Fair Trade

Can we fix trade imbalances by enacting punitive tariffs against companies and countries? These are excerpts from a conversation on Citizen Tom’s blog. My counterpart here is not a bad person, but I certainly disagree that tariffs are the answer to trade imbalances, and I said so…

To the idea that “[t]he government did allow to US manufacturing jobs to move overseas when they made trade agreements without any agreement to control trade imbalances” I was skeptical:

Congress does not “allow” manufacturing jobs to move overseas. Instead, they create tax incentives, such as 90% tax rates, that naturally drive jobs out of the country. They can provide positive incentives, too, but rarely do. They can be encouraged in this — but that is what we need a limited government conservative leader for. Trump is, of course, not that leader. Ted Cruz is.

What if we were able to keep companies from moving or closing?

How high of a wall must Congress build to keep corporations from being “allowed” to move out of the country? And once they’ve commanded companies to stay, how do they keep those companies alive in the face of losses? Bailouts?

How much extra must poorer people in the US pay as punishment to prop up these companies, once free trade is outlawed at their expense? Why is a wealth transfer scheme from the nation’s poorest to corporations, to prop them up since they aren’t allowed to leave, a good idea?

And what happens to all of those jobs focused on importing and distributing trade goods if that trade is curtailed by the same protectionist tariff schemes that did so much damage in the Great Depression?

How are trade imbalances to be determined? If we sell more natural gas than we import, shall we accept a tariff on natural gas and thus punish those workers in that industry by encouraging international buyers to go elsewhere, and reduce the American workers’ employment and wages?

If we buy more cellphones than we export, should we happily have our poorer citizens pay extra for the cellphones to support our government and the bureaucrats of international trade?

The total may balance, or it may not, but there is not one chance in a million that we would have balanced trade in any single product. We can arbitrarily muck with the prices and distort the markets, or we can fairly compete by doing those things we do well and paying people in other places to do what they do well. The result of this has been to offer Americans an astounding array of products from around the world, at low prices, improving the lifestyles of even the poorest of our citizens.

The Smoot-Hawley Tariff Act of 1930

We have tariffs now on a few products, the result of lobbyists in certain industries. These are invariably harmful to the general welfare, though they certainly benefit a few. There is a natural tendency to impose tariffs to ease “suffering” as you put it. But their history has been one of harm, and often great harm: The Smoot-Hawley tariff imposed by Hoover was one of the triggers of the Great Depression, and it was to do exactly what you describe, relieve suffering.

Even the US State Department, the government agency whose job they believe is to make the world safe for cocktail parties, describes the Smoot-Hawley Tariff Act this way:

During the 1928 election campaign, Republican presidential candidate Herbert Hoover pledged to help the beleaguered farmer by, among other things, raising tariff levels on agricultural products. But once the tariff schedule revision process got started, it proved impossible to stop. Calls for increased protection flooded in from industrial sector special interest groups, and soon a bill meant to provide relief for farmers became a means to raise tariffs in all sectors of the economy.When the dust had settled, Congress had agreed to tariff levels that exceeded the already high rates established by the 1922 Fordney-McCumber Act and represented among the most protectionist tariffs in U.S. history. Smoot-Hawley did nothing to foster trust and cooperation among nations in either the political or economic realm during a perilous era in international relations.

Worse than “did nothing,” it caused great harm at a crucial point. And it helped spread the Great Depression into a worldwide phenomenon.

Equal Difficulty and Equal Misery

The upshot: A tariff scheme is an attempt to “level the playing field” by dropping obstacles and bombs and cratering the ground on one side or the other of that field. It is a doctrine of “equal difficulty” in the same manner as socialism’s “equal misery.” Tariffs merely damage the play and never produce the desired overall results, except for a connected few — and those few lobby hard for them, as tariffs are potent in stifling competition.

But competition has been shown to be good for us and for the world. Let’s not try to harm the players and the play on each side. Let us instead focus on using and restoring our great resource of liberty to educate ourselves, and be competitive on the world stage as we have been in the past.

We will be fine if we do this well. And if we do not — if we fail the next generation by inculcating “safe spaces” and “self esteem” instead of personal initiative and an earned pride through a strong work ethic, then we will fail whether we are subjected to the harm of tariffs or not.

In the Past

My debate counterpart was not silent during all of this. The conversation may be read in its entirely here. But this response was interesting:

All you have stated happened in the past. That does not mean it will happen in the future if trade agreements are made in agreement and beneficial to both parties to obtain both free and fair, in my opinion.

I cannot guarantee that if I hit my thumb with a hammer it will hurt. But personal experience and careful research into the personal experience of others, backed by a solid hypothesis of the “impact” of such an action, tells me that I should expect pain if I take a swing at it again.

Choices

Why would China, for example, agree to have its people pay more for American goods than for other products they could get elsewhere? They would not, of course, and they declined to do this back when the US was the major destination for exported goods.

We no longer are. And since other nations and other companies have more choices than ever before, they are more likely to make the choice to deal with others. Buick is, today, a major automaker in China. Jeep is fairly substantial there. But Volkswagen is bigger than both combined, as China has choices.

China is, today, in Africa and India and South America cutting trade deals, ignoring our silly protectionist noises. And they were added to the TPP immediately because it gave them ridiculous advantages over the US, which seems to have been President Obama’s plan.

Can he ignore history? Oh, yes.

Into the Future

Progressives march into a ever-new, imagined future of perfection on Earth, unburdened by any notion of history. In so doing, they’ve killed hundreds of millions of their own people. And not all at once! Each successive mass death but the first was done in the awareness that it resulted in horrific death previously. But they blithely did it again and again — because the attempt was worthwhile to them in order to “improve” mankind. Look at the reasoning of Stalin, of Mao, of the Khmer Rouge as they did away with big percentages of populations.

At least the Khmer Rouge killed them outright with guns and machetes, as opposed to the more “noble” progressive goal of starving them to death to improve their lot. (There was a lot of starvation, too, but incidental to the slaughter.)

Progressives are ever ready to try it again. “Communism works, it just hasn’t been done right! We elites will get it right this time!”

Conservatives study history, and learn from it. And use it to guide their actions, knowing that man cannot be “perfected” but can do well in a structure that preserves and protects individual liberty and allows free markets to benefit all.
FreeMarket

===|==============/ Keith DeHavelle

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