If Not Us, Who?

The Girl Who Brung Us Is A Lovely Girl. Why Not Go And Dance With Her Again?

By Pejman Yousefzadeh Posted in | Comments (6) / Email this page » / Leave a comment »

One of the salient characteristics of the Republican Party has been its reputation as a pro-trade, pro-free market political movement. In embracing trade and the power of markets to bring prosperity, Republicans have historically put themselves on the right (no pun intended) side of the economic argument, ensuring that they will be in a position to embrace and advocate long-range policies designed to bring about an enlightened economic policy that will be consequential in improving the quality of life for people in America and around the world.

I remain confident that the Republican Party will continue to distinguish itself as the pro-free trade, pro-free market party. But if the image has been somewhat tarnished in the past few years, it is because of things like this.

Read on . . .

After running down the list of deleterious policy consequences that will follow the Bush Administration's misguided decision to impose tariffs on Chinese paper, Don Boudreaux concludes--quite rightly--with the following:

Protectionism is the freakish poster-child for the failure to see the full range of consequences of a policy action.  This latest episode is no different.  Nothing at all about subsidies -- real or imagined -- to foreign exporters changes matters.

Doubtless, we will get some reply stating that our trade policies are enriching the Communist Chinese. To that I have a twofold response:

  1. I don't like Communists and don't need to be lectured on the undesirability of their political movement. Indeed, I find it more than passing strange that the Bush Administration appears willing to embrace the command-and-control characteristics of a state-dominated economy when it imposes tariffs on Chinese paper (and for that matter, when it imposed steel, lumber and shrimp tariffs during the first term).
  2. I am not interested in free trade as a means of enriching the Communist Chinese. I am interested in free trade as a means of enriching us. When we trade with the Chinese--and when we ensure that we don't push for the implementation of shortsighted economic policies like yuan revaluation--we enrich ourselves. I thought that was a good thing. Evidently, however, some people--and sadly, they include people in the Bush Administration and Republican members of Congress--seem to have made prosperity less of a priority than it used to be.

And no, I don't like writing this. But when one's side is acting badly, one has an obligation to call one's side on such behavior in the hopes that said behavior will change for the better.

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In general, I support reducing tariffs and trade barriers, but I think it would be a mistake both politically and strategically for the Republican Party to push freer trade with China.

Our trade policies should take in consideration more variables than just increasing wealth. China has shown repeatedly it has hostile intentions to the U.S. and other allies in the West, and American consumers are funding their war machine.

If China wants to tap into our enormously wealthy market, it is perfectly acceptable to place restrictions on their trade practices with us.

The U.S. should instead encourage investment in other countries that aren't hostile to us, or even better encourage investment domestically through lower taxes.

I think a political win-win would be for the Republican Party to push for lower corporate taxes here and offset that by raising tariffs of imports, especially from countries that have questionable intentions. Companies both domestic and abroad would pour capital into our country. This policy could create a winning coalition from the Right and the Left.

The U.S. federal government used to be primarily funded through tariffs on imports, we didn't have an income tax or corporate tax at all. That's something worth remembering.

"Back in the thirties we were told we must collectivize the nation because the people were so poor. Now we are told we must collectivize the nation because the people are so rich. "

William F. Buckley, Jr.

Our trade policies should take in consideration more variables than just increasing wealth. China has shown repeatedly it has hostile intentions to the U.S. and other allies in the West, and American consumers are funding their war machine.

Read my links. We are in fact enriching ourselves tremendously via trade with China and thanks to the current rate of the yuan. By buying Chinese goods cheaply, we are flooding the Chinese with our dollars. The Chinese don't have anything to do with our dollars save reinvest them in America. This helps us enjoy benefits like low rate mortgages. We are growing far, far richer from this deal than China is. And your comment seems to indicate that if we do not trade with a country, we will succeed in impoverishing their war machine. How's that working with North Korea and Iran? (And no, I am not a hop, skip and a jump away from advocating Most Favored Nation status for North Korea and Iran because, among other things, North Korea and Iran have to undertake a massive and significant recalibration of their economic system (i.e. adopt free market reforms) before trade begins to work as a significant palliative. China is not perfect in that regard, but it is better by leaps and bounds and presents an enormous market for American companies to tap into--thus further enriching us.)

