Skip to comments.Riding the free trade raft over the falls
Posted on 04/18/2005 6:37:40 AM PDT by A. Pole
These are not the halcyon days of the Republicans' champion of open borders and free trade, Jack Kemp.
The "Minutemen," who appeared in Cochise County, Ariz., April 1 to highlight the invasion President Bush will not halt, are being hailed by conservative media and congressmen as patriots, as they are dismissed by the president as "irrational vigilantes."
Comes now the trade shocker for February. The deficit hit an all-time monthly record: $61 billion. The annual U.S. trade deficit is now running at $717 billion, $100 billion above the 2004 record.
Smelling political capital, Hillary Clinton and Chuck Schumer are co-sponsoring a 27 percent tariff on goods from China. Beijing ran a $162 billion trade surplus with us in 2004 in what trade expert Charles McMillion calls "The World's Most Unequal Trading Relationship."
The waters are rising around the Kemp Republicans. For these gargantuan deficits are sinking the dollar, denuding us of industry and increasing our dependence on imports for the components of our weapons, the necessities of our national life and the $2 billion in borrowed money we need daily now to continue consuming beyond our capacity to pay.
Brother Kemp is correct in his Washington Times column in saying Beijing has not been manipulating its currency. China fixed the value of the renminbi at eight to the dollar in 1994, just as we once tied the dollar to gold. Beijing rightly objects, "It is not our fault your dollar is sinking."
But here, the free-traders enter a cul de sac. They recoil at tariffs like Lucifer from holy water, but have no idea how to stop the hemorrhaging of jobs, technology, factories and dollars, except exhortation and prayer. For as 19th-century liberals, they believe free trade is "God's Diplomacy." Whoever rejects it sins in the heart. True believers all, they will ride this raft right over the falls and take us with them. This unyielding belief in the salvific power of free trade is, like socialism, one of modernity's secular religions.
As Kemp's column testifies, these folks are as light on history as they are long on ideology. Kemp claims "there is no demonstrable instance in economic history where nations were made worse off by free and open trade. There are only the doomsday scenarios spun out of the imagination of half-baked economists ..."
But between 1860 and 1914, Great Britain, which began the era with an economy twice the size of ours, ended it with an economy not half the size of ours. Britain worshipped at the altar of free trade, while America practiced protectionism from Lincoln to McKinley to Teddy Roosevelt to Taft. Tariffs averaged 40 percent and U.S. growth 4 percent a year for 50 years.
Bismarckian Germany did not exist in 1860. But by 1914, by imitating protectionist America, she had an economy larger than Great Britain's. Were it not for protectionist America shipping free-trade Britain the necessities of national survival from 1914 to 1917, Britain would have lost the war to Germany, so great was her dependence on imports. A real-life "doomsday scenario," thanks to a few dozen German U-boats.
Jack Kemp notwithstanding, protectionism has been behind the rise of every great power in modern history: Great Britain under the Acts of Navigation up to 1850, the America of 1860 to 1914, Germany from 1870 to 1914, Japan from 1950 to 1990 and China, which has grown at 9 percent a year for a decade. As China demonstrates, it is a mistake to assume free trade, or even democracy, is indispensable to growth.
Kemp trots out Smoot-Hawley, the 1930 tariff law, for a ritual scourging, suggesting it caused the Depression. But this, too, is hoary myth. In the 1940s and 1950s, schoolchildren and college students were indoctrinated in such nonsense by FDR-worshipping teachers whose life's vocation was to discredit the tariff hikes and tax cuts of Harding and Coolidge that led to the most spectacular growth in U.S. history 7 percent a year in the Roaring Twenties. Under high-tariff Harding-Coolidge, the feds' tax take shrank to 3 percent of GNP.
As high tariffs and low or no income taxes made the GOP America's Party from 1860 to 1932, the Wilsonianism of Bush I and Bush II open borders, free trade, wars for global democracy has destroyed the Nixon-Reagan New Majority that used to give the GOP 49-state landslides. Bush carried 31 states in his re-election bid. He would have lost had Democrats capitalized on the free-trade folly that put in play, until the final hours, the indispensable Republican state of Ohio.
