TRADE POLICY: the elephant ignored

TRADE POLICY (The Missing Debate)

Of all the candidates this cycle only Donald Trump made Trade Policy an important part of his message.  This is unfortunate because it is the great elephant in the room!

Ron Paul admits in “End The Fed” somewhat grudgingly to be sure, that the Constitution does indeed grant Trade Policy to the Congress.  The Congressman however is emphatic that though the power is there, no trade policy other than Free Trade is worthy of consideration.  I believe the Congressman’s Free Trade support is due to libertarian philosophy rather than to a pragmatic sense of what is best for America.  It is no secret that Ron Paul is an acolyte of the Austrian School of economics.  Libertarianism is said to be inconsistent with Trade Policy.  I disagree.  Unless one’s libertarianism is such that the existence of international borders, and the existence of Nation-States itself is considered illiberal.  For if one does accept that there indeed exist sovereign states with international borders, one must accept that there has to be consequences of these borders or they would be no more than abstract lines on a map.
Therefore borders must have consequences.  If our Constitution recognizes the Congress as having the authority to develop a national Trade Policy even the lack of having one, is itself a policy.

Yes, no policy is to have a policy, even if it leaves the nation de-industrialized and in debt.  Yes, poor monetary policy has allowed America to follow a poor Trade Policy for the past half century.  Ron Paul is correct on the evils of the current monetary policy, but he seems to not notice that it is this very monetary policy that has allowed the United States to follow its Free Trade policy out beyond its natural sustainability. If we had sound money, eventually we would run out of cash by buying the world’s production while selling little in return.   If we had a normal monetary system, and did not have the advantage of printing the world’s reserve currency, eventually the worth of the goods we import with our fiat dollars would exceed the worth of those dollars and then we would not be able to import more.  Until recently there has always been a demand for the Dollar because all of the world’s trade is denominated in dollars.  Thus, we could print more, and import more and more.
What we have done with the help of the Fed, is to advance down a road of decreasing self-sufficiency that is being hidden by the printing press.  But as the access to the Printing Press becomes more problematic, as our Fiat currency is backed only by faith.  Once faith starts to erode, it erodes faster and faster with no one wanting to be holding the last dollar!  When this day comes, we shall find ourselves dependent upon the world for every single item of our lives, but be unable to purchase any of it.

In the Great Depression a large percentage of Americans lived in rural areas.  Though dirt poor, they did not starve.  Even if dinner was corn on the cob, it was a dinner.  Now, almost the entire population is urban or suburban.  We do not know how to make clothes, shoes, bread, meat, TV’s, telephones, computers, chips; nothing.  Nothing, except dollars, that is!  And as we have noticed that demand is shrinking fast!
Why has Trade Policy been savaged by all sides of the political spectrum on America?  It is “mercantilist” as if that is self-evidently a bad thing to be.  Yes, the Empires of Europe were mercantilist and saw the world’s wealth as a zero sum, a limited amount, thus incumbent upon each nation to claim as much for itself as possible while limiting its rivals’ gains.  Somehow this “Mercantilist” Philosophy was proven wrong in the Modern Age, as Spain’s wealth from the New World merely sped it along the trajectory of indolence.  Or was it World War I that was caused by Mercantilist economics?  All very unclear other than the accepted wisdom that mercantilism was a dead letter.  Or is it?

The benefits of Free Trade have been widely touted.  Those nations that produce X more efficiently than others should trade with those nations that make Y more efficiently than they do X.  Everyone benefits, and there is no down side.  This fails to account for differences in employment standards.  Clearly slave labor will always result in lower cost items than those made by well-paid middle class laborers.  The thinking then is that we should be grateful to the poor slaves or proles because we get to save money on the product.  And this extra saved money can go to buying something else.  The moral equation is not even addressed here, but we all have heard of children in sweatshops working their fingers to the bones making our athletic shoes.  Oh, jolly swell!
But forgetting the morality of it, what do we say about the economics?   Ideally, Free Trade is supposed to be the inverse of the Marxist from each according to his ability to each according to his need: each will produce according to their ability and efficiency and what they excel at, and buy the things that others efficiently and excellently produce.  Yet, like Marxism this too is a subtle utopian idea.  The assumption is that there will be a close approximation of reciprocal skills and efficiencies for the various goods and services we need in the Modern World.  But, what if there is not?  What if nations like China can employ tens of millions in factories in conditions that no American or Western European would enter voluntarily?  And what if even the Chinese are not fully voluntarily engaged?  We have heard of contracts for employment that specifically require a promise to not commit suicide!  There are nets around the windows of some factories because of the high number of suicidal leaps.  This may indeed be the more efficient way to produce the gamut of consumer goods.  But is efficiency the only component of the equation?  What happens to the society that is lucky to benefit from the “foolish” decisions of producer nations, and becomes addicted to consumption of goods that are cheap yet of decent quality?  We can see what happens when we drive from Buffalo, NY, around the Great Lakes to Erie, Cleveland, Toledo, Detroit, Gary, then down the Mississippi to St. Louis.  Gary, Indiana was already a spooky post-apocalyptic place to drive though twenty years ago!  We have allowed steel to be imported from non-unionized nations; and surprise American steel isn’t competitive!  We cannot build a single Television in this country.  Remember, we were to do the high tech, and scientific research in this global division of labor.  But we do not.  It was manufacturing jobs in what are now the rust belt cities of the northeast, New England through the Great lakes that lifted more people, immigrants from every country on earth to a middle class lifestyle that was the envy of the world.  Gone, poof, for what?  We let go of the envy of the world for a philosophical purity of Free Trade?

