Restricting trade not in U.S.#8217;s best interest
Published 12:00 am Tuesday, April 29, 2008
When it comes to think about economic laws, a cynic would say we make no progress at all. It does seem that the same fallacies keep creeping back into wide-spread belief, and policy-makers keep making the same mistakes, and calls continue to be made for policies that have been tried in the past and found wanting.
One such shining example of the last is the column in The Ironton Tribune on March 28 (“Free trade certainly doesn’t mean fair trade”).
Starting from false premises, the column proceeds to wend its way through several non sequiturs to a thoroughly erroneous and self-destructive conclusion.
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The major premise of the column is that good-natured Uncle Sam is practicing free trade and being suckered by all those foreign countries that are not. This is, of course, completely false, because our country is not practicing free trade.
A few examples will suffice. The U.S. has numerous stiff tariffs: Brazilian ethanol is taxed at 54 cents a gallon; there are 20 percent tariffs on glossy paper from China, and high tariffs on Russian steel.
Then again, there are the numerous import quotas, such as those on sugar from Brazil, Philippines, the Dominican Republic and Australia.
Finally, the U.S. has been known to drop a subsidy or two to reward its favorites. Once family, yes, that’s one family in Florida receives at least $60 million a year in sugar subsidies. (The sugar growers are so favored that Americans must pay twice what the rest of the world pays for sugar.) We shouldn’t forget our friendly neighborhood farm, Archer Daniels Midland, who received $41.9 billion in corn subsidies in a 10-year span.
So we can’t argue that the U.S. is a bastion of free trade. Neither can we reasonably attribute our sinking dollar to any trade deficit. That comes about because we have been living beyond our means for years, propped up by foreigners buying our Treasury bonds and the Fed printing new money without any basis of value — just the kind of financial legerdemain that made Weimar Germany such a vibrant economic power.
I was amused by Mr. Crawford’s example of the compact fluorescent bulbs. It is unfortunate that four Ohio plants are closing and, yes, the new light bulbs are a stupid idea, but they were not foisted on us by China, but by our very own government, which in its infinite wisdom has mandated their use as part of its energy policy.
Mr. Crawford’s last attempt at rationale for his “fair trade” is to argue that Chinese factories exploit their workers, by violating Chinese labor laws. Even if true, how does that give us the right to police another country’s business and what can we do in the area of trade policy enforce them? In truth, the U.S., saddled as it is with extortionate taxation and grinding over-regulation, is unable to compete globally — but that’s not China’s fault, that’s Congress’.
And it is a false policy, as the column implies, to erect trade barriers. It’s been tried before at another time when things were not going well with the American economy.
The Smoot-Hawley Act, which became law in 1930 during the early part of the Depression, raised tariffs on some 20,000 items. This act sparked trade wars as each country retaliated against the U.S. and other countries who tried to protect local business and local jobs by keeping out the foreigners.
The crescendo of “fair trade” lengthened and deepened the Depression and spread its effects worldwide.
In truth, only free markets and free trade can bring prosperity. The spurious cries for “fair trade” will only serve to bankrupt us.
DAVID REID DILLON