We are developing the social individualist meta-context for the future. From the very serious to the extremely frivolous... lets see what is on the mind of the Samizdata people.

Samizdata, derived from Samizdat /n. - a system of clandestine publication of banned literature in the USSR [Russ.,= self-publishing house]

I wish they could all lose

There is a depressing article at Reason magazine about the protectionist instincts of both Hillary Clinton and Barack Obama. What the article does not tell us about much is whether McCain is much better (I honestly do not know, so I welcome comments about his voting record). And of course George W. Bush hardly made friends with Britain by slapping tariffs on steel imports – which also hurt American manufacturers and builders (but they lacked powerful friends in Congress). America is the largest economy in the world and despite what some of the more starry-eyed writers on China or the other ‘Brics’ might claim, is likely to remain so for the foreseeable future.

Basically, America matters. If the country goes down a more protectionist path, it will hit the world economy in general. For all his many flaws, Bill Clinton’s signing of the NAFTA Treaty – admittedly when Congress was in Republican hands – was one of the few major achievements of his time in power. It has helped to fuel the ascent of the world economy, lifting millions into higher living standards: if any fans of trade restrictions out there want to contest that assertion, let them provide figures. Here are some official US ones that give some pretty punchy numbers.

As the title says, I wish they could all lose. I have had it with the media guff about how a McCain-Obama contest will somehow elevate American politics and ‘restore’ its image in the eyes of the world. What is the point of winning image points among the Guardian-reading classes if you pull a rug under the world’s economy through greater trade restrictions? How is that going to help America’s ‘image’, assuming that Americans could or should give a flying **** what people think of them in the first place?

35 comments to I wish they could all lose

  • John Thacker

    Oh, on trade McCain is quite good. Cato rates him quite highly, one of the best in the Senate on opposing both subsidies and trade barriers.

  • Naxos

    It is civil liberties where he is truly dire.

  • Alsadius

    Actually, NAFTA was ratified while Congress was still Democrat-run. It came into effect on January 1, 1994, and the Republicans didn’t sweep Congress until the elections of November, 1994.

  • Midwesterner

    Trade war is like shooting war. Both sides come out worse. Often, one side is defeated completely. But we here would never say that under no circumstances may we shoot back in a shooting war.

    Decisions for government interference in trade should be given the same weight (or even greater) than decisions to enter into a shooting war. And they should be undertaken with the same expectation of loss and sacrifice as a shooting war.

    Trade barriers cannot ever make those inside them wealthier, just as military fronts do not ever make those inside them freer. But both kinds of fronts can stop hostile military or economic manipulations by an aggressive power from successfully taking territory. The military front in the case of a shooting war and the trade barrier in the case of a trade war both serve to prevent loss of infrastructure to the opponent intending capture.

    Until we can destroy the pathologically deranged constraints and penalties of all kinds that our government and those who have captured its powers have placed on producers, open and unqualified trade is just the consumers way of pushing the producers into the mine fields first. We had better hope the world becomes a friendly place before we run out of producers to sacrifice. I have this suspicion that it is not the ultimate intention of nations that engage in aggressive trade manipulation to make us cushy and comfortable in a life of luxury. I think that is an intermediary step. I suspect that as things progress they will act in their own best interest and by their own rules.

    Trade actions are a form of violence. While we rightly abhor violence as a means to take something not our own, we encourage it in self defense. When we hear trade actions referred to as ‘protectionist’ we immediately think ‘evil’, ‘stupid’, ‘greedy’, etc. Certainly the Democrat candidates for president see trade actions merely as another form of redistribution for buying votes. This is trade violence in the cause of theft. But do not allow yourself to be talked into the idea that defensive trade actions are always a bad thing.

    Becoming dependent on nations which are expansionist and have a history of using both domestic and international violence to achieve their goals is dangerous in the extreme. In a modern war, everything would be over before any serious production infrastructure could be domestically rebuilt.

    And please don’t any idiots say ‘they have no reason to start a war.’ At least, not unless those idiots are willing to defend the reasonableness of the last century’s worth of wars.

    Declaring a unilateral restriction-free trade zone is like declaring a unilateral disarmament (‘gun free’) zone.

  • Mid,
    You’re totally wrong.