If China wants to tap into our enormously wealthy market, it is perfectly acceptable to place restrictions on their trade practices with us.

See above. We are the ones doing the tapping.

The U.S. should instead encourage investment in other countries that aren't hostile to us, or even better encourage investment domestically through lower taxes.

The U.S. should encourage investment in countries where there is a significant market, where American consumers can get quality goods on the cheap and where purchases of the countries' goods will ultimately rebound to America's benefit by having American dollars reinvested in the American economy. China wins on all counts as a candidate. In general, see this. Note that this is what Republicans have historically stood for. Note that any cursory reading of history shows that such policies enrich America without allowing strategic competitors an undue advantage. And we are getting away from this tried and true formula for economic success . . . why?

I think a political win-win would be for the Republican Party to push for lower corporate taxes here and offset that by raising tariffs of imports, especially from countries that have questionable intentions. Companies both domestic and abroad would pour capital into our country. This policy could create a winning coalition from the Right and the Left.

I beg your pardon, but what are you smoking? A tariff acts as a tax. Tax something more and you will get less of it. The more you tax imports, the less of them you will have. At best, your proposal will be revenue neutral. But it won't stop there; the United States will simply lose out on all of the trade advantages discussed above. And given the quality of economic thinking on the Left, I am not interested in engendering a coalition with them. Oh, find me a significant number of Blue Dog Democrats who can help us pass free trade agreements and I'll work with them. Resurrect the Boll Weevil caucus and I'll break bread with that gang. But why in the name of Heaven should I consent to creating a coalition with the Left just for the purpose of having created a coalition--especially when the policy consequences shall be utterly disastrous. We live in a postdiluvian era. Let's act like it.

The U.S. federal government used to be primarily funded through tariffs on imports, we didn't have an income tax or corporate tax at all. That's something worth remembering.

And your point is . . . what? Let's turn the microphone over to a really smart guy named Thomas Sowell and see what he has to say about the efficacy of tariffs:

John Hawkins: Can you explain why protectionist tariffs on let's say steel or textiles actually end up costing America more jobs than they save?

Thomas Sowell: The number of jobs in the steel is exceeded many times over in industries making steel products, from automobiles to oil rigs, refrigerators, locomotives, etc., etc. Tariffs that save jobs in the steel industry mean higher steel prices, which in turn means fewer sales of American steel products around the world and losses of far more jobs than are saved.

This argument against tariffs applies to more than just tariffs imposed on steel, of course. So tell me again why a heavy reliance on tariffs such as the one that you proposed is such a good idea again. Because the attraction escapes me.

"At times one remains faithful to a cause only because its opponents do not cease to be insipid." --Friedrich Nietzsche

The U.S. won the Cold War against the USSR primarily because their economy completely collapsed. We outspent them in an arms race that their economy could not sustain. If the USSR's economy grew at a similar rate to China's, the Cold War would still be going on. I don't think it's a coincidence that the West and the USSR essentially had a trade embargo.

Your example's regarding North Korea and Iran are flawed. The West does in fact trade with Iran. I thought it was fairly obvious that Iran sells a large amount of oil on the world market. That is what makes it such a dangerous regime is that it has the funds to undertake a nuclear program. The West doesn't trade with North Korea, and it can't even feed it's own people. It has no real source of revenue except criminal enterprises such as counterfeiting. North Korea's saber-rattling is turning out to be complete joke, it doesn't have the funds to create a nuclear program or be a real threat to the U.S. If the West stopped sending aid to the country, it would also completely collapse.

At the end of the day, I really don't care about the miniscule impact China has on our economy, I'm far more concerned with the national security implications of a well-armed, hostile, undemocratic regime than I am the balance sheet of Coca-Cola.

China needs the West a lot more than the West needs China. China's main contribution to the world economy is their cheap labor. There are many third-world countries that could esily fill that void, countries that don't have hostile intentions on the world stage.

"Back in the thirties we were told we must collectivize the nation because the people were so poor. Now we are told we must collectivize the nation because the people are so rich. "

William F. Buckley, Jr.