Kemp calls China our trade partner surely a polite way to describe a regime that persecutes Catholics, brutalizes dissidents, targets 600 rockets on Taiwan, lets North Korea use its bases to ship missile and nuclear technology to anti-American regimes, and refuses to denounce racist riots designed to intimidate our Japanese allies.
As some on the Old Right have said since Bush I succeeded Reagan, open borders, free-trade globalism and wars for democracy are not conservatism, but its antithesis. And they will drown the GOP.
The Republicans jumping off the raft into the river and swimming desperately for shore testify to it more eloquently than words.
Come on, Racehorse, it isn't that difficult. Would Cuba benefit from trade with the US, or wouldn't it?
See # 87.
Since there is not much possibility of real free trade in today's world, there are going to be times when protectionism is appropriate. Probably not too many, but some. Also, in my very first reply to you, I noted the importance of national defense, I had meant to imply that there will probably always be at least a few industries that need to be kept local, thus protected.
Nevertheless, the concept of free trade is one with which I am comfortable, its opposite, Central Planning, with government deciding price and wage, and directing the econony, is one which I oppose on principle.
Incidentally, the herd animal tag line is a direct reference to the Democrat Pary's affinity with socialism and central planning. I am advocating the opposite, but if individual freedom and personal liberty were the characteristics of the herd, which they aren't, then I would count myself in.
And a skillful refutation of the facts from you, right?
you are confusing me. I can't tell which side of the free trade debate you are on.
OK, you have Karl Marx on your side. I have Adam Smith. I am a little surprised to find Marxist freepers, though.
Great Britain had PLENTY of places to which she could export machinery, equipment, and manufactured goods--they were called Colonies (Rhodesia, India, etc...)
Don't tell us that GB had 'noplace' to sell its goodies.
I recently had reason to browse through my aging copy of Smith's Wealth of Nations. With respect to tariffs and other protectionist intervention by government, if you were to do the same, you would find you are quite wrong. Now, with respect to other trade matters, he might smile on you just a wee bit.
Perhaps you've never heard of the Greens?
It is the Greenies who have shut down US lumber production, aided by Clinton. GWB has not been much help at all--if any--in recovery of the lumber industry.
Whether or not you or Pat ever choose to recognize the fact, tariffs do not penalize foreign producers. They are a hidden tax on the consumers of items so taxed.
Good going guy. Free trade shills refer to thousands of pages of government-to-government deals as 'free trade'. Lots of input from lobbyists and foreign governments but our elected reps can't change a sentence.
It is that difficult.
With whom are you proposing we do business? What is the measure of benefit?
Can you refute the facts cited by Buchanan? Or, do you prefer to remain in the land of theory?
At 30 cents/hour, a $8500.00 car only takes, ah, lemmeeesee heah, 28,333 hours--about 10 years' work--to pay off (excluding interest.)
That also excludes housing, food, clothing---JUST the car.
What GM is actually predicting is that the US market for GM cars will be gone by 2020. Thus, the Chinese market HAS to be bigger.
Ummm, Buchanan cited facts. Where have you refuted them?
"You place your right to buy anything at the lowest price above the right of American workers to have the highest standard of living. You are with the herd on this one."
What is the difference between making large wages and paying high prices and lower wages with cheap prices? If the purchasing power is the same, then introducing protctionist tarrifs to ensure high wages does nothing but increase government control and unnecessary meddling.
Your $4K computer (1985) would have cost you about $1K in 1990--and it was STILL made in the USA.
Since 1995, cost reductions have to do with slave labor, not manufacturing efficiencies--all of which were achieved in the USA before that date.
It is getting confusing, isn't it? I'm on his side and we're about to take a wrong turn. :-)
I am not proposing doing business with Cuba. I was asking a simple question: Would Cuba benefit from trade with the US?
What is the measure of benefit?
What is the measure used to decide the benefit China has enjoyed?
Quite the eye-opener, huh?
Sorry that you're confused. I'm not. Just because I agree with Marx's characterization of the destructiveness of free trade?
It is not a simple question.
What is the measure used to decide the benefit China has enjoyed?
