Robin van Puyenbroeck 0:07
Welcome to Trade Wins. I’m Robin van Puyenbroeck, your host, and my guest today is Congressman August Pfluger, a member of the United States House of Representatives, representing the 11th Congressional District of Texas. Before diving into politics, Congressman Pfluger also served his country as a pilot in the U.S. Air Force. With Veterans Day, just a few days behind us, I would certainly want to start by thanking him for his service. In Europe, we commemorate Armistice Day also on November 11. Myself being from Belgium’s Flanders Fields, I have the greatest respect for those who are willing to give it all. Congressman, welcome to the show. Good to see you again.
August Pfluger 0:48
Robin, great to see you. Thank you for the kind words; I appreciate that. You’re right on the heels of Veterans Day. What a neat thing to have everybody from different countries celebrating the same thing, the same mentality of gratitude for the legacy of those who have served before.
Robin van Puyenbroeck 1:07
Absolutely. Rather than me giving a long introduction about you I always ask my guests, what do you want people to know about you?
August Pfluger 1:17
Well, you started with what is probably the most important part and that is the fact that I served in the U.S. Air Force. I was stationed in many different places but was specifically stationed in Europe, the Far East, Japan and the Middle East. And we can dive into those details, I was a fighter pilot, commanded and flew in combat. Before that, I grew up in West Texas on a ranch. I am a seventh-generation Texan who had a lot of experience growing up with ranching and what it means to work hard and coming up in a community of faith. I think probably different from other industries, but the same in the American spirit of innovation and getting the job done, making sure that you work hard, you provide for your family. At an early age, I decided that I wanted to fly; I wanted to be a pilot. Following in the footsteps of my grandfather, I wanted to do that. He was a World War II pilot. So, I went to the Air Force Academy and graduated there and started a 20-year career. In fact, I’m still serving in the Air Force Reserves. One of the things that shaped me was the ability to move to different places, to see the world, to understand just how important different instruments of power are — not just the military. In fact, I probably learned more about the other instruments of power, whether it was diplomacy or economy. That was a neat opportunity. I’m married to my wife Camille and we have three daughters. We reside in Texas and have traveled extensively and that travel and understanding of where we’ve lived, especially overseas, has really shaped the way that I think about serving in Congress and being on the Foreign Affairs Committee as well as our Homeland Security Committee. Specifically, on Foreign Affairs, I serve on the subcommittee for trade.
Robin van Puyenbroeck 3:11
Yes, we’re definitely going to talk much more about trade in a few minutes. I’m always intrigued, what’s the story behind a person. Like, what drove you as a young man to say, “I want to become a pilot” and then become a pilot in the Air Force. Was this driven by your parents or by your grandfather who served? How did you come to that conclusion, to that decision to sign up and go for it?
August Pfluger 3:36
Listening to my grandfather’s stories as a kid and understanding how he joined in the middle of World War II and what led him to that point, why he wanted to serve and then hearing what sounded like an amazing adventure: to be able to fly. I had other relatives who were pilots and also a great grandfather who served in World War II in the army. But, I think serving was probably a given, it just depended on what type of service — whether it was the military or community service or maybe something a little bit different. But, listening to my grandfather, hearing his stories about flying, even stories where he said, “we went out and it was bad weather and we didn’t know if we’re going to make it.” That didn’t deter me; it didn’t scare me. I heard how he dealt with it, how he thought about it and the way that he was able to overcome those situations. It sounded exactly like what I wanted to do. Going to the Air Force Academy was that first step and then being able to get a pilot training spot and follow that dream was incredible.
Robin van Puyenbroeck 4:45
Yes. Where did your grandfather fly? Was it Europe or the Pacific?
August Pfluger 4:50
He actually was an instructor and taught a lot of people how to fly. He flew multiple different aircraft. I think because he joined a little bit later, because of his age he didn’t make it to a combat deployment. But, he did a lot of instructing and training throughout Texas and New Mexico. He flew a variety of aircraft including some bombers, but never made it over to the theater.
Robin van Puyenbroeck 5:18
I have one question my son asked about. He’s seven and he’s very determined to become a pilot himself. He already figured that out. I have to ask, how is life as a pilot in the Air Force?
