Posted on 04/13/2005 1:00:10 PM PDT by LowCountryJoe
There is a disturbing trend under way in Washington these days where politicians threaten Draconian action as a "stick" to coerce a result they desire. They do this even while they acknowledge that swinging the stick won't solve the problem it purports to address and most likely will exacerbate it and lead to undesirable consequences. They typically justify their use of provocative and extreme threats as the only means available to rectify a situation they characterize as a pending "crisis" or a "systemic meltdown."
The most recent instance that comes to mind immediately is levying huge protectionist tariffs on selected trading partners (China) to stifle their exports into the United States and to coerce them into artificially altering the value of their currency. It is an extremely dangerous stratagem to impose a protectionist tariff on China just because some people believe we are importing too many Chinese goods and would like to coerce the Chinese government into cutting their currency free of its link to the dollar. For example, Sen. Charles Schumer, D-N.Y., has introduced a bill to hit all Chinese imports with a 27.5 percent protectionist tariff, which is co-sponsored by the Democratic Senate Leader Harry Reid, (D-Nev.) and the junior senator from New York, Hillary Clinton (D-NY).
Red flags are raised immediately by the way supporters of smacking China in the face with a huge protective tariff mangle the English language to distort reality. Schumer is fond of calling his bill a "tough-love effort" to force the Chinese to "stop playing games with their currency." Similarly, other senators supporting the legislation insist it is crafted to pressure the Chinese into "ending their currency manipulation."
How can one rightly call anchoring a nation's currency to the dollar, as China does, "playing games" or "manipulating" their currency? Was it "currency manipulation" under the Bretton Woods international monetary system when the value of the dollar was fixed at a specific weight of gold and the value of foreign currencies then fixed to the dollar? It may be the best policy or the worst possible policy (I happen to think it was one of the best) but it certainly isn't "manipulative." There is substantial professional opinion among economists that a nation can effectively stabilize the value of its currency (especially if it isn't widely traded) and de-politicize its monetary policy by linking it to a strong foreign currency like the dollar or the euro.
Imposing a 27.5 percent tariff on Chinese imports not only would be disastrous in its own right, it would not stop there. China almost certainly would retaliate, and the seeds of a trade war would be sown. The Schumer-Hillary tariff on China could easily turn into the Smoot-Hawley tariff of the 21st century. Just as Smoot-Hawley quickly got out of control - expanding originally from an effort to protect farmers - so too would Schumer-Hillary get out of control as other petitioners quickly lined up to demand protection against other countries "flooding" our economy with "cheap" goods and "manipulating" their currencies to give their exports an "unfair" advantage.
There is a permanent lobby in Washington for replacing free trade with managed trade led primarily by Fred Bergsten, a former assistant secretary of Treasury for international affairs under President Jimmy Carter and now the director of the Institute for International Economics. Bergsten recently made a pitch before the Counsel on Foreign Relations for a pre-emptive 50 percent tariff on China to prevent an international economic calamity. Even former Nixon Commerce Secretary Pete Peterson, who supports the idea, acknowledges that a hefty protectionist tariff on China is playing with fire. Peterson said, "I don't suggest using sticks lightly. They're a very dangerous thing to get started because they can result in retaliation and so forth."
The simple truth is, there is no demonstrable instance in economic history where nations were made worse off by free and open trade. There are only doomsday scenarios spun out of the imagination of half-baked economists that are concocted to spur governments to act pre-emptively. There are, however, innumerable instances where a false fear of free trade (usually goaded by economic interests who benefit in the short run from protectionist policies) has led a government to "pre-empt a crisis" with protectionist policies that very quickly cascaded into a genuine economic calamity. Smoot-Hawley is the most dramatic instance in the last hundred years. Let's not tempt fate with a Schumer-Hillary tariff that could become the Smoot-Hawley tariff of the 21st century.
User tax would be the way to go.
Class? ....... Anyone???
Kemp's warm embrace of illegal immigration and economic revisionism leads me to suspect that he must've been one of Ward Churchill's students.
That is exactly what I thought of when I saw the title, too. LOL!
Also, can you show me where Mr. Kemp has written or spoken anything that leads you to believe that he's soft on illegal immigration? [I'm guessing, "No!"]
Kemp truly displays his ignorance by repeating this fallacious myth.
The truth is, two-thirds of U.S. imports under Smoot-Hawley came in duty-free, and when the tariff was enacted, more items were added to the free list than were taken from the free list and made dutiable.