    Declaring a unilateral restriction-free trade zone is like declaring a unilateral disarmament

    That’s some sophistry like the “fair trade” scam. That’s demagogy.
    Trade is not war, it’s the opposite of it, it’s the free exchange of goods, voluntarily undertaken, to the benefit of the parties involved.

    Any restriction is coercion – is an abridgment of individual rights.

    Seems that your right to not insulate your home is more important to you than the right to buy whatever you wish.

  • To clarify: using military terminology, “disarmament”, “Trade war is like shooting war” – this is what I call demagogy.

    Trade is not war. Quite the opposite.

  • Nick M

    Mid,
    I think you made a similar point in your inaugural post here. I wasn’t sure what to think at first. Especially after the arguments piled up thick and fast on either side. I think you’re right. The whole concept of free-trade is that it is, well, free, without one side warping terms and conditions to suit themselves. And before someone says, “well, everyone tries to get the best deal…” That is not what this is about. This is not about a business negotiating from a position of strength, this is about states doing it and using the market as a proxy.

  • Nick M

    Jacob,
    Free trade is quite the opposite of war and all trade is not free. Dumping goods with a government subsidy, gerrimandering currency markets – none of that is free or fair.

    Let’s say you and Mid both had widget factories and were direct competitors. Let’s say Mid’s State subsidises Mid’s Widgets Inc enormously and yours didn’t subsidize yours. Doesn’t that look a bit like there’s an interstate widget war on?

    Now if I ran Nick’s Gadgets Inc and bought a load of widgets what’s best for me? In the short term I can buy Mid’s cut-price widgets but as long as he’s subsidized what reason has he to innovate? Mid’s widgets would essentially be a state-funded monopoly. In the long run I’d be better off playing the two of you off against each other on a level playing field and forcing the two of you to innovate and improve your businesses.

    Short version. If governments skewing the pitch gives their nation’s companies market dominance then I fail to see how that is different (except in degree) from a total state monopoly.

  • Laird

    Nick and Mid both have it wrong. If a foreign government “skews the pitch” in favor of its domestic industries it might harm certain specific companies (as in Nick’s example of the widgets), but the overall macroeconomic result is that country’s taxpayers are subsidizing the consumers of the other country. Those consumers then have more money to spend on other goods. And as long as those subsidies remain in effect the consumers will continue to benefit. As long as there are no significant (i.e., governmentally imposed) barriers to entry, if the “evil” foreign government should ever reduce the subsidies or try to raise prices domestic competition will re-emerge.

    Far from being “unilateral disarmament”, in the long run true free trade benefits the country adopting it, and bleeds the resources of any country which subsidizes its local industries. You just have to keep your eye on the big picture, not on specific industries which might suffer short-term harm.

  • Midwesterner

    Interesting example Nick. A friend of mine’s dad (many years ago) was a provider in a service business where entry costs were high and the market was finite. They provided air service to oil platforms. There were three competing providers. The buyers in the market deliberately gave some business to the highest bidder. But they gave more business to the middle bidder and they gave the most business to the lowest bidder. Their method was to preserve competition but reward performance.

    Allowing one provider to sell below cost to put the others out of business would have ultimately cost them far more than the short term savings. They knew this and went to a fair amount of cost and inconvenience to disincentivize that behavior. We have now nations gaining monopolies by using the power of government to undertake a similar loss-leading strategy. (Our own spectacularly destructive internal measures play right in to this. Without them, we would be able to defeat their ploy with pure market energy.)

    Since the US and other free countries could easily recover our own production capacities given enough time, we are in the unfortunate act of incentivizing opponents to do what ever they intend to do in an abrupt and advantage preserving manner.

  • Midwesterner

    Jacob:

    Trade is not war.

    Jacob is either passing strawman arguments or is an idiot. I never said “trade is war”. He actually quotes my statement that “Trade war is like shooting war”.

    The rest of his comments are unsupported assertions commensurate with strawman arguing.

  • Midwesterner

    Laird,

    You are making a whole lot of assumptions about what exactly it is that the other government wants to achieve.

    Whenever I see a government/nation/collective behaving in a manner that doesn’t make sense from my value system, I look at what the government/nation/collective has valued and attempted to achieve or acquire in the past.

    It’s Occam’s razor here. If there is a simple and historically consistent explanation for what somebody is doing, it is probably right. It is always dangerous to use our own values to explain somebody else’s actions. Especially when it requires us to add the caveat that they must also be stupid if our value system is their goal.

