, effectively transferring wealth from the world’s poorest to US pharmaceutical companies.¹³

4. Financial System Dominance (2–3%)

Control over global payment systems (SWIFT) and the dollar-based financial architecture provides leverage that can be weaponized for economic advantage, creating implicit compliance costs for trading partners.¹⁴

This dominance allows the US to impose “secondary sanctions” that force third parties to comply with US policy priorities or lose access to the global financial system. For example, when the US reimposed sanctions on Iran in 2018, European companies were forced to abandon legitimate business activities despite EU opposition to the sanctions.¹⁵ The European Union established a special payment mechanism (INSTEX) specifically to circumvent US financial dominance, demonstrating how other advanced economies view this power as an unfair trade advantage.¹⁶ The threat of being cut off from SWIFT and dollar clearing forces countries to align their policies with US interests regardless of their own economic priorities.

5. Historical Forced Market Opening (5–8%)

The United States, like European colonial powers, used naval power to forcibly “open” markets in the 19th century. Commodore Perry’s “Black Ships” expedition to Japan in 1853–1854 and US participation in the unequal treaty system with China following the Opium Wars established trade patterns that continue to shape current relationships.¹⁷ This was “gunboat diplomacy” at its worst: trade with us or we’ll destroy you militarily.

The treaties imposed during this period established extraterritorial rights for US citizens, fixed low tariff rates that prevented industrial development in target nations, and secured privileged access for US businesses.¹⁸ Japan’s inability to set protective tariffs under these treaties delayed its industrial development by decades, while similar provisions in treaties with China contributed to the “century of humiliation” that still influences Chinese economic nationalism today.¹⁹ Trade historian Ha-Joon Chang notes that these forced market openings effectively “kicked away the ladder” of protectionist policies that the US itself had used to develop its own industries.²⁰

6. Military Interventions for Economic Interests (8–10%)

As Major General Smedley Butler candidly acknowledged in his famous 1935 confession: “I spent 33 years…being a high-class muscle man for Big Business, for Wall Street and the bankers. In short, I was a racketeer for capitalism.”²¹ Numerous military interventions throughout Latin America, Southeast Asia, and the Middle East have secured access to resources and markets for US corporations.²²

Matt Kennard’s book, The Racket, explores this history in detail. US imperialism has been achieved through economic and cultural means as or more often than it has been achieved through overt military action. He details how agencies like the National Endowment for Democracy (NED) and USAID (US Agency for International Development) have pursued transparent imperial aims while masquerading as aid agencies, in country after country.²³

The 1954 CIA-backed coup in Guatemala was explicitly launched to protect United Fruit Company’s land holdings from a democratic government’s land reform program.²⁴ In Iran, the 1953 coup against democratically elected Mohammad Mossadegh was orchestrated after he nationalized oil resources, returning them to foreign control.²⁵ In Iraq, following the 2003 invasion, the US implemented “Order 39,” opening previously nationalized industries to foreign ownership and repatriating all profits — a wholesale rewriting of economic rules through military force.²⁶ Documents declassified decades later confirm that securing preferential access to resources and markets was a primary motivation in many of these interventions.

7. Economic Sanctions and Selective Enforcement (4–6%)

The US selectively enforces international trade rules and deploys economic sanctions as leverage in negotiations. This selective approach creates asymmetric compliance costs and forces trading partners to accept unfavorable terms.²⁷

The United States currently maintains comprehensive sanctions programs against over 20 countries, affecting approximately 8 billion people worldwide, or roughly 28% of the global population.²⁸ These sanctions are applied unilaterally, outside of UN frameworks, and often violate international law according to UN special rapporteurs.²⁹ The economic costs to targeted nations are enormous — sanctions on Venezuela alone contributed to a 38% drop in GDP between 2015 and 2019, while similar measures against Iraq in the 1990s caused an estimated 500,000 excess child deaths according to UNICEF.³⁰

At the WTO, the US has been a serial violator of rulings against its practices while demanding strict compliance from others. For example, the US maintained illegal cotton subsidies for years after adverse WTO rulings, and when the WTO authorized retaliation for illegal US tax subsidies to Boeing, the US threatened to withdraw from the organization entirely.³¹ This selective approach to rule enforcement represents a significant unfair advantage that smaller economies cannot replicate.

Calculating the Total US Unfair Advantage

Aggregating these components and applying Navarro’s methodology yields a striking conclusion: approximately 37–49% of the US export price advantage could be attributed to practices that trading partners might reasonably classify as “unfair.”