August Pfluger 5:30
Oh, it’s fantastic. If you have any desire, then I would definitely look at the Air Force. Your missions can be one thing on one day and yet something totally different on the next. I would say that the camaraderie, the teamwork, and being a part of something greater than yourself… Yes, flying is amazing and it’s so much fun. There’s personal satisfaction to that. The team satisfaction is something that all of us, even after we stopped flying, certainly miss. It sticks with you. You’re competitive individually, but you also understand the value of a team. I would encourage him to continue to explore that.
Robin van Puyenbroeck 6:12
Yes, he’s getting the team experience playing hockey now. That was going to be another question. What would be the life lesson that you have taken away, that’s characteristic of the life of serving in the Air Force? Would that be the camaraderie and those friendships?
August Pfluger 6:29
For sure. The formations that we fly in, you’re flying with wingmen. You’re only as good as the weakest link. You focus on the effort as a team, you focus on competing as a team and you focus on working as a team. I’ll say a couple of things. Number one, your word and the integrity of what you say is so important; it is so critically important. You have to have personal character and integrity. You have to work hard because you don’t want to let the team down. You want to make sure that you are pulling your weight and you’re doing what you can to get the job done.
Robin van Puyenbroeck 7:10
Lives depend on it, of course.
August Pfluger 7:09
Yeah, It’s life and death. It absolutely is life and death. Iron sharpens iron. From a Biblical sense, I believe in that and I’ve always believed in that aspect. I think this is the perfect career to see that play out. You really push each other. Those life lessons will carry over to every single career. It has certainly helped me in this particular career that I’m in now of serving once again but also making sure that I view our district as a team and we have certain needs and I’m happy to represent them.
August Pfluger 7:27
You decided to go into politics. It’s a slightly different sport. Was that a major transition? The House is a very different environment, I would think, then the Air Force.
August Pfluger 7:57
It is certainly a different environment. There is some aspect of teamwork, but there’s also some aspect of combat. The only difference is that in the Air Force you know who the enemy is and sometimes in politics, I guess you don’t.
Robin van Puyenbroeck 8:09
Iron still meets iron.
August Pfluger 8:10
That’s right. It can come from any angle. I would also say, for our country, it is similar. I learned a lot from the squadron mentality, that team mentality, that there are things that we need as a country. Joining politics was, first off, out of the blue. I had always had a desire to maybe do it one day, but it happened a lot sooner than I thought. Transitioning, taking those lessons and then just working hard has been the guiding light. The farmers and ranchers that I represent, they don’t take a break; they continue to work hard. The people who produce oil and gas don’t take a break. They continue to work hard every day. It was actually pretty easy to transition on a work-ethic basis because we worked very, very hard in the military, sometimes seven days a week for extended periods of time. Now doing this, you can transition that mindset and represent a district that works very hard as well.
Robin van Puyenbroeck 8:10
Absolutely. You mentioned the ranchers, the farmers and the energy industry so let’s talk about trade and also about the disruptions in global trade. We see tariffs obviously crumbling. Supply chains, I believe, on a daily basis outside of the Port of Los Angeles is about $50 billion of goods just floating there. We have shortages from microchips to certain food produce, consumer prices are rising. Where’s all this going to end from your perspective, also, with your constituency there, a very important constituency in Texas. What do you make of all this?
August Pfluger 9:45
There certainly is not enough time to talk about every detail of it because the direction that we’re headed in right now is very concerning. There is the pandemic that I think kicked off a lot of the supply chain issues. However, they were certainly able to be overcome. There were obstacles and hurdles that we needed to overcome and, for the most part, we have overcome those. But, some of the policies that have been left in place are forcing people to make a decision that, in a lot of cases…, Let’s just take it to the very micro level of labor. When you look at GDP and you look at our ability to produce goods and services, the most basic ingredient of that is people. That is the most basic ingredient in order to have the capability for production. So, when that supply of labor is competing not only against other like businesses and industries, but they’re also now competing against the government, then it is not a surprise that what you’re going to see is a very difficult time in getting people back to work. Because of that, this domino effect of inflation, this domino effect of rising costs in everything, our labor costs are increasing because you’re having to compete to get people to work there. Walk through an airport. I was at the airport this morning. There are maybe 1-2 people working in any of the coffee shops, the fast-food chains or any of those where there used to be 5-10 people working. You’re going to see lines that represent that slowdown. Those lines are the ships that you just mentioned. They’re the people waiting to get that product in on the coast of California, it’s analogous to the ships that are waiting to get in. It’s because we don’t have the capacity right now due to a shortage of labor. It’s not a shortage of people, it’s a shortage of people who are going to get paid to do that job instead of being paid to do other things. I’ll say people stay at home, in a lot of cases, because of the stimulus and because of the different packages that we have. I think it’s time to move forward and use free-market concepts instead of government stimulus which is a market inefficiency. It can be defined in no other way than a market inefficiency.