  • Mid:

    “Trade war is like shooting war”.

    Me:

    Trade is not war.

    Correction: Trade war is not like shooting war.

    Calling something “trade war” is already a misleading use of words. There are no trade wars in a free economy. “Trade wars” means tariffs, or trade barriers – the exact opposite of trade. Trade wars is a deliberately destructive euphemism.
    Its like liberals – US liberals are anything but [liberals], the same way as trade wars are anything but trade.

  • Nick M

    Nick Gadgets Ltd will buy what is best for them. That doesn’t mean necessarily what is cheapest. Nick Gadgets might diversify and buy from several suppliers, to keep options open, just as the buyers in Mid’s story.

    The beauty of the free market is that everybody does what they think is best for them, and aren’t subject to limitations and decrees from above.
    If you feel that buying imported items subsidized by foreign governments isn’t good for you you are free not to buy them. You don’t need government to order people around to keep away from those goods (by imposing high tariffs, or outright import bans).

  • Midwesterner

    Jacob:

    There are no trade wars in a free economy. “Trade wars” means tariffs, or trade barriers – the exact opposite of trade.

    A little test of your thinking here, Jacob. Based on your statement and definitions can we then assume there is no ‘free economy’ in the presence of ‘trade war’?

    In a free market, there is only one market. Therefore, we have to look at a foreign nation’s market as being one and the same as ours. (Otherwise, we’ve already conceded that no free market exists in the context of trade with them.) So if that other government is tampering in the (one and only) market, ergo, there is no ‘free market’.

  • Bruce Hoult

    It’s over twenty years now since we in New Zealand declared a unilateral free trade agreement with the entire world. Anyone can attempt to sell their stuff here. Any bank can open branches here. Any airline can fly to NZ or provide domestic flights.

    We’re doing fine.

  • Laird is correct. If some foreign state wants to bleed itself to sell me subsidised goods, more fool them. let them do it and when they finally go broke, well then domestic producers will emerge to take up the market in their place and in the meantime, capital that would have gone into that sector will instead get allocated in the domestic market where some foreign schmucks have not decided to fuck themselves over by ‘dumping’.

    In fact, foreign ‘dumping’ works best if it is nice and long term, which well and truly transfers the actual advantage onto the target market. If someone wants to ‘dump’ cheap goods on me by screwing their taxpayers, I am totally prepared to reap the benefits, thank you very much.

  • Laird

    Mid, I make no assumptions because I don’t care what the subsidizing government wants to achieve; all I care about is the economic result. And I stand by my statement: any government which subsidizes its inefficient (by definition; otherwise no “protection” would be needed) domestic industries is ipso facto subsidizing the consumers of those products in other countries. And that country is benefitted on an overall basis, to the detriment of the taxpayers in the subsidizing country.

    The intent of the subsidizing government may be any number of things, but if you’re going to apply Occam’s Razor I would posit that it is probably nothing more than the irrational belief that such a policy benefits their national economy. In other words, it is premised on simple economic ignorance (which is endemic, even among economists). Personally, I prefer Hanlon’s Razor: “Never attribute to malice that which can be adequately explained by stupidity.”

  • Therefore, we have to look at a foreign nation’s market as being one and the same as ours.

    I don’t care so much about that foreign nation’s market. If their market is not free, that doesn’t mean we have to cripple our market too, so as not to lag behind their follies.
    A free market is not a conditional thing: “we can have a free market only if you have one too”. A free market is good for us, no matter what others do, and if they cripple their market with tariffs, the more advantage for us.

    The New Zealand example is great.
    I wish the US (and every other nation) would scrap the NAFTA and GATT nonsense, and declare free and open markets. I mean: free trade does not need pacts, agreements, bureaucracies and regulations. It needs the absence of such.
    Governments are for protecting individual rights, not for managing trade and imposing tariffs. We do not need government managed trade.

  • Midwesterner

    Bruce,

    And how would you be doing if the US, et al didn’t have a big defense umbrella?

