President-Elect Donald Trump made it a centerpiece of his campaign to renegotiate bad trade deals. He has taken a lot of flack from globalists and the libertarian right for his free trade skepticism. We heard no less than Paul Ryan himself opining that free trade was a conservative value. Radio commentator Mark Levin is about to have his head explode over the issue. So let us examine the details a bit. Is Free Trade a superior position? I submit to you that free trade, like so many other things in life, is all in what you make it. It can be good, or it can be very bad.
As Men of the West, we tend to naturally gravitate towards the West. When one opens up free trade between the United States and other Western Nations, such as (though not limited to) England, Germany, or Canada, we see a certain benefit to both parties. Opening free trade with Canada hurt the US timber and logging industry – but it did not destroy it. We have competition between Texas Oil and Alberta Oil. Blackberry, a Canadian company, has suffered greatly at the hands of Apple, but is poised to fight back. General Motors and Ford both have factories on both sides of the US and Canadian border, and we don’t hear talk of them leaving Canada for the US, or leaving the US for Canada. The reason for this is that the Western Nations tend to have a similar set of laws. If you move your factory from Michigan into Ontario, you still have to put scrubbers on your smokestacks, deal with health and safety regulations for your employees, pay overtime wages, and pay some kind of health benefit. The playing field is mostly level.
When you engage in free trade with a country that isn’t traditionally Western, like China (or Mexico to a lesser extent), you avoid many of the same rules and regulations and save piles of money. The United States Government has regulated several industries completely out of the country in the name of the environment. However, the negative environmental effects that these business may or may not have had did not go away. We merely offshored them to China, at the expense of American workers. In many cases, we have made the environmental damage far worse than it would have been here, because the Chinese do not regulate these things in the same manner that we do. But our Green Agitators never visit China so they haven’t noticed.
In order to fully grasp what a heinous betrayal this is, it is necessary to point out that the United States Federal Government was formed to bestow upon the posterity of the Founding Americans the benefits of liberty. When the US Government requires an American factory to purchase expensive equipment to ensure air quality around a factory, and then opens up free trade with a country like China that has no such requirement, you have just cut off an American at the knees. His Chinese competitor can do everything exactly as the American, but without having a significant cost added in on top. The playing field is not level. The US Government has signed the death warrant for the jobs of its own citizens. This is known as trying to have your cake and eat it too.
You cannot have free trade with a country that holds its citizens to a lower standard than you hold yours. When you do, you invite competition against your own people and deny them the ability to engage in a fair fight. This doesn’t create a modern economy. All it does is put people out of work. It deprives them of the meaning and purpose that comes with a job well done. It is a complete and total betrayal of the people that the members of our government swore to protect. And that is why free trade is not always a virtue. Sometimes, it is an abomination and a blight on a country.
Free Trade Is Not a Virtue
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You also cannot have free trade with fiat currencies.
If it was gold, and one country had barriers, gold would flow one way causing inflation (like Spain with the gold from the new world) and deflation to provide a negative feedback.
Now, when the peso is devalued 20%, it is like a 20% import tariff and export subsidy.
There’s also the VAT taxes, and regulations.
Fiat currency is an issue, and Chinese currency manipulation makes them a larger problem than Mexico when it comes to the uneven playing field. But that issue is more complicated and harder to explain.
Yeah, I’ve often wondered about how fiat currency distorts economics. Add the US $ being the semi-default world-currency and it makes everything so murky.
That is at the heart of the debate between Vox and Nate on Inflation Vs. Deflation.
http://voxday.blogspot.com/2013/03/inflation-vs-deflation-i.html
The case for free trade is rather simple: you are either free to spend your own money as you see fit or you must submit to powerful politicians, spending your own money only with their permission. Free trade is just an the idea of freedom extended to economics. If you don’t think freedom is a virtue, then fine, but if you do, then there are few credible ways you can claim free trade is not a virtue. If you’re not economically free, i.e., if you’re not free to work the job you want or use the fruits of your own labor as you want (like spending your own money), then you have precious little freedom. In fact, I’m willing to make the further argument: without economic freedom, there can be no other freedom.
To make the case for free trade, if you actually do believe freedom is a virtue, the problem with free trade is that while the gains are enormous, they are made by pretty much everyone (Americans at all income levels consume far more today than just a decade or two ago, particularly medically, as the wonderful medicine we have today wasn’t even available then, but strangely people who consider themselves experts focus exclusively on wages; if the real price of things drop, as they have, then stagnant inflation adjusted wages, the idea that is used to indicate economic stagnation, indicates economic growth), thus largely invisible (the hedonic treadmill is real), and the “losers” are few (though even they are winners in the long run), thus are visible. Invisible winners, as you amply demonstrate, by completely ignoring them in your post, and visible “losers” (who aren’t really losers, as they end up finding other jobs, most times far better than the ones they had) makes people blind to what’s going on around them.