Robin van Puyenbroeck 12:08
Yes. It flooded the system with cash in the middle of a global health crisis. I just came back from Europe myself. I was surprised to see in Europe that there are those shortages of labor that you mentioned. I’ve never seen that many signs up in literally every single restaurant or store, “Help Wanted.” The question is, how do you turn this around? Because policy is a big factor here. You did mention those types of subsidies that were available to keep people in their homes. Nobody knew where this all was going to go. Now we have more clarity. There’s also the element of tariffs where we talk about the global flow of goods. What’s your position on tariffs, but also the impact? When I talk to business leaders they say, “We are used to having to adapt and to adjust. We will work with anything you give us, just give us clarity and structure.” They work with the tariffs because they have to, not by choice. You mentioned those types of subsidies as an inefficient regulator of the economy. Where do you place tariffs in that conversation?
August Pfluger 13:11
Academically speaking and philosophically, being a free-market advocate and believing in that system, I’m academically and philosophically against tariffs. I think one of the problems that we’re seeing right now is that the system that we have created, the WTO and the system of free trade throughout the world, is, instead of multilateral trade deals and that framework, changing to preferential trade agreements are really the in vogue type of agreement. What you’re seeing is the competition for goods, the competition for services between countries is now, and it has been for a number of years, entering a new phase where the accountability is probably less likely to be adjudicated by a larger framework and more likely to be adjudicated between countries who sign up to work together in these preferential deals. That leaves you to have to then take actions that are inefficiencies in the form of tariffs. There are a couple of different ways that they can help the overall system and that is if you have actors who are not willing to abide by the rules and they’re not willing to be transparent and have above the board type dealings, then that is a way that you get their attention. In general, you shouldn’t have to do that if everybody is a cosigner. What we’ve seen in the past, I’ll just bring up China as an example, over the last 4-5 years, the United States has entered a trade agreement with China. We expect them to adhere to the rules and if they don’t, then that’s where tariffs have been used in the past. They’ve probably been used in a positive way to continue to move the ball towards what the overall international norms say that this is how we’re going to trade, but it’s only as effective as the will to enforce it.
Robin van Puyenbroeck 15:15
As for enforcement, you mentioned multilateralism and the big elephant not just in the room, is the WTO and that multilateral trading infrastructure is not working anymore. The question is, can this be salvaged? This morning I had a conversation with an editor of the Financial Times and was looking at the FDI and the Foreign Direct Investment flows. Where are the investments going? He was saying, “Well, what we’ve seen in the last year and a half is that those flows are no longer truly global; they’re more regionalized.” That connects closely to what you’re just saying about looking at bilateral or regional trade pacts and trade deals. The multilateral was created, we have the GATT, we have the WTO, it’s still there. It’s like the United Nations almost, it’s like any government — it’s what the members make of it and can you enforce the rules. Do you see any salvation there? Is there any solution at the multilateral level?
August Pfluger 16:11
I see a utility for it. Certainly for new member countries that are entering and working on, whether it’s to reduce levels of corruption, but I also see a very dramatic decrease for those countries that are well developed and that are experienced in trade because now there’s this very aggressive approach, whether it’s the Belt and Road Initiative, and everybody else that’s trying to counter that and then compete in places like Africa and the Indian subcontinent and other places. The WTO is a little arcane and it’s actually very difficult to dispute trade differences and to get an outcome that is beneficial to both parties. So no, I think we’re going to see a continued move away from it, especially with the big trade deals and the big players in trade you will probably see a move away from it.
Robin van Puyenbroeck 17:02
Contrary to what was the case a decade ago, the United States is no longer the only major trading bloc in the world. It’s one of three or maybe one of two. Can and should the U.S. still play a leading role in trying to tie the world together on trade or should the U.S. take a break there and go to what you were just mentioning, more targeted trade deals? Will that fracture the cohesion that has existed for a very long time?