    I actually like very much the model that Perry is putting forth in another thread. It is the barrier destroying effect of the internet, etc that is providing one of the strongest forces towards free trade and open markets and, consequentially increased liberty. This is why we must be so very hard on companies that prostitute themselves to totalitarian states and obstruct these open lines of communication. They are being party to hostage taking on a national scale. Simple logic is that these companies are either trading with a foreign power (and therefore subject to international trade regulation), or they are trading with a criminal enterprise (and should be prosecuted for complicity). I have a real problem with the idea that we can accept stolen property in good conscience. And if there is one thing I am absolutely certain of, it is that the controllers of these despotic states are not the ones suffering the cost of their power motivated trade manipulations. It is their captives.

    Perry, regrettably they are not bleeding themselves. They are bleeding their captives. We have the means to make nations who politically censor the internet (for the obvious purpose of controlling their captives) either live without products made in free nations or stop censoring their captive’s free communication. Governments have no right to their subjects life, liberty, and property. There is no ethical way I can see to be complicit in their theft of it.

  • Of course, free trade does not trump war, that is: if a nation is at war it’s government should, probably, impose a trade ban with the enemy. That would be justified, but only that.

  • Midwesterner

    Laird:

    Personally, I prefer Hanlon’s Razor: “Never attribute to malice that which can be adequately explained by stupidity.”

    Personally, I prefer Paul Mark’s razor. Never expect a cat to bark. Attributing their actions to stupidity also requires you to assume they have abandoned their millennia old patterns and adopted ‘Western’ values. Possible, but I’m not one for expecting cats to bark.

  • Midwesterner

    Jacob,

    We agree on that. Apparently our difference is in how much warning there will be when hostile trade moves become something a little more, er, noisy. I would prefer we make sure we retain certain vital capacities. China is foregoing production of very valuable agriculture products in order to retain the capacity to feed itself staple foods that could be imported far more cheaply than what could be produced in their place. I wonder why.

  • Eric

    Midwesterner has a point. There are strategic capabilities a country needs to maintain for reasons outside economic health. I would think every country should maintain the capability to feed its people, for example, as well as produce weapons and spare parts.

    Beyond that, though, it seems like “trade wars” are kind of silly. I’m with Perry – if the Japanese want to subsidize my Toyota, I’m happy to pocket the difference. When they decide to stop subsidizing Toyotas I may buy VW instead. How does that hurt me?

  • Michael Kent

    Jacob wrote:

    Of course, free trade does not trump war, that is: if a nation is at war it’s government should, probably, impose a trade ban with the enemy. That would be justified, but only that.

    A lot of good that trade ban with the enemy will do you if it’s your enemy who’s making all of your tanks and aircraft carriers.

    Mike

  • Bruce Hoult

    Mid,

    What defense umbrella is that? We haven’t been under it since the mid 80′s, due to an issue entirely unrelated[1] to free trade. Since then the US has refused to play with us and has blocked our attempts to sell our old A4 jets.

    Incidentally, NZ is on the verge (probably in April) of signing a free trade agreement with China, which is arguably far more important than free trade with the USA or even the EU, and is the first China has entered into with any developed economy. This doesn’t affect China’s ability to sell to us (which has been free, along with everyone else, for 20 years) but our ability to sell into China.

    [1] there is a theory that the 1984-1987 Labour government may have used the nuclear ban to distract their greenie left wing while they were adopting free market reforms. On the other hand that was a long time ago, and no political party in NZ has a policy of ending the ban.

  • lucklucky

    “A 1% increase in trade from Africa, will mean more money than all the aid put together annually.”

    Who said this?

    http://www.time.com/time/world/article/0,8599,1717934,00.html(Page3)

    “You forget that Bush has an M.B.A. He thinks like a businessman in terms of the bottom line. Results. Profit and loss. There is an empiricism to a lot of his furthest-reaching policies on Africa. Correctly, he’s big on trade.
    “A 1% increase in trade from Africa,” he says, “will mean more money than all the aid put together annually.” He’s proud that he twice reauthorized the African Growth and Opportunity Act (AGOA), a modestly revolutionary Clinton Administration initiative that enabled previously heavily taxed exports to enter the U.S. tax-free. Even though oil still accounts for the vast amount of African exports to the U.S., the beneficial impact of AGOA on such places as the tiny country of Lesotho, and its growing textile industry, has been startling.”

    Obama or Clinton if they mean what they say, will be a disaster.

  • Midwesterner

    Bruce,

    If you truly believe that the USA could disappear from the planet and there would be no change in the relative security of the rest of the free world, I am incredulous. That is an astonishing claim.

  • Bruce Hoult

    Straw man.