This estimate aligns with the magnitude of unfair advantages that Navarro himself attributed to China (42%), suggesting that major economic powers engage in comparable levels of market distortion — they simply use different mechanisms reflecting their particular strengths and historical positions. While China may leverage its labor cost advantage and regulatory flexibility, the US leverages its financial dominance, military power, and historical market access advantages.

Economists Dani Rodrik and Arvind Subramanian have noted that all successful development stories involve strategic departures from free trade orthodoxy.³² The difference is that powerful nations like the US can both engage in such deviations while simultaneously enforcing free trade rules against weaker nations. As economic historian Erik Reinert documents, this “do as I say, not as I did” approach has characterized US trade relations since the country’s founding.³³

Evaluating Legitimate Concerns and the Fair Trade Tradition

Despite this critique of Navarro’s one-sided analysis, some of his concerns about China’s trade practices do resonate with legitimate traditions of fair trade scholarship that deserve serious consideration.

The fair trade movement, which emerged in the 1980s and gained significant momentum in the 1990s, has always emphasized that trade should serve broader social and environmental goals rather than becoming an end in itself.³⁴ Organizations like Global Exchange, Oxfam, and the Fair Trade Federation have pioneered standards that emphasize living wages, sustainable production methods, and community development.³⁵

Navarro’s critiques of China’s environmental and labor practices align with these concerns, though his proposed solutions often diverge dramatically from the fair trade movement’s emphasis on engagement and standards-setting rather than protectionism. China’s rapid industrialization has indeed come with severe environmental costs — including widespread water and air pollution, habitat destruction, and significant greenhouse gas emissions.³⁶ The World Health Organization estimates that outdoor air pollution alone contributes to over 1 million premature deaths annually in China.³⁷

Similarly, labor conditions in Chinese factories, while improving, continue to include excessive working hours, inadequate safety measures, and limited collective bargaining rights.³⁸ The suppression of independent labor unions in China represents a significant departure from international labor standards and creates legitimate concerns about wage suppression that harms both Chinese workers and competing industries in other nations.³⁹

However, where Navarro’s analysis falls short is in recognizing that these problems are characteristic of rapid industrialization processes rather than unique to China. The United States and European nations experienced similar environmental devastation and labor exploitation during their own industrialization periods.⁴⁰ Moreover, many Chinese factories with poor working conditions are producing goods for Western brands that drive cost-cutting measures through their supply chain management.⁴¹

The fair trade tradition suggests a more nuanced approach than Navarro’s punitive tariffs. Scholars like Richard Appelbaum and Edna Bonacich suggest that responsibility for improving conditions must be shared between producing and consuming nations.⁴² This includes graduated standards that tighten as countries develop, support for capacity building in environmental and labor regulation, and supply chain accountability that makes Western corporations responsible for conditions in their supplier factories.⁴³

Economists Joseph Stiglitz and Andrew Charlton have proposed a “development round” of trade negotiations that would focus on creating space for appropriate regulation while gradually raising standards in ways that support rather than penalize development.⁴⁴ Such an approach recognizes the legitimate concerns about regulatory competition while avoiding the nationalist framing that characterizes Navarro’s analysis.

Implications and Conclusions

This analysis isn’t intended to excuse unfair trade practices by any nation, but rather to demonstrate that the global trading system reflects power imbalances that benefit established economic powers like the United States. When Navarro argues that “America is the globe’s biggest trade loser and a victim of unfair, unbalanced, and nonreciprocal trade,”⁴⁵ he’s telling only part of the story.

A more complete picture recognizes that all major economies deploy their particular advantages — some fair, some unfair — within a trading system whose rules they helped write. The United States has built its trade advantage not just on legitimate productivity and innovation, but also on historical power projection, structural financial advantages, and a willingness to leverage military might for economic gain.

True trade reform would require all nations — not just America’s trading partners — to acknowledge and address their unfair practices. As we evaluate trade relationships, we should apply analytical frameworks like Navarro’s evenly and acknowledge the complex ways that power shapes market outcomes. We must move beyond the simplistic framing of “us versus them” that characterizes much current trade debate.

The fair trade tradition offers a more promising path forward — one that recognizes the legitimate concerns about environmental and labor standards that Navarro raises while rejecting the zero-sum nationalism that characterizes his proposed solutions. By focusing on raising standards globally while supporting capacity building and development, we can address the genuine problems in the global trading system without resorting to self-defeating protectionism or ignoring the unfair advantages that powerful nations like the United States continue to enjoy.

Only with this more balanced perspective can we develop trade policies that promote genuine fairness and sustainable prosperity for all.

[I used Claude 3.7 significantly to write this piece]

References

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2. Ibid.
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