August Pfluger 17:33
Can the U.S. be a leading role and be the leading voice in trade? Absolutely, 100%. I would say that it’s a must to continue to keep the world order in a way that is in the post-World War II era, that we keep good business dealings and transparency and low corruption and those types of things that everybody appreciates with trade. Now, are we a leading voice in trade? I would say, “No.” Over the past year, and this is a very small chunk of time, but I want to see the U.S. Trade Representative, Ambassador Tai be empowered to go out and work with countries to either continue along in the WTO or to be aggressive for the United States and to get good trade deals in a regional type mentality. There are a number of examples where, whether it’s in the South Pacific, Europe or Asia, where we’re probably getting left behind in certain areas and we need to continue to be a leading voice. If we don’t, some of these countries have nowhere else to turn. They have no other option. They have to have the Foreign Direct Investment and they’re going to take it from people regardless of whether they are China or Russia or other people that don’t adhere to the same norms and values we do.
Robin van Puyenbroeck 18:50
Absolutely. Another element in this conversation when we talk about global trade is what powers the global trade, of course, energy. That’s up in your wheelhouse. Looking at situations, I know you’re very outspoken about tying the energy question with national security. Looking at Europe today, threats are being made of closing the gas pipeline and making Europe very cold this winter. These are things that never happened, from what I believe, even during the Cold War. I don’t think the Soviet Union ever turned off the pipeline of natural gas. From what you are looking at, your perspective on the energy front, what role is there for the U.S. to play both from an energy security perspective, but also coming off the meetings in Glasgow and Scotland, when you look at renewables, at environmental footprint. Where’s this heading? What role can those nations that you just mentioned share values, what role can they play in the energy question?
August Pfluger 19:49
Well, this is certainly at the very top of my list of priorities and one of the reasons that I’m in Congress right now and that’s to lead on the question of energy security. Europe is going to go through a very tough winter. Every single country that is adjacent to Russia, whether they are Baltic countries or down to the Balkans, they are facing a tough time right now and a decision of whether to use Gazprom gas or to work to diversify. In some cases, they may not have the choice. U.S. policy is extremely misguided under this administration. I represent a district that produces a tremendous amount of oil and gas and has the most prolific oil and gas field in the world. We have the ability and we have demonstrated that ability to lift people out of poverty, to provide affordable and reliable energy. That’s really the key right now. Partners, allies and countries around the world are looking for reliability. You don’t want to deal with a bad actor who at any given moment can and will shut off the gas and literally turn the power off. If anybody thinks that because we’re in the 21st century that we won’t go back to harder times, more difficult and challenging times when we didn’t have energy and we didn’t have food, that is wrong. That possibility exists. If we don’t have policy that provides energy in a reliable way, then we will. I am advocating and I meet with foreign leaders all the time to make sure that we know what they need and that we are advocating here in the United States to continue to provide not only for our own needs but to those of our partners and our allies, like that of Eastern Europe, and Western and Central Europe as well.
Robin van Puyenbroeck 21:36
Where is the United States now as an energy exporter? I know there are plenty of LNG export terminals close to where you are. There are several LNG import terminals in Europe. What’s being exported now? Where are we?
August Pfluger 21:51
Just two short years ago we were the number one producer of oil and gas. There’s no question that we want to continue to work to make sure that our environment is good. But, we also want to make sure that human life is sustained and survivable. At the end of 2019, beginning of 2020, we exported more than we imported. Now we have the administration calling on OPEC to produce more energy and looking at Russia to produce more energy. We’re not okay with that. We should, and I believe we will, get back to being the number one producer to make sure that our LNG, which is the cleanest in the world, is used by people all over the world, but specifically, by our partners in Europe. We also take an “all of the above” approach. I want people to realize that in my district we have more wind energy than the entire state of California.
Robin van Puyenbroeck 22:45
I read that somewhere, yes, that Texas is one of the largest, if not the largest producer of renewable energy in the United States.
August Pfluger 22:53
It is.Twenty to 22% of our grid’s demand is serviced by renewables. We’re leading on that issue. With the increase in population across the world, with the increase in demand, it is only going to increase. It’s not going to be just in a linear fashion. There will be an exponential increase in demand. It’s going to take all the above and that’s great. But, we shouldn’t throw it away. What we saw at this climate conference, guess who wasn’t there? China wasn’t there. Russia wasn’t there. They produce extremely dirty energy. They’re not part of the solution when it comes to the climate solution. We should not let them reap the benefits of cutting our knees out from under us just to let them continue to produce energy and then take market share away throughout the globe.
Robin van Puyenbroeck 23:42
Yes. Prior when you, I believe, served at the National Security Council in the past, was the energy question your key area of focus, energy security?
