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.
Pitchfork Brigade bump!
Pat has a good pen!
It amazes me how freepers have rejected globalist liberal tax theory, but completely embrace, unquestioningly, global trade theory.
It is truly amazing that Buchanon rails against anyone who opposes tariffs, but doesn't seem to comprehend that that would only mask a tax system which, at its core and its foundation, confers a tax advantage on foreign producers above and beyond our own.
Trying to compensate for that with tariffs is like trying to put lipstick on a pig. We should enact the FairTax sooner, rather than later, so that US producers will no longer be handicapped by their own government's tax system. This would tremendously improve our balance of trade and, unlike discriminatory tariffs, would not invoke the wrath of the WTO and our trading partners.
Wow. Great article. I don't support everything Buchanan preaches, but his views on free trade are spot-on. Free trade = subsidizng Nazi China.
And before anyone asks: yes, I am more than willing to pay more for the things I buy in order to keep manufacturing jobs here. I think of it as the price of national security. A nation with no ability to make anything is a colony of those that can.
Karl Marx loved the idea of Free trade. Anything Marx was for, I'm against.
If all the countries were approximately equal in social and economic status, then free trade would be great, much as it is among the 50 states. But as we know, many (most?) third world countries are dictatorships or corrupt democracies that exploit the people.
I disagree with him more than I agree with him. But, when he's on target, well . . .
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. Among Smith's reasons were "the defense of the country," "for the encouragement of domestic industry," for "revenge" and "retaliation" on nations that impose tariffs on one's own exports -- and to break open foreign markets.
Today, tariffs and taxes on U.S. exports entering China average around 30 percent. If the GOP were true to Smith, it would strip China of MFN and impose on Beijing the same tariff levels Beijing imposes on us -- both as retaliation, and to crack open the Chinese market to U.S. farmers and manufacturers. In 1997, we sold China a pathetic $13 billion worth of goods -- less than we sold to Singapore -- while we bought some 7 percent of China's entire GDP.
The thing is, they might be sending the raft over the falls, but they sure as heck ain't on it. Kemp and his cronies are well taken care of, no matter what the future holds.
Free trade dogma.
Buchanan cites facts, phil_will1 falls back on failed intentions and free trade theory.
We should enact the FairTax sooner, rather than later, so that US producers will no longer be handicapped by their own government's tax system.
Free trade subsidizes socialist economies. Tariffs and protectionism leaves them to twist in the wind, or rely on their own struggling economies for sustanance.
The US market is the market to be in for American producers or foreign producers. A NRST taxes American made goods at the same rate as socialist imports. The globalists still get their way.
I think one important point left out is not free trade but fair trade. Free trade works well when the living standard and business costs are of the same magnitude. Canada-U.S. free trade would fit in this example. Both are industrialized nations with not too dissimilar business and living environments. The playing field is level. Introduce Mexico and problems erupt. Mexican policies on salaries (very low and a maximum wage for foreign owned companies), banning foriegn real estate ownership, lower standards, etc., leads to an imbalance. Same with China. Free trade, with a level playing field, works by expanding the size of the market. Unlevel free trade, like with China or Mexico causes problems with employment, trade imbalances, etc. For example, how many U.S. companies are shipping goods to Mexico for Mexican consumers? If Mexico could grow their economy, then their citizens could be consumers of U.S. goods rather than cheap producers of U.S. goods for export since the producers can't afford the very goods they produce.
Precisely right! Good post, IMHO.
More free trade dogma.
While FDR did a lot of damage to the US, do you really think the US is as socialized as Canada? Free trade with Canada subsidizes their socialist economy just like free trade with the rest of the world's socialist economies subsidizes them.
Unlevel free trade, like with China or Mexico causes problems with employment, trade imbalances, etc. For example, how many U.S. companies are shipping goods to Mexico for Mexican consumers?
This is a point most free traders like to ignore and illustrates that the US market is the market to be in for the dreaded American producers, too, not just enlightened foreign socialist countries.
Communists view economics as a zero-sum game (nobody gets wealthy except at the expense of others) which is precisely the same view that protectionists have.
"Karl Marx loved the idea of Free trade. Anything Marx was for, I'm against."
Karl Marx was also a strong believer in a graduated (or progressive) income tax.
Kemp and his ilk are utopian radicals like many before them and to our bane with many more to follow. Their rhetoric always begins with utopian premises, and only if you press them do they attempt to answer specifics as it relates to real people other than their conspirators (think tank whores and their financial pimps). FTR I do think we need a better tax system that does not punish American based industry for investments here.
Just plain old BS from Pat..
So if we stop trading with China, they will become more politically free? Its worked great in Cuba, that's for sure.
Alexander Hamilton rose up from his grave, read your post, scratched his head, and scowled, "what's wrong with you, son?" :-)
The founding pops were mercantilists, remember? Nor were the early American economists to follow believers in tariff-free trade.
So, how might remembering a little thing like the British Empire fit into your analysis? :-)
Go Pat Go!
This comparison is utterly ludicrous. On January 1st of 1860 the U.S. was comprised of 33 states -- by 1914, we were up to 48. Great Britain didn't change very much in that time period. The reason the U.S. economy grew so rapidly in those years compared to Great Britain was that we still had a frontier, while they did not.
Social security ratio was designed for current workers [read jobs] to support retired workers and the ratio was somewhat better than 20 - 1. Now it is heading for 3 - 1.
But the jobs still exist, now in China, et al but those jobs do not pay into the SS system. A start is to put an equalization SS tax on imports to restore the job ratio.
