Tuesday, March 27, 2018

Pat Buchanan’s Embarrassing Views on International Trade

A Don Boudreaux letter to The American Conservative:
You harm your conservative cause by publishing attacks on free trade that are as severely flawed as is Pat Buchanan’s “Why are Republicans Afraid of Tariffs?” (March 6).  A correction of all of his errors would fill a thick monograph.  So I here mention only two of his myriad mistakes.
First, the evidence contradicts Mr. Buchanan’s assertion that protective tariffs were key to U.S. economic growth in the 19th century.  Here’s Dartmouth economist Douglas Irwin in his richly researched 2017 volume, Clashing Over Commerce, writing about America during the post-Civil War 19thcentury:
[P]roductivity growth in non-traded sectors (such as transportation, services, utilities, and communications) was much more rapid than in agriculture and in manufacturing, the sectors more affected by trade. Productivity growth in the service sector is usually explained by particular technological innovations – such as railroads, electrification, and the telegraph – none of which depended on protective tariffs.  And yet the service sector was key to US economic performance during this period [pp. 280-281].
And here’s Irwin, writing last September in the Wall Street Journal, on the several decades prior to the Civil War:
As Treasury secretary, Alexander Hamilton wanted moderate tariffs, not protectionist duties. In his day, tariffs accounted for nearly all federal revenue. He wanted to keep imports flowing so he could finance the federal government’s Revolutionary War debt and secure the young nation’s credit. President Polk, far from being a protectionist, was a small-government Democrat. He slashed tariffs dramatically in 1846.
A second error is caused by Mr. Buchanan’s complete ignorance of the meaning of trade deficits.  After spilling much ink early in his essay bemoaning American trade deficits and interpreting these as evidence of U.S. economic decline, Mr. Buchanan writes this doozy: “We should tax foreign-made goods and use the revenue, dollar for dollar, to cut taxes on domestic production.  The idea is not to keep foreign goods out, but to induce foreign companies to move production here.”  Mr. Buchanan obviously does not realize that “to induce foreign companies to move production here” is to induce foreign companies to use their dollars, not to buy American exports but, instead, to invest those dollars in America – investments that put upward pressure on the U.S. trade deficit!
Someone whose potted economic history is so defective, and whose ignorance of even the meaning of basic concepts such as “trade deficit” is so deep, has no business writing about trade policy.
Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 
The above originally appeared at Cafe Hayek


  1. Be reminded as well that besides being a complete ignoramus of economic history and theory, he's staunchly anti-immigration, the 'legal' kind as well as the other kind. The two - the economic ignorance and anti-immigration position - go always hand-in-hand.

  2. I've also noticed some saying that, since China raised tariffs on U.S. products like pork, that they will finally be able to enjoy bacon, and at lower prices, supposedly because it will no longer be "sent" to China.

    I doubt that such people have thought through the situation of a pig farmer who lost his customers, and what he will likely do rather than simply continue to grow pigs at a loss.

  3. Another thing: the Protectionists claim that the Smoot-Hawley tariff did not dramatically worsen the Great Depression, based on economists' calculation that the tariff only reduced national GNP by 2%.

    What happened, though, is that exports dropped from about $7 billion to almost $2.5 billion, due to retaliatory tariffs. Most of U.S. exports were agricultural products. Small wonder that when farmers failed due to loss of customers, the rural banks failed, too. (I got this info from an FEE article published in 2012)