Does “Free Trade” Hurt Americans?

Pat Buchanan is a sharp political analyst. He strikes at the core of an issue more quickly than Marion Barry could light a crack pipe, which is to say pretty quickly. But his grasp of economics is poor. Not just poor: resoundingly bad.

In a recent article commenting on Trump’s State of the Union address, Pat Buchanan began his article this way:

Before the largest audience of his political career, save perhaps his inaugural, Donald Trump delivered the speech of his life.

And though Tuesday’s address may be called moderate, even inclusive, Trump’s total mastery of his party was on full display.

Congressional Republicans who once professed “free-trade” as dogmatic truth rose again and again to cheer economic nationalism.

“We’ve lost more than one-fourth of our manufacturing jobs since NAFTA was approved,” thundered Trump, “and we’ve lost 60,000 factories since China joined the World Trade Organization in 2001.”

Yet a Republican party that embraced NAFTA and voted MFN for China every time it came up gave Trump standing ovations.

…One had thought the free-trade beliefs of Republicans were more deeply rooted than this.

“We have withdrawn the United States from the job-killing Trans-Pacific Partnership,” Trump exulted, having just tossed into the trash that mammoth trade deal beloved of Bush Republicans.

GOP champions of the TPP, if there are any left, sat mute.

Trump cited the first Republican president, Lincoln, as having got it right when he warned, “abandonment of the protective policy by the American Government (will) produce want and ruin among our people.”

Celebrating protectionism, hailing “America First!” in a virtual State of the Union address — it doesn’t get any better than this.

Pat Buchanan is a populist. He wants America to be more independent and free of involvement with international bureaucracies like WTO and NAFTA. I agree with him. I want to see these groups completely eliminated. I want to see the European Union go the way of a certain other Union and crack-up completely. Internationalist bureaucracies do nothing but promote more bureaucracy, restrict liberty, and cost us money.

But Pat Buchanan, whether he realizes it or not, is not necessarily anti-bureaucracy. He’s just anti-other bureaucracies. He still wants his own bureaucracy to administer “economic nationalism” as he calls it, which is a nice-sounding way of saying “government-controlled trade”. He wants protectionism, mainly referring to tariffs on foreign goods – tariffs that YOU pay for at the cash register.

I am a fellow traveler with Buchanan in regards to opposing international bureaucracy in favor national sovereignty. But I’m not content with stopping there. I want the revolution to continue inward. I want to get rid of not only international barriers to trade, but national barriers as well. I want both monstrous international trade bureaucracies and domestic tariffs thrown in the dumpster.

SCHIZOPHRENIA

In the second half of the article, Pat Buchanan changes his tune a little bit:

In restating his commitment to the issues that separated him from the other Republicans and won him Wisconsin, Michigan, Ohio and Pennsylvania, however, Trump reaffirmed aspects of conservatism dear to his audience.

He committed himself to regulatory reform, freeing up the private sector, rolling back the administrative state. The Keystone and Dakota Access pipelines are on the way to completion. And Trump is all behind school choice.

…Ronald Reagan was not wrong when he said, “Government is not the solution to our problems; government is the problem.”

This does not make any sense. Buchanan is making paeans to rolling back the administrative state and repealing regulations. I applaud this idea. He even trots out the old Reagan line on government as the problem, which I also agree with. But literally a few paragraphs ago, he committed himself to the need for protectionism and “economic nationalism” conducted by government bureaucrats. So which is it? Is government the problem, or the solution?

Populists have always been schizophrenic in this regard. They are supporters of liberty in terms of national sovereignty but supporters of government control over the economy. They want to take power out of our hands as citizens and give it over to bureaucrats to tax us as long as the mantra is this: “I will punish you for buying foreign goods and I don’t care if you don’t like it.”

But I am in favor of local bureaucrats versus international bureaucrats. If a useless idiot is going to have taxing power over my life, I’d prefer it to be someone locally who I can place direct political pressure on as opposed to someone elsewhere in the world from whom I am completely separated. Therefore, you can call me a political populist. Statist globalists are worse than statist nationalists, so I will support nationalists insofar as it enables voters to exercise direct political pressure against annoying government idiots who get in their way.

Let me put it this way: I can get revenge against my local government at the ballot box. Getting revenge against transnational bureaucracies is far more difficult.

DOES FREE TRADE HURT AMERICANS?

Let’s answer these questions: Is Buchanan right? Does free trade hurt us? Is government protectionism the answer?

No, no, and no – in that order. I can prove it in two charts. First, the below chart shows the per capita output of US manufacturing:

14455c

Next, view this comparison of manufacturing output in the five major industrial nations:

14455d

The proof is in the pudding – American manufacturing has been a resounding success. The key is this: it has been within a relatively low-tax / low-tariff infrastructure. Firms have been able to maximize efficiency and minimize input costs on their own terms. No direction from bureaucrats was necessary. This  has been the spontaneous order in action.

But this does not satisfy the populist protectionists. They want the government to step in and punish American consumers with taxes on imported goods that they want to buy. They claim it will bring more prosperity to the country. What is never really explained is how needlessly taking money out of consumer’s pockets by forcing them to either buy higher-priced American goods or pay an import tax will make them into more prosperous people.

Of course, populist protectionists never refer to it as a tax. That makes it sound bad – which it is. Regular Americans understand that increased taxes do not help them in any conceivable fashion. So protectionists call it a tariff instead, and pretend that somehow China will pay for a US-government enforced tax on their exports. China does not pay the tariff. American consumers do. And it is indeed a tax.

Finally, just look around you to see free trade in action. The United States of America has been the overall free trade capital of the world nearly since it’s inception. In every aspect of life, America is richer today than it was 200 years ago. We live lifestyles incomparably more comfortable and luxurious than the common man lived 200 years ago. This prosperity was produced by free people making voluntary deals with one another – not by government edict.

CONCLUSION

We live in the digital age. Even if populist protectionists like Pat Buchanan get their way and tariffs go up, digital goods and web services will remain outside their reach. The marketplace of ideas and digits will continue to enrich us regardless of the what protectionist regulatory state decides to do.

Further writing is on the wall: robotization. Regardless of whether or not tariffs go up, manufacturing jobs will continue to be lost to robots. Where manufacturing jobs do not require human judgement, humans should expect to compete with robots. So American manufacturing may become more productive and profitable, but it will be because of robots, not tariffs.

I still support populist nationalists over bureaucratic globalists. I wanted the UK to secede from the European Union. They did. Now I want to see Scotland secede from Great Britain. I want to see the breakdown of judicial sovereignty into units held as locally as possible. This is where liberty flourishes.

I am happy to support Buchanan in the rollback of international bureaucracy. But I am not content to stop there.

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