Tariffs and national self-interest

Patrick Buchanan provides a succinct summary of why Trump’s emphasis on tariffs in the relationship with China is hardly unprecedented.  In fact, one could say it’s a return to the policies that once made a young nation great:

A tariff may be described as a sales or consumption tax the consumer pays, but tariffs are also a discretionary and an optional tax. If you choose not to purchase Chinese goods and instead buy comparable goods made in other nations or the USA, then you do not pay the tariff.
China loses the sale. This is why Beijing, which runs $350 billion to $400 billion in annual trade surpluses at our expense is howling loudest. Should Donald Trump impose that 25% tariff on all $500 billion in Chinese exports to the USA, it would cripple China’s economy. Factories seeking assured access to the U.S. market would flee in panic from the Middle Kingdom.
Tariffs were the taxes that made America great. They were the taxes relied upon by the first and greatest of our early statesmen, before the coming of the globalists Woodrow Wilson and FDR.
Tariffs, to protect manufacturers and jobs, were the Republican Party’s path to power and prosperity in the 19th and 20th centuries, before the rise of the Rockefeller Eastern liberal establishment and its embrace of the British-bred heresy of unfettered free trade.
The Tariff Act of 1789 was enacted with the declared purpose, “the encouragement and protection of manufactures.” It was the second act passed by the first Congress led by Speaker James Madison. It was crafted by Alexander Hamilton and signed by President Washington.

As Buchanan mentions, tariffs were once an integral part of an economic policy that became known as “The American System” — a policy so successful that other nations emulated it.  It’s worth noting the Federal government undertook its first infrastructure projects with almost no other source of funding other than tariffs (land sales being the main exception).  I’ll admit: I’m not a fan of the Federal government doing public works projects.  But the limited revenue stream tariffs provided kept such activity modest in the early republic, and for the most part it’s easy to see the wisdom of such projects as lighthouses, postal routes and the Cumberland Road.

Still, public works projects were controversial, even then.  Many in the South believed tariffs disproportionally benefitted northern industrial interests through protectionism and infrastructure.  Tariffs sparked the Nullification Crisis in South Carolina, and was cited as one source of discontent as States left the Union after Lincoln’s election in 1860.  Sectionalism aside, the nature of tariffs as a voluntary tax that promotes national self-reliance and internal growth recommends it as one of the best ways to fund a limited government.  Certainly, the explosive growth of Uncle Sam after institution of the Income Tax is evidence of that.  I’ve said before that a national sales tax would be preferable to an income tax (provided it didn’t result in both being in effect).  Many of the same reasons apply to tariffs.

Buchanan rightfully points out that abandoning so-called “free trade” for a tariff system that enforces fair trade will be painful in the short term, much like a junkie getting over their addiction.  American wages have been stagnant in inflation-adjusted terms since the 1970s.  The only reason we appear to have a higher material standard of living is the influx of overseas goods that appear cheap on the price tag, but which in reality take a heavy toll on the nation in terms of lost industries, disappearing jobs and a growing economic dependency on outsiders.  That doesn’t even take into account that many of the reasons goods made in places such as China are ‘cheaper’ is that they lack protections for workers and the local environment — impacts we considered so important here that we willingly added them to the economic burden of production.  In short, “free trade” as it’s currently practiced is an apples-to-oranges comparison that hides or downplays the negative aspects of globalism.

Much more of this — now!

The Justice Department announced today that it filed a lawsuit against Crop Production Services Inc. (Crop Production), headquartered in Loveland, Colorado, for allegedly discriminating against U.S. workers in violation of the Immigration and Nationality Act (INA).

The complaint alleges that in 2016, Crop Production discriminated against at least three United States citizens by refusing to employ them as seasonal technicians in El Campo, Texas, because Crop Production preferred to hire temporary foreign workers under the H-2A visa program.  According to the department’s complaint, Crop Production imposed more burdensome requirements on U.S. citizens than it did on H-2A visa workers to discourage U.S. citizens from working at the facility.  For instance, the complaint alleges that whereas U.S. citizens had to complete a background check and a drug test before being permitted to start work, H-2A workers were allowed to begin working without completing them and, in some cases, never completed them.  The complaint also alleges that Crop Production refused to consider a limited-English proficient U.S. citizen for employment but hired H-2A workers who could not speak English.  Ultimately, all of Crop Production’s 15 available seasonal technician jobs in 2016 went to H-2A workers instead of U.S. workers.

The U.S. should not simultaneously have unemployment and programs to permit the hiring of foreign workers.  It’s long past time to take all the incentives out of the “guest worker” programs by making them prohibitively expensive for U.S. companies.  Guest worker visas should be so difficult to obtain that companies find it cheaper to offer retraining opportunities to American citizens than to import Indian or Chinese laborers. As retraining becomes more widely available, the government should also make clear that Americans who fail to take advantage of the opportunity will no longer be allowed to draw unemployment benefits.

This may all be part of the “dismal science,” but it’s certainly not rocket science.  Where globalists went wrong was in applying the principle of comparative advantage to international trade without taking into account that money, like water and electricity, takes the path of least resistance.  “Free trade” cannot be fair trade when one party (like China) doesn’t offer a minimum wage or the basic economic protections we’ve come to take for granted.  By allowing such lopsided relationships, we’ve sold our economic inheritance for pennies on the dollar at WalMart, while allowing practices we find abhorrent to flourish overseas.  This is hardly the U.S. leading by example.

Protecting American jobs may cause the prices of some goods to rise, but that’s literally a small price compared to allowing our economy–and its workers–to be undermined fatally by current practices. As Toby Keith sang:

“He’s got the red, white and blue flying’ high on the farm,
Semper Fi tatooed on his left arm,
Paid a little more in the store for a tag in the back that says USA

Hire American.
Buy American.
BE American.

America first.