Free Trade. The scapegoat for bad government policy. By Centinel

Free Trade. The scapegoat for bad government policy. By Centinel

The anti-capitalist crowd hates free trade. What is puzzling is that many of the so-called free market conservatives denounce free trade and rally for protectionist policies. We have a candidate in 2016 that promises to curb China and make America great again. Promising to use tariffs and fines against corporations to impose his will and make them move back in America. He says that government officials made “bad deals” when negotiating these trade agreements. Yes, they did make bad deals by negotiating against what is best for America. His solution is wrong. There’s no question that free trade has built and kept our standard of living where it is. Free trade is the basis of America’s wealth. It  is morally superior to centrally managed protectionism. Adam Smith called free trade “the natural system of liberty”. It allows citizens to fulfill their creative and productive potential. America needs free trade to compete in the global economy by allowing us to specialize in products that we are good at producing.
It is a global economy whether you want to face it or not.

Look at it from the average citizens view. Why should people in Washington get to decide what an individual person pays for something based on where it was made? Putting a tariff on an item doesn’t hurt the manufacturer. The end user pays for the tariff. The government gets the money (ah ha!). A tariff is another excuse for implementing a tax on the poor little consumer. Like a fee on your cell phone. Not a tax per se, just another way for the government to get money. Austrian economists recognize this as another way to lower the standard of living of a society. Centralize as much money as you can. Richard Cobden in an 1845 speech claimed that free trade promotes peace among nations. This is true. If tensions rise, the more economically entwined countries are, the more reason they have to find peaceful solutions to problems. Start imposing tariffs and you start raising barriers. Free trade is foreign policy.
Americas recent history we have built countries. The most expensive way has been to roll in and start giving money and building infrastructure. Free Trade is building or rebuilding a country using market forces, raising both countries standard of living in the process, while spreading the message of liberty to our trading partner. It helps break down oppressive regimes. Friedrich Hayek’s works are available legally in China. Picture that happening under Mao.
Frederic Bastiat wrote in Protectionism and Communism:
“Every citizen who has produced or acquired a product should have the option of applying it immediately to his own use or of transferring it to whoever on the face of the earth agrees to give him in exchange the object of his desires. To deprive him of this option when he has committed no act contrary to public order and good morals, and solely to satisfy the convenience of another citizen, is to legitimize an act of plunder and to violate the law of justice.”

True. So applying tariffs and embracing protectionist policies does the reverse of what we expect in a free society. In the buildup to WWII industrialized nations engaged in trade wars. One nation would impose tariffs and quotas and the other nation would counter by upping the ante (you might say) and raise their quotas and tariffs. The global depression deepened. This contributed to the WWII conflict. Post-WWII The allies realized this and encouraged free trade. Have we forgotten that lesson?

Why is it so popular to raise tariffs to “punish” trade partners?
When a country has economic problems opportunistic Nationalist leaders seize on the emotions of the people. Authoritarians have to have a scapegoat of some sort to rally people’s emotions. It is easy to blame China for unfair trade practices. In fact, they have been unfair by currency manipulation and other dirty tricks so the charges against them are true. Opportunistic politicians see these issues as paths to power by offering an eye for an eye scenario which brings votes. We will show them! The reality is we will make ourselves pay.
 The answer is to hold China accountable, not punish the American consumer and lower our living standard by raising our cost to live. What good will it do to double the price of a flat screen TV? None made here anyway. It will be some time before we can get a factory churning them out. If any company wants to make them here. Meanwhile, where does all that money go? Government.
We are protecting no one.

So what is the answer?
Stop making bad trade agreements. The TPP is the worst trade agreement ever. NAFTA is second. I am sure that serious political lobbying took place both times. These trade agreements are one sided. We are always on the losing end. Current agreements need enforcement to bring balance and a hard line taken on the infractions. Renegotiate the agreements to fix the infractions.

It is that easy.
Making the American citizen pay for the problem at the store is not the answer.
Which is what tariffs do.
Fix the problem at the source and don’t make problems.
What about short term? We need jobs!
Federal, State, and local Government regulations and taxes has stifled entrepreneurship and small business.
Loosen regulations and taxes and watch America awaken in a few short months.
The REAL problem is not China, it is our governments interference that has created this environment. Again, solving a government created problems by adding more government is not the solution!
Corporations are profit driven, the government has made it too hard to make a profit in the USA!
If you can't make any money in your hometown, you have to go somewhere else to find work. Right?

When looking at the big picture, this is all cyclical. A close friend of mine explained to me what we should do to stop the outflow of products made here. His answer was “Nothing”. He was much older and experienced in economics than I was and explained it to me this way using Japan and the steel industry as examples. Our factories are old. The technology is ancient.
They’re not worth saving at this point. We went to Japan, for example, post-WWII and built them all new factories with all the latest technology. Japan is our trading partner and everyone is afraid they will own this country because they are so successful. They are buying companies and real estate at a record pace and it is scaring people that remember the old days. (Those of you old enough to remember the late 70’s - early 80’s remembers this). He continued:
What will happen is in time we will close our factories and for 20 - 40 years depend on Japan to supply the product we used to make. One day their factories will be old as will be their technology. Due to new technology, we will find it workable to build a new, automated factory in the USA. We will start making that old product here again because Japan will not be able to mass the resources to rebuild their old factory like we did 50 years ago. Though we may not hear it, the old timers in Japan will wish for the glory days when Japan made that product and lament that they are losing their country. But what they fail to see is the cyclical nature of free markets because of shortsightedness.“

I don’t know if my friend is still alive (I doubt it, he was 40 years my senior) what he has said is coming true. Having lived long enough (fortunately) to witness it, China and Japan are having internal problems and technology is to the point where it is workable to bring industries back. Search for Re-shoring Institute on Facebook. They have stories on industries moving back into the USA for various reasons. The other day I saw DARPA demonstrating a robot that stood and acted on its own. It has a human form and it walked up to a large sized box on the floor, picked it up and put it on a warehouse shelf. That same robot last year couldn’t walk 10 feet without problems. Advances will soon allow a warehouse of robots stacking and storing merchandise. Look it up on youtube, it is amazing. We will have the Luddites protesting robots because they displace labor.
You may get to see Luddites attacking and destroying robots one day. Be sure you will see on TV a politician promising to get even with the big bad robots. This is the old way of thinking, like tariffs.
We don’t want the old factories anyway. Amazon and UPS are investing Billions in 3d printing, assembly, and fulfillment processes. You will be able to design a product on your home 3d printer, market it on Amazon, you will take the order, they will make the product, ship it and put the money in your account.
But what about larger companies like the auto industry? Do a Google search on the company from India currently building small assembly plants using automation and local labor in most major metropolitan areas. You order a car, built from scratch in a couple of days, and you go get it. They may deliver it to you. It may drive itself to your house in a few years. Granted, this car isn’t the greatest, it is the first of its kind and likely the future of manufacturing cars.

It is a new world and new techniques that we are building in this country.
We are in the time between old tech fading away and new tech on the horizon.
Don’t lament the old way of thinking.
The old power brokers are on their way out, their influence will continue to wane.
Things are changing for the better.
So don’t fall for a slick politician putting Tariffs on Buggy Whips. We don’t want to make them here anyway.
Only when it is in our best interest. Which may be never?
Let’s utilize the free market.
It is the method flexible enough to keep pace with the changing world which is headed toward localization, help provide peace between nations, and still the only way to preserve and lift the human condition now and in the future.