BTW Pat, the prophet who tells us what we don't want to hear, is right again.
In a turn of events that seems to fly against all logic, during the four years that have passed since the U.S. first imposed the tariff on Canadian lumber we have seen a dramatic acceleration in the decline of U.S. lumber producers by all measures (number of mills, production levels, employment, etc.).
A case study like this offers a great example of unintended consequences.
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Global trade is global tax. The trade deals brokered via "free trade" force "rich countries" to pay for infrastructure development, computers for foreign government workers and all kinds of other stuff so those countries can "trade" with us. It is a scam of gigantic proportions to redistribute the wealth of America to the rest of the world.
The British Empire was more or less static at that point. The only acquisitions the Brits made after that was durign the Boer Wars in SA. I'm talking abotu the diff between a growing nation and a mature one.
The impact of NAFTA on trade between the U.S. and Canada cannot be accurately measured even now -- more than a decade after NAFTA was first ratified. The problem is that NAFTA is often mistakenly cited as a cause of some trend or another in trade between the two countries, when the reality is that NAFTA's impact has been very small compared to the bigger impact of varying exchange rates between the two currencies.
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.
A Taxreform bump for you all.
If you would like to be added to this ping list let me know.
John Linder in the House(HR25) & Saxby Chambliss Senate(S25), offer a comprehensive bill to kill all income and SS/Medicare payroll taxes outright, and provide a IRS free replacement in the form of a retail sales tax:
A bill to promote freedom, fairness, and economic opportunity by repealing the income tax and other taxes, abolishing the Internal Revenue Service, and enacting a national retail sales tax to be administered primarily by the States.
Refer for additional information:
There are three ways of creating real wealth, manufacturing, mining, and agriculture. When we ship our manufacturing plants overseas the corporations do well but the country starts to regress.
To put it more bluntly and more starkly, I paraphrase a businessman testifying last Thursday before a congressional committee holding hearings on our trade problems with China: "How can you compete with a country that pays its workers 30 cents an hour, provides no benefits, and puts you in jail for trying to organize a union?"
Sure is an interesting argument: in order to punish struggling socialist economies, we must practise socialism.
Lumber is declining in America because the environazis have imposed sustainable development on us. It has nothing to do with tariffs and everything to do with environmental regulation and destruction of property rights.
In Santa Cruz county CA, it costs thousands of dollars to produce a report that is at least a thousand pages long, outlining your INTENT to harvest timber. Not a harvesting plan, an INTENT to harvest. This kind of crap destroys the property owners right to get economic value from his property, and gives the state ownership of the property-- the only privilege many timber owners have in CA is the right to pay TAXES.
I haven't followed the case closely, but I have two points about this. Firts, isn't the closure of U.S. lumber producers related to the fact they no longer have a large enough supply of raw timber. Didn't protecting U.S. loggers from importing Canadian timber mean a glut of timber processing capacity in the U.S. that caused this decline in producers? Secondly, Hasn't the WTO ruled against the U.S. consistently in the lumber-trade disputes?
My point is that the U.S. consumer and lumber processors are hurt, just to help the loggers in the U.S. At the same time, the Canadian loggers are hurt. It sounds like free trade would be good overall to both the U.S. and Canada, even though U.S. loggers may suffer.
It sounds similar to the Mad Cow issue. Canada produces cattle for the U.S. beef industry, but Canada doesn't process the meat. Now that Canadian beef are banned in the U.S., the U.S. meat packers are suffering, even though cattle producers i the U.S benefit. Now Canada is trying to get meat processing facilities opend in Canada becasue there isn't enough processing capacity to handle the level of cattle production. Again, closing the border hurts both sides.
You calling the founding fathers socialist? Besides, explain how tariffs are socialist?
What needs explaining? Apparently, you have no trouble with our government picking winners and losers as a matter of policy.
Can you explain why globalist tax theory fails, but globalist trade theory holds?
We opened up trade with China, which had been dirt-poor before, and it is becoming wealthy. We haven't traded with Cuba, and it remains dirt-poor.
I would just as soon see all totalitarian states remain poor and relatively weak. In fact, although I don't think that it would have much impact now, I would still like us to stop "free" trade with China, whose government I think is a repugnant one.
It is not a government that we should be supporting in any way, and we certainly should not be making a bellicose, totalitarian state wealthy.
No, I don't have a problem with a trade policy that picks American producers to be the winners over foreign socialist producers. You do?
Can you refute the teachings of Thomas Sowell?
"The US market is the market to be in for American producers or foreign producers."
That is true today, but China is growing at more than double our rate, has been doing so for more than a decade now and that is expected to continue for the foreseeable future. One of the big carmakers, GM I think, expects the Chinese auto market to be larger than ours by 2020.
Let's stick to this article, dissembler.
(The predictable response by the U.S., of course, was to raise the tariff even higher -- but that only made things worse!)
More importantly, the improvements in productivity at Canadian mills made U.S. producers utterly uncompetitive in cases where the tariff doesn't apply -- like in export markets in Asia.
Your point about Santa Cruz County may be a valid one, but let me ask you this . . . your comment could just as easily apply to a manufacturing facility as to a forest, so what makes you think anything would be different in the manufacturing sector if the U.S. were to impose a tariff on Chinese imports?
That should come as no surprise, considering that China's population is about four times larger than ours.
Here's a bizarre statistic for you . . . there are more people in China who speak English as a second language than there are native English speakers in the United States!