Not the same measure I would apply to who would benefit in Cuba.
House Republicans who enjoy sporting Adam Smith ties should read a little more Adam Smith. In at least four cases, the father of free trade wrote, it must be "advantageous to lay some burden upon foreign (imports)," i.e., impose tariffs...
See the link in post 8
The British had colonies all over the world during those years.
Cuba would benefit from trade with the US.
no, I just totally misread your first post on the thread, where I thought you were criticizing Pat B. I got your meaning backwards.
As for Marx saying free trade will destroy nationalism, isn't that a good thing if the nationalism destroyed is Chinese (or Cuban) marxist nationalism?
We know that you are proficient in posting free trade html dogma,
Actually I rarely take a positon on free trade per-se, my issue is taxation and how best to release domestic business from the constraints that our current tax system imposes on manufacturing and all aspects of our commercial infra-structure.
Can you explain why globalist tax theory fails, but globalist trade theory holds?
Wrong question. The issue is more of one on how a retail sales tax only system operates to counter trade disadvantages. Productivity in this country far outways labor plus transport costs of goods in international trade and is not actually the dominant factor in manufacturing leaving our shores. Tax and regulatory conditions imposed on our manufacturing infr-structure account for alot more of the manufacturing fleeing our shores.
Under an NRST, that removes taxation and costs associated with business taxes from domestic manufacturers, our exports become more competitive. A retail only tax levied on all goods domestic as well as imports assures equalization of tax treatment of priducts while retaining the advantages of strong competition to keep corportations on the edge of the envelope in advancing technology and quality of goods at lowest cost to the consumer.
A tariff on imports merely provides an environment that encourages our own industry to slack off in competitive and techological advances in productivity while retarding the advantages of competition in expanding markets of international trade. A tariff does nothing to remove tax or rgulatory burdens on our domestic industry depressing the our domestic economy and industrial capability which is causing business to move their operations off shore.
With an NRST only tax system, we relieve domestic manufacturing from the heavy overhead costs imposed on them, while at the same time assuring that foreign imports are loaded with at least the same tax burden as our own domestic products.
As far as tariffs go, there is nothing at all to prevent us from imposing selective tariffs as well as NRST on imports in specific international trade situations where that would be of value. In the mean time why should we burden what manufacturing we have or treat those trade partners that are valuable to us any different at the retail level than we treat our domestic goods?
Furthermore why should we not create a manufacturing taxhaven to attract foreign manufactures to relocate there companies in the United States to encourage a reversal of the outflow of manufacturing from this country?
Marx wouldn't support free trade if it destroyed communist nationalism. Free trade destroys capitalist nationalism that's why Marx is in favor of it.
Cuba would benefit, but would Castro? Is it a coincidence that the longest serving leader in the Hemisphere (world?) is the one with the most economically isolated subjects?
Do you think Marx really anticipated an economy like China's today? Basically an autocratic capitalism. Would Marx or Lenin or Mao see today's China as truly Communist? To me it looks like 19th century mercantilism, and Marx would say it will crumble.
No, I don't believe it is a coincidence that isolationism has aided Castro in oppressing his people. Just as the emergence of capitalism in China has kept the Chicoms scrambing to squash dissent, trade with Cuba would allow the Cuban people a better standard of living which wouldn't necessarily be a good thing for Castro.
It's obvious you've never read Wealth of Nations. If you had, you would never have quoted the reference to Smith's four exceptions since they in no way support your position for protectionist tariffs. Nice bluff, however, FR is a tougher forum than what you're probably used to.
The Fair Tax is certainly one good proposal.That isn't enough, however. A UNIFORM revenue-raising tariff tax is an immediate, and effective additional step, however, that is fully-compliant with WTO rules and bylaws. (Granted, the rest of the Turd World will suddenly scream bloody murder...especially the Chinese...and who knows what the WTO would actually do...since it isn't about the rules, its about politics ).