The Free Trade acolytes will argue that Protectionism will merely protect inefficiencies and harm the interests of consumers.  But are there individuals who are purely consumers, and not producers?  If so they live by theft or charity.  It is ridiculous to claim to protect “consumers” while throwing producers to the dogs!  We are all both!
The US Car industry whined for Protection because Japanese companies were eating their lunch.  If the Japanese employees were paid the equivalent or provided the equivalent lifestyle as GM workers, then there ought not have been protection.  Fair Trade is not Protectionism.  But if Chinese electronics are made by pathetic souls who are under suicide watch, it is not Fair Trade to collude with the oppressors in order to buy cheaper plasma TV’s.

America needs to decide if the price for Free trade is worth paying.  What is the price?  It is first of all, increased unemployment, and under employment.  It is increased costs of welfare, and Medicaid.  We do not wish to become a third world-like nation having to step over the dying sick, and starving poor!  So, we will have to increase our taxes to pay for public services.  Public Services require Public Servants, and Public Servants join Public Servant Unions.  When their number reaches a critical mass, their very electoral input causes the nation to tip beyond the tipping point, beyond the hope of recovery of true prosperity.  But as US debt rises in response to the enlarging welfare state, the faith in our dollar, which has underwritten this journey to the edge of sustainability, begins to fail.  What will we do when Brazil does not want dollars for its shoes that are exported here?   We will go barefoot?  And when TV’s are not shipped over here for fiat paper, we will sit around and play Sudoku by the light of fluorescent bulbs made in China.  Oops, they will be unaffordable.  Plus we will have no electricity, because we will not produce our own energy supplies, and we have given billions of dollars to con men to produce electricity that becomes competitive at 1 to 2 dollars per kilo Watt hour (now we pay 2-3 cents for the same!)  And who will sell us energy for our paper dollars?

When Trade Policy is elevated into a Theological Position rather than dealt with as an ad hoc annual Congressional debate, we have allowed Washington to abdicate its proper role.

Is there any one single Trade Policy that benefits all sectors and individuals equally?  No, of course not.  But, does Free Trade benefit a majority?  No!  Free Trade IS a Trade Policy.  It just is not a smart one.

We need to add on to imported goods the additional cost it would take to produce them here.  If American companies choose to out source their manufacturing to overseas factories; fine.  It is a free country.  But they must not expect to be able to sell their products in the American economic zone!

The US Economic Zone is the single greatest in the world.  It ought to be treated as a great privilege to gain access to this market; we ought not treat it like Esau did his birthright!
We need to re-industrialize and create employment that creates true wealth.  Jobs that remove CO2 from emissions do not produce any actual value.  Somewhere something of actual value must be sold to pay the green paychecks.  Only in Academia would it be believed that performing a useless task becomes useful if the government defines it as useful.  Technology that does nothing but lower CO2 emissions does nothing of any intrinsic worth.  Only artificially valuing this by laws and regulations can it be sold, but even then no new wealth is created.  Government cannot make Fiat money worth more than people are willing to accept for it; and they cannot make fiat work produce wealth!

The United States needs to end the social welfare state.  The safety net has become a mattress for multiple generations.  With the Government or Society as the father figure, teenage Oedipal issues are turned into sociopathic fashions.

Tariffs once provided for the bulk of the Federal budget.  Once again, this can be done.  Imagine inner cities humming producing American-made shoes, of high quality and exported to the world.  American TV’s of world class clarity; it can be done.  Tariffs, to equilibrate the distortion of slave labor will encourage high tech manufacturing jobs throughout the northeast.  Bring on line American energy, and power American factories.  Reduce unemployment, and welfare.  Reduce the numbers of Public Servants and their power.  Reduce the cost of the government and reduce taxes and a positive reinforcing cycle will shake the world!

They tried to bow America’s head to accept their yoke?  How dare they think we would allow that?
We can turn the USA and the world around in six months if we started doing these things now.

Where is this debate?  Monetary policies have allowed this de-industrialization, but have not caused it.  It is Free Trade as dogma that has done so.  Unless we revisit trade policy as an actual issue and not as theology, we can audit the Fed until the cows come home.  If we do not produce more than we import we will not prosper, anyway you try to run monetary policy.  Fix trade policy and monetary policy does not matter.

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