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Wednesday, January 16, 2013

How is that conservative? Part Two - Free Trade

I am now preparing to butcher the sacred cow of many conservatives. To many, free trade is synonymous with capitalism, freedom of opportunity, and economic progress. To criticize free trade is the equivalent of embracing communism.

Hogwash.

It is just as foolish to practice unilateral free trade as it is to practice unilateral pacifism. Both are good ways to get your butt kicked. Moreover, the traditional (and ergo conservative) policy of the United States has been to protect native industry from dumping and other predatory trade practices. George Washington was the first president to sign legislation, known as the Tariff Act of 1789, to protect incipient native industries from heavily-subsidized companies in other countries, particularly England. This was quickly followed by the Tariff Act of 1816, which was more detailed and addressed the issue of foreign companies pricing their goods below the profit margin to force American businesses out of the market. Countervailing duties were added in the 1890s, another means of dealing with the subsidy practices of foreign powers.

Interestingly enough, one of the early and more ardent supporters of international free trade was President Woodrow Wilson, a staunch progressive. His view was that tariffs were an example of "eeeeevil" corporations using the government to promote their own ends. However, by 1934 a more practical solution was enacted, the Reciprocal Trade Agreements Act. This policy allowed for ongoing adaptations in tariff policies as the result of negotiation with other economies. In essence, this legislation allowed for the United States to decide on a case-by-case basis how to deal with trade imbalances. Those nations which engaged in fair trade with us were rewarded with free access to our markets. Those nations that practiced unfair trade policies (corporate subsidies, high tariffs on U.S. goods) were prevented from doing so any longer. The net result was twenty-eight agreements to mutually reduce tariffs by 1940.

It is worth noting that the purpose of all of these laws was to keep native manufacturing strong. It has traditionally been seen as very important that America be as self-sufficient as possible. We do not want to be the Spain of the 21st century, transferring our acquired wealth to those nations who produce goods we import. Nor do we want to be used in the same way England once used its colonies, selling our raw materials to a nation that manufactures, only to buy those same materials back as finished goods. It doesn't take a degree in economics to see that selling low and buying high is not a recipe for economic success.

Neo-conservatism is the domain of reformed communists who replaced their former passion for a command economy with a rabid, albeit senseless, devotion to laissez faire economics. This school of thought mirrors the ideas of Woodrow Wilson, namely that any interference in trade by our government is bad for our economy. Certainly, laissez faire economics might be a viable system, providing all involved governments did indeed keep from interfering with free trade. However, such is not the case. Engaging in laissez faire economics while our trading partners enact tariffs and subsidies is economic suicide.

Unilateral free trade has turned Detroit from a beacon of capitalist success to a half-barren wasteland. It has led to the formation of an economy fueled by consumption rather than production. Those who insist that free trade will always benefit American interests are failing to think long term. We must be making money to keep spending it, after all.



Let us remember with whom we are competing. To produce goods for the same prices as our foreign competitors, we will have to recompense our workers as they do. Labor, after all, is where most of the cost of production is incurred. If  laissez faire proponents do not mind this idea, then I am sure they will find this a perfectly acceptable standard of living for the average American:



This is how people live in the countries from which we are importing. To compete with their prices, this is how Americans would have to live. This is what George Washington was trying to avoid. We do not want to be a nation of paupers; we are already a pauper nation.


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