  • Rohan Swee

    Eric: Midwesterner has a point. There are strategic capabilities a country needs to maintain for reasons outside economic health. I would think every country should maintain the capability to feed its people, for example, as well as produce weapons and spare parts.

    So where do you draw the line between strategic capacity and commercial capacity? If we don’t want government sticking its mitts into the market, and it’s economically advantageous for me to purchase, say, steel, from non-domestic producers, then my nation will lose its steel-producing capacity. And it’s not as if a nation’s war-making ability inheres in a few designated defense contractors, if I may belabor Midwesterner’s point.

    Now, I’m usually the first one to run screaming for the door at the mention of “protectionism” and “tariff”; I honestly don’t know what the right way of going about maintaining vital domestic production would be. I do know that watching my nation’s industrial and manufacturing capacity being gutted in the last decades, in a hostile world of unfree “free” trade, is giving me the willies.

  • Midwesterner

    Straw man.

    Well, certainly a piece of paper would have protected you from the Imperial Japanese. It would have bound Red China. Treaties always held the Soviet Union in check. And Chamberlain proved that Nazi Germany was as good as its word.

    Beside, if some world power desides it would be economically or politically useful to direct New Zealand, you have plenty of friends capable of defending your sovereignty. EUrope, for example. Just look at the wonderful job they did for Croatia and Bosnia. Look at the wonderful job they are doing now for Kosovo. That was NATO? Oops. Well NATO can/will still do these things with out the US, right?

    And besides, you guys are so morally pure, nobody will ever threaten you. We know this because you tell us so.

  • Midwesterner

    I honestly don’t know what the right way of going about maintaining vital domestic production would be.

    Me neither, Rohan. But I do know that every nation that ever thought it didn’t matter soon became either a de facto protectorate of another power, or a district of another power. I have no intention of seeing our nation pull a collective Chamberlain. Our biggest enemy is our own internal political redistributers. But since there is no other place to go if this country lost the next WW, I don’t want to commit national suicide trying to purge ourselves of the thieves in our midst.

    “If the disease don’t kill ya, the cure will” is a joke, not a plan. I really don’t have the answers either. But I will fight to have the questions asked anyway. Unlike Churchill, we have nowhere to go for help. I got the willies, too. There are too many people who believe that WWII was the war to end all wars. Well, at least all ‘Great’ wars. The best way to prevent war is to be a hard target.

  • MDC

    NAFTA is an odd creature. Although ostensibly sold on the notion of free trade, the idea seems to eventually evolve it into a “North American Union” along the lines of the EU, simply forming another protectionist trade bloc along regional (rather than national) lines. Just like the EU, really.

  • Paul Marks

    John McCain is indeed a free trader. Perhaps he is not as ardent a free trader as some people around here – but the standards of Washington D.C. he is.

    On “civil liberties” – I agree that giving money to a political campaign is a civil liberty.

    But most people do not agree with me – so the idea that John McCain is against civil liberties because he is in favour of limits on how much money individuals and corporations can dontate to political campaigns would strike most people as odd.

    On such things as waterboarding John McCain is out of step with most Republicans because he is too much IN FAVOUR of civil liberties.

    I am more like most Republicans on such things.

    “That is because you are a libertarian in name only” – perhaps, certainly the pain of enemies does not upset me.

  • tdh

    If the Taiwanese referendum on March 22nd favors de-facto independence, a trade war, if not WWIII, might well result with Communist China. Better now than later.

    The US doesn’t have a free market. We’ve been using tax dollars to subsidize the movement of manufacturing overseas. Union thugs still have the power to hamper manufacturing in the US. US facilities face regulations, many of which ought not exist, that their foreign competitors do not face.

    The capacity to manufacture is a crucial part of the capacity to wage war, as is the diversity of that manufacturing base. The end result of the unfree aspects of the market in the US, in the absence of mitigating unfreeness in trade, has been the movement of manufacturing to, most notably, Communist China. The implications, especially in view of expressed military threats by Communist China against the US, and of their alliance with the neo-Soviet regime in Russia, are ominous.

    NAFTA wasn’t about free trade, and neither is that corrupt, incompetent, anti-American John McCain (or his progressive-as-code-word-for-communist Democratic foils). If you’re tempted to say “But he’s a war hero,” remember that so, too, to a far greater extent, was Benedict Arnold.