Furthermore, there's little evidence that American exports were affected by Smoot-Hawley. Exports fell to countries that were not impacted by the tariff as well as to countries that were impacted by it.
The decline in international trade was a RESULT of the global depression, NOT a CAUSE of the depression. And there is absolutely no evidence of countries imposing "retaliatory" tariffs in response to Smoot-Hawley. Most governments were more concerned with stimulating their own domestic economic recoveries rather than whatever minute proportions that could be spared for trade.
No fooling, dude.
The phrase "illegal immigration" doesn't exist in Jack Kemp's vocabulary.
Frankly, I doubt that Jack even understands the word "border".
Us "Central-planning types" need not defend a horribly failed trade policy. We need to hear from the Free trade types who have yet to show us how this policy has benifited the nation. Oh yeah, don't forget to address the flood of illegals from Mexico since NAFTA was signed.
Sorry protectionism does not work. Never has never will. All it does it keeps business that does not have a sound business policy keep on running (case in point the auto industry) or it empowers the unions. I rather listen to people like Walter Williams or Jack Kemp than Pat Buchanan.
Okay, so what you're saying was that the economic progress we made in the relatively protectionist America of the 1980s wasn't as good as the heady Free-trade days of the 1990s and 2000's. Is that what you are attempting to argue? If so, convince me that these days are better then the 1980s.
And I'd rather listen to Thomas Jefferson than Karl Marx.
"The prohibiting duties we lay on all articles of foreign manufacture which prudence requires us to establish at home, with the patriotic determination of every good citizen to use no foreign article which can be made within ourselves without regard to difference of price, secures us against a relapse into foreign dependency."
--Thomas Jefferson to Jean Baptiste Say, 1815.
But, in general, the protective system of our day is conservative, while the free trade system is destructive. It breaks up old nationalities and pushes the antagonism of the proletariat and the bourgeoisie to the extreme point. In a word, the free trade system hastens the social revolution. It is in this revolutionary sense alone, gentlemen, that I vote in favor of free trade.
~Karl Marx, "On the Question of Free Trade" - January 9, 1848
I'd rather listen to Adam Smith or Milton Friedman than Karl Marx or Thomas Jefferson - because they are actual economists. Even protectionists don't (and can't) argue that the net effect of trade barriers is to make the country better off as a whole. They argue that they make labor in the industries they are protecting a better off, while making the rest of the population a worse off. Trade barriers are no different from welfare, social security, or any other income redistribution scheme.
OK. Adam Smith is fine by me...
Excerpted and condensed from:
Of Restraints upon the Importation from Foreign Countries
of such Goods as can be produced at Home
"There seem, however, to be two cases in which it will generally be advantageous to lay some burden upon foreign for the encouragement of domestic industry...
- The first is, when some particular sort of industry is necessary for the defence of the country....
- The second case, in which it will generally be advantageous to lay some burden upon foreign for the encouragement of domestic industry is, when some tax is imposed at home upon the produce of the latter. In this case, it seems reasonable that an equal tax should be imposed upon the like produce of the former....
IMHO, the prohibitive and restrictive regulatory burdens and mandates imposed by the federal government on domestic industries essentially constitute an economic "tax" that qualifies for a compensating tariff to be placed on competitive imports under Smith's second case.
I completely agree with you there. I just disagree with those that would impose tariffs to protect U.S. jobs in non-defense related industries where we do not possess a comparative advantage. I would also impose tariffs if human rights or other foreign policy reasons warranted it. For example, I think Bush I's decision to grant MFN status to China was unwise considering China's human rights record and anti-U.S. sentiment. We might as well donate money directly to their military.
I agree that excessively high, protective, "targetted" tariffs do not work as intended. And often, the disparities and loopholes they create generate more harm than good.
That's why I generally advocate a relatively low (10~15%), flat-rate "revenue tariff" to be levied uniformly on ALL imported goods.
At very low tariff rates, revenues will increase as the tax rate is increased. However, if the tax rate is set too high, revenues will begin to decline as trade is discouraged too much. IMHO, the goal should be to establish a tariff rate that maximizes tariff revenue to the Treasury, thus allowing other forms of domestic taxation to be reduced.
Their currency is artificially set. How would they alter it if not artificially? They can either float the yuan, or, if they don't want to do that, adjust its value to be closer to what it would be if they floated it.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.