“Opening free trade with Canada hurt the US timber and logging industry”
By “hurt”, you mean made timber less costly for people to buy, thus people who couldn’t afford the products of the timber industry now can and those who were all ready consuming those products can spend less on those products, thus buy something else they wanted, that previously they couldn’t afford. On top of this wonderful turn of events, the workers that “lost” their jobs in the timber industry can now use their labor in a more valuable industry. This is why people who “lose” their jobs because of such events, typically end up with better paying jobs. The transition between the “lost” job and the next can be bitter and painful, but the end result is mostly the same: a better financial and economic life.
In fact, your entire line of reasoning is confused economic thinking, which leads you to dramatically false conclusions, like the ones you make in your second to last paragraph. The very purpose of a business is to satisfy consumer demand, making consumers’ lives better. You’ve inverted this, by thinking that the purpose of businesses is to make business owners wealthy and to provide jobs. Using this line of though, you must believe that monopolies are great things, since they provide wealth to businessmen and workers, at the expense of consumers. I’m certain you would be upset at a cab driver who drove an extra 10 miles to increase his fair, though his rationale for doing such is the same as your argument against free trade.
“We merely offshored them to China, at the expense of American workers.”
Why do you ignore the benefits to the American consumer? And why are businessmen and workers a higher priority than consumers? The real awesomeness of free trade is that when people are free to buy and sell as they want, each trade is mutually beneficial. No worker can be forced to work for another, thus all work is voluntary. Similarly, no one can be forced to buy from anyone, thus all consumption is voluntary. Free trade takes both sides into consideration, leading to mutual benefits. You take sides, hurting one for the benefit of the other.
And you banging away at the government and the ridiculous regulations it puts forth as an example of free trade is an egregious intellectual betrayal you perpetrate. If businessmen move their businesses over seas because those businessmen are not free to create those businesses here, because powerful politicians dont’ like those businesses, then this is not free trade.
You should look into the very real examples of the enforcement of environmental regulations, rather than believe the rhetoric politicians mouth for their enforcement. Regulatory capture is a real thing. When politicians choose sides, they choose the side that pays them the most. Consumers are rarely organized enough to buy politicians to curry favor, but powerful businessmen who want their competition to go away are. Also, the most polluting industry in the world, the chemical industry, is most powerful here, in the US, not in China. I’m afraid you are being duped by disingenuous politicians who want nothing more than to control your economic life, thus control much of you life.
“You cannot have free trade with a country that holds its citizens to a lower standard than you hold yours.”
Americans should be forced to continue to hit themselves in the head with hammers because people in other countries hit themselves in the head with hammers. That’s no less silly than your above statement. Also, preventing businesses from being operated in the US doesn’t mean Americans are being held to a “higher” standard. It just means you’ve accepted the idea that politically correct standards are “higher”.
There may be good arguments against free trade in certain circumstances, since there are some things that are indeed more important considerations than economic. However, when one tries to use economic arguments to argue against free trade, then you can safely ignore what that person says, as it’s clear that person has little understanding of economics.
“Why do you ignore the benefits to the American consumer? And why are businessmen and workers a higher priority than consumers?”
If you have to ask this question, it is clear you have little understanding of economics. Or indeed society.
The whole problem with the novel that you wrote comes down to your first paragraph:
“The case for free trade is rather simple: you are either free to spend your own money as you see fit or you must submit to powerful politicians, spending your own money only with their permission. Free trade is just an the idea of freedom extended to economics. ”
There is, unfortunately, not a single nation in which this is the case. Which is the point. Free trade can be beneficial or it can cause a great deal of pain.
The rest is unfortunately hand waving. Contrary to wishful thinking, there are drawbacks to free trade – drawbacks that we are seeing in real time. And they are caused by the fact that we don’t live in an imaginary libertarian dream world.
Like most libertarian ideals, free trade only works in a world where everybody is a libertarian. That is not this world.
Ken, you say, “The real awesomeness of free trade is that when people are free to buy and sell as they want, each trade is mutually beneficial.”
But, that simply isn’t true. People often make trades that are not to their benefit, either because they are short-sighted and selfish or they are ignorant. It would be more accurate to say that, “each trade is not coerced.” I may freely choose to buy a crappy used car that will break down in a month, but that trade isn’t beneficial to me.
Then you follow that sentence with , “No worker can be forced to work for another, thus all work is voluntary. Similarly, no one can be forced to buy from anyone, thus all consumption is voluntary.”
And this too is obviously false. All work is NOT voluntary. And neither is all consumption. Work is required for survival, and a certain amount of consumption is required for survival. Providing basic food and shelter if a REQUIREMENT, not a voluntary choice per se.
Anyone that has a history of family in a ‘Company town’ would understand that Free Trade is twisted.
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Good article. Well-done.