August Pfluger 23:53
It was certainly something that I did focus on. I had a different portfolio as part of our defense strategy, but I think it ties in very closely. When you have energy and when you look at the winner of World War II, the Allies, the reason that we won was specifically that Nazi Germany did not have the energy to continue to compete. That is a very big point that we need to all focus on. Those who have energy will continue to grow their economy right now. They will compete across the world. We want to make sure that every one of our allies and partners is able to do that.
Robin van Puyenbroeck 24:29
To wrap up the conversation on the trade question because we had this conversation this morning with over 500 of our businesses around the world, the question came up, of course, what is the economic impact of these infrastructure bills? Many countries are now focusing on putting the dollars behind infrastructure spending, not just in the United States, but in many other countries in the world. What do you see the impact being on global trade, on flows of capital as a result of these infrastructure bills? I’m just asking a question, putting this against the debt levels. Who’s going to repay all the debt that we’re now building up due to the spending? Does it all make sense?
August Pfluger 25:09
There is the question of, do we need infrastructure? That’s very easy to answer, that is a yes. From a macro perspective across the globe, I think the answer is yes. But you have to understand from a supply and demand approach, the innovation that private industry brings to infrastructure is very vitally important. When there’s a need and then you add the supply and the demand of goods, services, labor and everything that kind of works together, it really is only serviceable by free-market principles. When debt comes into this, and there’s a balloon and there’s any sort of inefficiency that enters the equation, and we’re seeing that in multiple ways, multiple inefficiencies are being entered, you have a very complex equation here. I’m thinking we’re going to potentially get ourselves into a real bind where any adjustment in the interest rates then makes it very difficult to pay back the money that we’re borrowing. If it’s forced, let me just use the renewable discussion here, we need renewable energy, but if it’s forced beyond what the capability of the current technology is and it doesn’t meet the need and then the supply and the demand get out of balance because you had an inefficiency, that’s when an interest rate adjustment will be harmful. I hesitate to use the word depression, but you could enter a situation like that because you’ve had these multiple factors in the equation that were inefficiencies. And then what happens if we don’t consider some other element that comes into the equation — natural disasters and things like that hurt. I’m very worried about the way the policies are going without the true economic ability to sustain it and to have the progress that we need.
Robin van Puyenbroeck 27:08
You mentioned, interest rates and the likelihood or unlikelihood today that they would rise. Are we going to enter a situation like Japan was in for decades with stagflation for everything, no rising interest rates because we simply can’t afford it? That’s also not sustainable, it doesn’t last forever. At some point, interest rates will have to go up. It may take a long time, but we simply can’t afford it with current debt levels. How do we solve that conundrum?
August Pfluger 27:38
You’re right. We in this country, the United States, have a dual-mandate system when it comes to our monetary policy. In other countries, they generally go with a single mandate. But here, keeping those interest rates at a sustainable level and then pairing that with bad fiscal policy, that’s what I’ll call it, the monetary policy is pretty handicapped to do anything. If they make a change that is in reaction to the environment in which they see, then that hurts your overall strength. The ratings, let’s just say that we’re unable to pay the debt or if something happens where we can’t keep up with it, then those ratings hurt trade partners around the world,
Robin van Puyenbroeck 28:23
Servicing debt alone would become almost insurmountable, I would think. Good! Thank you so much, Congressman, this was a great conversation. I very much appreciate your time. It’s really good to see you again. I always like to end on a note with a slightly more personal question. I ask all my guests, what can you share with us here that you have never shared before? This could be anything, even very anecdotal.
August Pfluger 28:52
That’s so interesting.
Robin van Puyenbroeck 28:53
I’m sure from the Air Force days you have a couple of good ones.
August Pfluger 28:57
I’ll go even more personal, especially since I’m talking to somebody from Belgium who understands the game of football, as you call it there, we call it soccer here. I have three daughters and have been a soccer coach. I don’t think I’m in danger of being hired by anybody to be a professional soccer coach anytime soon. I’m a great motivator for little girls, but teaching them the principles of soccer, I was glad that I was only the assistant coach.
Robin van Puyenbroeck 29:28
You know when to take a step back for the benefit of the team. Thank you so much, Congressman. I wish you a good day and we’ll hopefully have a chance to connect again in the future. I do have a trip to Texas on the agenda. I think the NASA Space Station is on the wish list here for the holidays. I’m heading down there very soon, so thank you again.
August Pfluger 29:52
Robin, thank you. I appreciate the opportunity.
Robin van Puyenbroeck 29:55
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