What They All Get Wrong About Tariffs
This article is part of my posts on the economic system of distributism. This is from practicaldistributism.blogspot.com which you can find here:
When President Trump chose to impose tariffs on China, there were various reactions. Some economic schools praised him because they believe tariffs will improve the American job market in those industries currently heavily outsourced to Chinese labor. Free market libertarians, typically representing the Austrian school of economics, berated him because they believe tariffs are terrible and hurt the American economy. However, Trump said he was doing this as an economic sanction because China was stealing US intellectual property.
Let’s start with where President Trump is wrong. He is using the tariff as a means of economic sanction – to punish another country. This is generally being characterized as a form of “trade war,” which is not an unreasonable conclusion. The reason he is wrong, however, is because we have been living under the doctrine of free trade long enough that China can economically hurt us just as much as we can economically hurt them. You can only impose a punishment from a position of power, and we don’t seem to have one. China is where our corporations produce our computers, cell phones, network infrastructure components, and many other things on which we have come to depend for our daily lives. It wasn’t that long ago that flooding in a region of China cause a world-wide shortage of computer disk drives. China can retaliate quickly and effectively against any form of economic sanction we may want to impose. A concrete example of this type of economic, and therefore political, dependence is the United Kingdom’s departure from the European Union. One of the issues they have to address is potential interruptions in their food distribution. The UK has the resources to provide this for itself, but they have spent decades allowing themselves to become dependent on foreign countries for basic necessities. This is now being used as an argument against becoming politically independent from the EU.
Those praising the tariffs as a means to improve American job opportunities are wrong because Trump’s stated reason for imposing the tariff is not to bolster American jobs or American industries. It was a punishment for stealing intellectual property from American companies. Our situation is very different than when our economic might was building during the industrial revolution. As a nation, we desired greater economic power, but we were already economically independent for the majority of our daily needs and wants. We used an aggressive tariff system to not only protect our fledgling industries, but to open foreign markets to our strong industries.
Others, including those who believe in the Austrian School of economics, criticized these tariffs on the grounds that tariffs are bad for economics. For example, political commentator Ben Shapiro has stated on numerous occasions that tariffs are bad for the economy. He describes them as a tax on everyone for the benefit of the few. Are tariffs ever allowed according to his view? According to Shapiro, they should only be used for national security reasons or “in the name of liberty.”
“As JFK put it, ‘We will bear any burden in the name of liberty,’ and, I’m sorry, but getting slightly more expensive goods from China in the name of liberty doesn’t seem like all that much of a burden to bear to help the people of Hong Kong, who are flying the American flag while they are protesting for their freedom.”– Ben Shapiro, Practicality vs. Morality?
So, we can use tariffs as a tool for political change in a foreign power, but not to protect national industries and jobs. While other capitalists disagree with this view, the implications of this position are astounding when you consider that we are dealing with a socialist dictatorship.
This is a tacit admission that, except when national security concerns apply, or when we want to help influence some form of political change in the name of liberty, socialism is an economic good for capitalism. Is this a ridiculous assertion? Consider the following points.
- The capitalist justification for free trade is that we can take advantage of lower labor and production costs in foreign countries. However, when you include socialist regimes in this, you are saying that a socialist workforce is more economically competitive than a capitalist one. Socialism is fine (for them), as long as it lowers ourcosts.
- Labor costs are lower in other countries when they have a lower standard of living or worse working conditions and wages than we do. When you include socialist regimes, it means that we accept the fact that some Chinese workers are practically slave labor, and some factories that produce products for American companies have such bad conditions that they had to have anti-suicide campaigns and put up nets between the company barracks in which the workers live to catch those who try to jump to their deaths.
- Capitalists proclaim with pride that we are a service and information provider for the world. This is the idea of “comparative advantage,” where different national economies will specialize in what they do best. Many denounce the idea that we should remain competitive in manufacturing, either traditional or new, or declare that we cannot do so. What about those workers in our own manufacturing industries? Well, they need to get themselves retrained to participate in those areas where we have a comparative advantage. In other words, the reason we outsource the production of our most advanced consumer computers and electronics is because a totalitarian socialist regime like China is simply better at it than our capitalist society – and that must be good for us because there is no need for us to improve in those areas.
These positions can only be explained by a view that considers the so-called global economy to be the primary and most important economy, followed by the national economy. Other capitalists may consider the national economy to be primary and the global economy secondary but, for those of the former view, socialism is treated as an economic good for capitalist markets.
In the end, President Trump backed down on the tariffs in hopes that it would keep our prices reduced through the Christmas shopping season. Does this not show that we have become economically dependent on foreign countries, including China?
What can Chinese President, Xi Jinping, say about this? If I were him, I would be using this as propaganda to the Chinese people, that it proves socialism is superior to capitalism, that capitalist production cannot compete with socialist production, and that people who live under capitalism are not able or willing to do the work necessary to produce what they want because they are too lazy and greedy, which is why they depend on socialist workers.
While trade is generally good, distributism’s emphasis on supporting the local economy means that it should not be at the expense of economic independence. One of the foundational ideas behind distributism is that the more economically dependent you are, the more politically unfree you are. This applies to the national economy just as much as it does to the local economy. The views of capitalists seem to be divided between those who consider the global economy as primary and those who consider the national economy as primary. They don’t seem to give local economies much consideration. Distributists consider the local economy as primary. If the country is filled with a lot of strong and stable local economies, then the national economy will be strong and stable.
When considering trade policy, a nation should look to maintain a level which won’t cause too much economic turmoil for its people if trade gets interrupted. It should also not be the cause of the demise of your own producers. Some capitalists will declare that you are just forcing your own people to accept inferior products or to endure higher prices. They are ignoring the fact that many of their country’s top competitors in international markets initially grew under the protection of tariffs against foreign competition. Markets are different from country to country.
The labor market in the United States is different than the labor market in communist China. Why do any of our capitalists seem to insist that making these two labor markets compete against each other constitutes “free trade?” Are the wages comparable? Are the working conditions comparable? Are worker rights comparable? All of these can influence the cost of labor, and a tariff can be used to actually make them comparable.
Material costs and rents in the United States are different than those in communist China. Even when you factor in the competitive advantage given to many of our large corporations from government subsidies and preferential legislation, does it even come close to the level of government support of a socialist regime like China? No, the competitive advantage seem to be mainly against smaller competitors in our own country, which is why so many of our large corporations outsource production to China and other foreign countries. Tariffs can be used to protect our companies from this.
If a country is lacking development in a particular industry that impacts its economic independence, it cannot compete against those foreign companies that have already developed. A tariff on a particular industry will allow that industry to grow and develop within its own market.
Distributism would rather see as many people as possible engaged in productive work in small independent businesses supporting their local economy. We do not advocating leaving them at the mercy of corporate interests that drain local economies and leave people dependent on government assistance. We do not advocate corporate interests that consider it better to have workers in a socialist regime produce the products we need than our own people.
Why Trump’s tariffs on China are a big deal; CNN Business
Leaked Document Shows Potential Food & Fuel Shortage after No-Deal Brexit; Subverse News
Trump’s 45% tariff on Chinese goods is perfectly calculated; Los Angeles Times Op-Ed
Yes, Ben Shapiro is Still Wrong on Tariffs. Here’s Why; American Greatness
The Second Cold War; Ben Shapiro, Ep. 833 (starting @ 40:00)
Practicality vs. Moral Character?; Ben Shapiro, Ep. 839 (starting at 8:45)
Trade Trucers Push President Trump to Back Off on China Tariffs; Breitbarthttps://www.breitbart.com/economy/2018/11/29/morechinatrucetalk/