Tuesday, March 8, 2016

If You Want to Know What Is Wrong With Trump Protectionism, Read Walter Block

Mark Perry writes

The ‘logic’ of protectionism leads to an absurd conclusion: complete self-sufficiency at the individual level

Thanks mostly to Donald Trump, but with some able assistance from Bernie Sanders and to a lesser extent Hillary Clinton, there’s been a new revival on the campaign trail of anti-free trade, pro-protectionist trade demagoguery, supplemented with some recycled, outdated, and discredited mercantilism (the belief that a government can make a nation more prosperous by regulating trade and using tariffs and other protective measures to favor domestic industries). It’s therefore a good time to update and recycle a CD post from last year that featured what I think is one of the best and most persuasive arguments against restrictions on trade and trade policies that protect domestic industries from foreign competition in an effort to save or protect domestic jobs, courtesy of economist Walter Block. In his 1975 book Defending the Undefendable (full text available online here via Mises.org) Walter uses an effective reductio ad absurdum approach to expose a major flaw in the position of those like Trump and Sanders who oppose free trade and free trade agreements, and who instead support protectionism and other restrictions on international trade so that foreign countries don’t “steal our jobs.”

The text below is adapted from Chapter 23 (“The Importer”) of Walter’s excellent book in which he defended “the pimp, prostitute, scab, slumlord, libeler, moneylender, and other scapegoats in the rogues’ gallery of American society.” In the original version of the book in 1975, Walter focused on the aggressive advertising campaign of the International Ladies’ Garment Workers’ Union that was being implemented at that time to promote the struggling domestic garment industry against the rising tide of lower-cost imported clothing. I’ve taken the liberty of updating the text below with more contemporary references (emphasis is mine).
The position of many Democrats, Donald Trump, and union organizations like the AFL-CIO is that past trade agreements like NAFTA and the pending Trans-Pacific Partnership trade bill cause American jobs to be lost, displaced, and outsourced to countries like Mexico, Panama and Korea. Presidential candidates Donald Trump, Hillary Clinton and Bernie Sanders have all recently criticized US trade deals and Trump and Sanders have advanced some form of protectionist trade policies as part of their platforms. According to Trump, China is “ripping off” the United States on trade and stealing our jobs. China, Mexico and Japan were identified by Trump as countries where “we are getting absolutely crushed on trade.” Trump has proposed imposing 45% tariffs on Chinese imports and a 35% tariff on Ford cars made in Mexico in an effort to keep jobs in the US.
On a superficial level, protectionist arguments seem plausible. After all, every toy, car, T-shirt, iPhone, or tomato that could have been produced domestically, but was instead imported, represents work that could have been performed by Americans. Certainly, this means less employment for American workers than would otherwise be the case. If the argument was limited to this aspect of trade, the case for the restriction, if not prohibition of imports, would be well-made.
The argument, however, is fallacious, and the consequences to which it logically leads are clearly unsound. The premise which opposes free trade and justifies protectionism on the national level also justifies it on the state level. We shall ignore the political impossibility (unconstitutionality) of one state setting up tariffs between it and other states. This is, after all, irrelevant to the economic argument of the anti-free trade advocates like Trump, Sanders and the AFL-CIO. Theoretically, any one state could justify its policy in exactly the same way that a nation can. For example, the state of Montana could bar imports from other states on the grounds that they represent labor which a Montanan could have been given but was not. A “Buy Montana” program would then be in order. It would be just as illogical and unsound as any “Buy American” campaign.
The argument, however, does not end at the state level. It can, with equal justification, be applied to cities. Consider the importation of a baseball glove into the city of Billings, Montana. The production of this item could have created employment for an inhabitant of Billings, but it did not. Rather, it created jobs, say, for the citizens of Roundup, Montana, where it was manufactured. The city fathers of Billings could take Trump’s anti-trade position and “patriotically” declare a moratorium on trade between the citizens of their city and the foreign economic aggressors in Roundup. This tariff, like those of the larger political subdivisions, would be designed to save the jobs of the citizens and prevent Roundup from stealing jobs away from Billings.
But there is no logical reason to halt the process at the city level. The anti-trade, protectionist thesis can be logically extended to neighborhoods in Billings, or to streets within neighborhoods. “Buy Elm Street” or “Stop Maple Street from stealing our jobs” could become rallying cries for the protectionists. Likewise, the inhabitants of any one block on Elm Street could turn on their neighbors on another block along the street. And even there the argument would not stop. We would have to conclude that it applies even to individuals. For clearly, every time an individual makes a purchase, he is forgoing the manufacture of it himself and outsourcing its production. Every time he buys shoes, a pair of pants, a baseball glove, or a flag, he is creating employment opportunities for someone else and, thereby, foreclosing those of his own. Thus the internal logic of the protectionist argument leads to an insistence upon absolute self-sufficiency, to a total economic interest in forgoing trade with all other people, and self-manufacture of all items necessary for well-being.
Clearly, such a view is absurd. The entire fabric of civilization rests upon mutual support, cooperation, and trade between people. To advocate the cessation of all trade is nonsense, and yet it follows ineluctably from the anti-trade and protectionist positions put forward by Donald Trump. If the argument for the prohibition or restrictions of trade with tariffs and trade barriers at the national level is accepted, there is no logical stopping place at the level of the state, the city, the neighborhood, the street, or the block. The only stopping place is the individual, because the individual is the smallest possible unit. Premises which lead ineluctably to an absurd conclusion are themselves absurd. Thus, however convincing the protectionist, anti-trade arguments advanced by Trump and Sanders might seem on the surface, there is something terribly wrong with them.
MP: Even though Walter’s book is now more than 40 years old, his strong defense of free trade and his complete take-down of trade protectionism above using reductio ad absurdum is as fresh and compelling today as it was in 1975. Especially in this new era of anti-trade demagoguery and hysteria, increasing calls for tariffs and other forms of trade protection, and a troubling trend towards isolationism, it’s a very timely message that deserves more attention

1 comment:

  1. No one can deny that a large part of America's standard of living was created by the vast manufacturing sector after WWII. These jobs allowed even non-college educated persons to have a decent middle class standard of living. Those jobs are gone, and if you are not able to do technical or other "mental" work, what are you supposed to do? How can any society survive without jobs for most people?