The U.S. won the Cold War against the USSR primarily because their economy completely collapsed. We outspent them in an arms race that their economy could not sustain. If the USSR's economy grew at a similar rate to China's, the Cold War would still be going on. I don't think it's a coincidence that the West and the USSR essentially had a trade embargo.

Never mind the fact that China has fundamentally altered its own economic system to make it a capitalist one (albeit imperfect capitalism). China is an authoritarian/totalitarian state with a thriving, dynamic economy. The Soviet Union was a complete command-and-control economy that fell under its own weight because the system failed. As I mentioned in my first comment, you have to have the foundation for a successful economy in place in a certain country before you can trade with that country. The Soviets did not have that foundation in place. China does--a distinction you fail to note and glide over completely. And again, by trading with the Chinese, we are enriching ourselves, as I have demonstrated in my post and in my first comment. You have given no evidence beyond mere insistent assertions why anyone should believe otherwise.

Your example's regarding North Korea and Iran are flawed. The West does in fact trade with Iran. I thought it was fairly obvious that Iran sells a large amount of oil on the world market. That is what makes it such a dangerous regime is that it has the funds to undertake a nuclear program. The West doesn't trade with North Korea, and it can't even feed it's own people. It has no real source of revenue except criminal enterprises such as counterfeiting. North Korea's saber-rattling is turning out to be complete joke, it doesn't have the funds to create a nuclear program or be a real threat to the U.S. If the West stopped sending aid to the country, it would also completely collapse.

The United States and the West get oil from OPEC, which transmits Iranian oil. And there are currently sanctions against Iran that prevent trade. They were imposed by the U.N. in response to the Iranian drive for a nuclear weapons program. So in fact, the West's trade with Iran has been severely diminished at the very least. And the reason there is no trade with North Korea is that North Korea does not trade with anyone. It is an autarky. It is completely isolated from the world. It is not the West that has made the decision not to trade with North Korea. It is the North Koreans who have made the decision to isolate themselves entirely from the world. Again, you neglect to note this.

At the end of the day, I really don't care about the miniscule impact China has on our economy, I'm far more concerned with the national security implications of a well-armed, hostile, undemocratic regime than I am the balance sheet of Coca-Cola.

Either you don't read carefully or you don't care about the facts. In any event, as I have amply demonstrated, China has much more than a "miniscule impact" on our economy. Quite the contrary; that impact is pronounced. If it weren't, the paper tariffs wouldn't be such a big deal. Your comment about "the balance sheet of Coca-Cola" is ill-advised and misinformed snark that only serves to lend a strawman element to the argument. No one has discussed "the balance sheet of Coca-Cola" but rather, the balance sheet of the country at large. I have shown evidence--and you have failed to dispute--that trade with China enriches the United States. I have shown evidence--and you have failed to dispute--that trade with China is certainly more than "miniscule." As of 2005, "China replaced Mexico as the second largest source of imports for the United States (worth $196 billion in 2004). China’s share of U.S. imports was 13% in 2004, although this proportion still falls short of Japan’s 18% of the early 1990s. The United States is China’s largest overseas market and second largest source of foreign direct investment on a cumulative basis. U.S. exports to China have been growing rapidly, although from a low base. In 2004, China replaced Germany to become the fifth largest market for U.S. goods." (Link. See also this.) Sound "miniscule" to you? Did you even know these facts and figures before you chose to post? And did you think that I didn't?

Of course, enriching the United States does indeed entail allowing corporations to thrive while making an honest buck, since those corporations are the ones that create the jobs that pay the money that buy the stuff that keep our economy going. I thought this was obvious.

I would respond to your last paragraph, but it is of a piece with all of your other writings: All assertions. No evidence. No thought afforded to the economic consequences of your advocacy and no consideration whatsoever for the facts that drive the creation of international trade policy and security policy.

"At times one remains faithful to a cause only because its opponents do not cease to be insipid." --Friedrich Nietzsche

of reference. The Republican party's embrace of free trade is relatively new. The Smoot-Hawley tariff act that greatly deepened the Great Depression was named after two Republicans, Senator Reed Smoot (R-Utah), and Rep. Willis Hawley (R-Ore).

I fully agree with your points on free trade though.

 
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