The real problem, is that this imbalanced trade situation is looking more and more like a narcotic addiction...and the pain of withdrawal...recession/depression becomes ever more imminent even if we don't take any governmental steps to stop the hemmhorraging. We need to really address the political management issue here of the inevitable 'blow-back'...the pernicious and false perception that late-delivered cure is the CAUSE of the pain. The pseudo free traders will never relinquish their dogmatic creed. The economic reprecussions, being really severe...have to be taken into account...and a plan to deal with them implemented. I recommend slashing capital-gains taxes on U.S. investments, ...but leaving them on all our foreign investments. Give the WTO SOMETHING ELSE to bitch about.
And--to make the Cato crowd dance a jig...a regulatory "holiday" [ All OSHA, EPA, and other regulatory "enforcement" authority hereby suspended indefinitely until the crisis is declared over, and all existing activity "pardoned" pursuant a declaration of "economic crisis" .
Although, Lenin's statement has it backwards, the point is still the same - the capitalist allegiance is money. Actually, I wouldn't characterize the rope seller as capitalist. I would characterize him as communist. Just as the robber barons weren't really capitalists, but communists.The rope seller could be compared to former US companies whose loyalty is markets abroad, not their homeland. Loral comes to mind.
What will crumble in China is the Chicoms control if capitalism continues to flourish. As long as the Chicoms are supported by US consumers, they remain in control. If it weren't for trade with the US, China isn't capitalist enough to enjoy the growth it is now enjoying.
Bluff? I quoted him, which is more than you were capable of.
Yes, Karl Marx's communist beliefs make a reliable compass of what "not to do". He also liked the idea of mass 3rd world immigration into 1st world countries. He understood that for communism to take root in a country, chaos, instability, strife and conflict were necessary.
You nailed it. These guys are way too insulated to see or feel the effects of their policies.
"At 30 cents/hour,..."
Not an accurate depiction of the labor rate in China.
"$8500.00 car only takes, ah, lemmeeesee heah, 28,333 hours--about 10 years' work--to pay off (excluding interest.)"
Maybe for one person. But when cars first came to the US many creative methods were used in purchasing the cars, until wages caught up. It will not be any different in China.
"What GM is actually predicting is that the US market for GM cars will be gone by 2020."
Rhetoric isn't generally convincing.
Long, long overdue to directly confront the EU over it's "Business Launch" subsidies of each and EVERY product in the AirBus inventory. A nice 35% retaliatory tariff to offset their subsidy they refuse to relinquish would be, at a minimum, a fair response.
"If tariffs protect the rights of the individual, then they do not reduce spending power, they protect it. If a tariff allows us to preserve our system of government, then how does it harm the quality of our life?"
What rights of the individual are being protected? Do we have a right to a certain wage or specific type of employement?
Your argument is that we should have more government involvement to solve problems that are created by to much government involvement. It would make more sense to reduce corporate taxes and reduce regulations.
How profitable do you think US manufacturers would be if they could not access markets outside of the US?
Nephi has been here since 1998, and you've been here nine months -- you're just a newborn.
Free trade dogma insists that everyone benefits from it in the long run, but history does not agree. In history there are winners and there are losers. Protectionism creates winners (pre 1870 England, Wilhelmine Germany, pre 1945 America, China, India, and Japan) and free trade creates losers (Spain, Holland, post 1900 England, post 1970 America).
Free trade, like Marxism, is a textbook theory that just plain does not work in the real world because nations are no more altruistic than people. When pushed to extremes it creates economic distortions that benefit people who live off of investments at the direct expense of people who live off of paychecks as the economy stops making things.
Go Pat Go!
So America expanded economically because it had a frontier while Britain didn't ? What, pray tell, were Canada, Australia, New Zealand, and southern Africa ? Not to mention the rest of the Empire. A little thing like the Indian subcontinent ?
Yelling "commie" is what the free trader always does when the facts have argued him into a corner.
Tell me how Hamilton, Lincoln, McKinley, Taft, Coolidge, and Hoover were commies.
"(.....pre 1945 America, China, India, and Japan)"
You're kidding right? The great depression, slave wages, 3rd world lifestyles and getting a nuclear bomb dropped on you is what you would consider "benefits"? For some dumb reason, I would prefer to live with the trade policies of post 1970 America, and live in the resulting environment, than live in China, India or any other protectionist country.
Well Put Sam......