The Dangerous Nonsense Of Protectionism?
By Steve Farrell (04/15/05)
In a text published at Mises.org, Murray N. Rothbard argues against any kind of national economic protection – something we will and have heard as justification for the upcoming vote (this May) on the Central American Free Trade Area of the Americas (CAFTA), and the renewal vote for the WTO (also later this year).
Under the heading, "How To Look at Tariffs and Quotas," Rothbard writes in this 1986 text:
"The best way to look at tariffs or import quotas or other protectionist restraints is to forget about political boundaries. Political boundaries of nations may be important for other reasons, but they have no economic meaning whatever. Suppose, for example, that each of the United States were a separate nation. Then we would hear a lot of protectionist bellyaching that we are now fortunately spared. Think of the howls by high-priced New York or Rhode Island textile manufacturers who would then be complaining about the 'unfair,' 'cheap labor' competition from various low-type 'foreigners' from Tennessee or North Carolina, or vice versa.
"Fortunately, the absurdity of worrying about the balance of payments is made evident by focusing on inter-state trade. For nobody worries about the balance of payments between New York and New Jersey, or, for that matter, between Manhattan and Brooklyn, because there are no customs officials recording such trade and such balances.
"If we think about it, it is clear that a call by New York firms for a tariff against North Carolina is a pure ripoff of New York (as well as North Carolina) consumers, a naked grab for coerced special privilege by less efficient business firms. If the 50 states were separate nations, the protectionists would then be able to use the trappings of patriotism, and distrust of foreigners, to camouflage and get away with their looting the consumers of their own region.
"Fortunately, inter-state tariffs are unconstitutional. But even with this clear barrier, and even without being able to wrap themselves in the cloak of nationalism, protectionists have been able to impose inter-state tariffs in another guise. Part of the drive for continuing increases in the federal minimum-wage law is to impose a protectionist devise against lower-wage, lower-labor-cost competition from North Carolina and other southern states against their New England and New York competitors.
"During the 1966 Congressional battle over a higher federal minimum wage, for example, the late Senator Jacob Javits (R-NY) freely admitted that one of his main reasons for supporting the bill was to cripple the southern competitors of New York textile firms. Since southern wages are generally lower than in the north, the business firms hardest hit by an increased minimum wage (and the workers struck by unemployment) will be located in the south.
"Another way in which interstate trade restrictions have been imposed has been in the fashionable name of 'safety.' Government-organized state milk cartels in New York, for example, have prevented importation of milk from nearby New Jersey under the patently spurious grounds that the trip across the Hudson would render New Jersey milk 'unsafe.'
"If tariffs and restraints on trade are good for a country, then why not indeed for a state or region? The principle is precisely the same. "
But he is wrong. It is not precisely the same. Money that stays in the United States, blesses the United States. Jobs that move across state borders are easily followed by workers who can relocate without moving to a foreign land with foreign moral and political values.
And let's stop making pretend that the competing nations will ever, and I mean, ever play on a level playing field. They have not, and will not. This is not Utopia. Besides, like it or not, there are real world security interests out there, e.g., China. Do we really think China’s stated ambition to become the number one military power on the planet, the stated goal of a communist regime, is all bluff, and that we are not threatened by the economic and military growth we fuel in the name of ‘free trade’ with them?
Let's join the real world. There are bad players out there, some of them mass murderers who hate the United States, have us listed as enemy # 1 in their strategic documents, and have their nukes pointed our way.
Finally, it needs to be asked, do these ‘free marketers’ believe in the right of a free people to collectively vote on the interests of the United States first? Don't individual consumers do this? Why not, then, a nation?
Don't you and I decide who we do business with? Doesn't common sense say, ‘don't do business with the mob,’ and how about, ‘don't buy stolen goods?’ As far as I can tell, China and countries like her are the very definition of a mob, among the worst the world has ever known, patent stealers too. And so why can't the national law, like the local law, ban or put reasonable restraints upon doing business with such shady partners?
The Constitution, by the way, gives us this right. According to that document, the US Congress, not some unelected international body, regulates our commerce with foreign nations.
The other side of the coin is that our government in the name of protectionism (corporate welfare, for instance), and also in the phony bologna name of free trade (e.g. the WTO, NAFTA, CAFTA, the FTAA, and the EU) has done many things which have hurt and undermined our economy and our liberties. Free trade under the WTO, NAFTA, et al., has been nothing more, nothing less than managed trade, and the managers have rarely been our friends.
We all know this, or ought to.
What would be preferred, if we truly wish to prosper, is a focused effort on deregulating the American economy by free market groups, reinstating true free enterprise on the national and state level. That alone would usher in an era of prosperity unknown in the history of the world. Then let other nations, jealous and or amazed by what they see, follow. But a permanent agreement to always offer 'free' trade to our neighbors, was as Washington, Adams, and Jefferson suggested, (learned as President, in Jefferson's case), not wise, because a friend today is an enemy tomorrow. Men and nations must reap as they sow, and America must be free and flexible enough to respond in kind.
With all do respect to Mises.org, a fine economic philosophy website, I disagree on this point. And although they would be the first to protest that their arguments are not intended to endorse such New World Order schemes as the WTO, NAFTA, or CAFTA, they ARE being used by others to endorse these very things.
Universal free trade is a Utopian Dream that ought to be discarded if America wishes to remain free and sovereign.
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