The conservative position: Free trade or protectionism?

By Jonathon Moseley

In a trade war, we are told, foreign manufacturers are not affected at all by tariffs imposed by the U.S. government. Only U.S. consumers will pay more.

Yet, mysteriously, if a foreign country imposes tariffs on U.S. exports, it is a catastrophe for U.S. manufacturers and "farmers" (giant conglomerates). So we are told that U.S. exporters will suffer from a trade war. However, foreign producers importing to the U.S. will not be affected in the slightest.

That is not sound analysis, but propaganda. Saying that tariffs hurt U.S. consumers and U.S. producers, but tariffs have no effect at all on foreign consumers or foreign manufacturers is not a legitimate argument.

President Ronald Reagan was a protectionist. Reagan was a free trader. Sometimes Reagan was both a protectionist and a free trader on the same day, even in the same speech on the same day. Reagan was a firm adherent to "it depends." Reagan gave strong voice to both sides, evidently as a way of encouraging a balance between the extremes.

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Reagan imposed protectionist tariffs on imported motorcycles to save Harley Davidson from business failure, purely to benefit an American company. "President Reagan, asserting that he was trying ''to enforce the principles of free and fair trade,'' imposed a 100 percent tariff today on some Japanese-made computers, television sets and power tools." (Gerald Boyd, New York Times, April 18, 1987, page 1)

Tariffs, trade restrictions, free trade, protectionism and regulated trade – these issues have been a fault line dividing the Republican Party and the conservative movement for many decades, possibly more than a century. Yet advocates insist that free trade is the one and only conservative position.

These things are tools. They are not "always" true. They are not "always" false. They are not "always" or "never" the right tool. No sane person would advocate for an income tax rate of 0 percent nor of 100 percent. Yet trade has turned into a caricature.

Let's start with "the multiplier effect." In macroeconomics, when an additional $1 is spent in the U.S. economy, there is economic growth of $4 or $5 (maybe $6, depends on a lot of current conditions) within the U.S. economy. Buying American grows the U.S. economy, far beyond any difference in the retail price.

But when we spend $1 additional in China, the Chinese economy grows by $5 or $6. The U.S. economy is poorer by the $1 sent overseas. (Note that the actual multiplier at any given time depends on many current factors, so it won't be the same number in China as in the U.S.) No one is permitted to comment on trade policy or tariffs until you do a homework assignment to study up (thoroughly) on "the multiplier effect."

Second, we are told that foreign imports are cheaper for U.S. consumers to buy. Are they? Only if you ignore the total costs. The U.S. Navy patrols the shipping lanes to keep cargo moving. Rent the movie "Captain Phillips" if you have forgotten Somalia's pirates taking over giant cargo ships from China, like the Maersk Alabama. Without the U.S. Navy intervening, the loss to pirates would be unrestrained and would approach 100 percent of all cargo ships passing Africa. Why not?

Who pays for the shipping ports? There are some fees, but they don't pay the total costs. The customs bureau has to inspect the shipping containers coming in to make sure they don't contain nuclear bombs from al-Qaida, chemical weapons, military weapons being smuggled to MS-13 (it's already happened before), drugs, etc.

Oh, and ships from China require fuel. The U.S. military has fought trillion dollar wars in the Middle East, some say to keep the oil flowing, including to fuel giant cargo ships.

So if you add up the total costs of foreign imports, are they actually cheaper? I think not. If you buy furniture from North Carolina, it gets shipped on a truck on President Eisenhower's interstate highway system. If you buy poor-quality furniture from China, the U.S. taxpayer subsidizes the transportation from China and through U.S. security.

Third, we are told there is "comparative advantage." Certainly in the faculty lounge that works every single time. But does it work in the real world?

How much "cheaper" was Chinese drywall? In Florida alone, an estimated 20,000 homes – at a cost of $100,000 per home for remediation – were contaminated by defective Chinese drywall. "The drywall, imported mostly between 2004-08, smells foul and emits sulfur compounds that corrode air conditioning coils, electrical wiring, metal appliances, electronics, jewelry and plumbing fixtures. Residents with the drywall complain of health issues from nosebleeds to respiratory problem." (M. Wozniak, "Home buyers need to remain aware of Chinese drywall," News Press, Nov. 30, 2014)

And that's not the only problem: "Over 1,000 dog deaths have been linked to problems with the imported jerky treats. ... But this is hardly the first time that tainted Chinese-made food products have made the news. There was a massive pet food recall in 2007 that implicated Chinese producers, and there were worried that those ingredients could have made it into the human food supply. There have also been concerns about lead paint on Chinese-made toys exported to the U.S." (Brian Walsh, "China's Food Safety Problems Go Deeper Than Pet Treats," Time magazine, May 21, 2014)

I would never suggest that a Communist country that murders its own people and forces adults and children to engage in slave labor to export junk to the United States would be more careless about its manufacturing standards. But for the faculty-lounge canard of comparative advantage, without the ability to hold the manufacturer (U.S. or foreign) responsible for defective or contractually non-conforming products, comparative advantage is a myth.

So why the fervent, angry insistence on free trade, spouting the catechism of free trade? Many believe in unrestricted free trade because they want an unregulated, libertarian utopia in which government is not necessary.

James Madison in Federalist 51 expressed the foundation of our U.S. government: "If men were angels, no government would be necessary. If angels were to govern men, neither external nor internal controls on government would be necessary. In framing a government which is to be administered by men over men, the great difficulty lies in this: you must first enable the government to control the governed; and in the next place oblige it to control itself. "

Too many advocates for the free market today necessarily assume that "all men are angels" and therefore "no government is necessary." Globalist free trade follows a dream in which governments fade into irrelevancy. Our U.S. Constitution was created to fund the U.S. Government from "excise taxes" – primarily tariffs. These policies are tools and should not be viewed as near-religious dogma.

Jon Moseley graduated from George Mason University School of Law (now called Antonin Scalia Law School) and earned a Bachelor of Science in Business Administration from the University of Florida. He taught business to former Communists in Latvia after the fall of the Soviet Union in the private seminar firm International Trendsetters.