The Mischaracterization of Free Trade & the Paradox of Fair Trade
Originally published in The Daily Comet on May 15, 2019 by Gwayne Gautreaux
Nothing has been politicized more and understood less than the effects of trade. President Trump has repeatedly used false narratives and misguided logic to mischaracterize what he considers to be ill-effects of past trade policy.
The president erroneously believes the principles of trade to be based on a ‘zero-sum’ outcome, that if one country is gaining, it must be at the expense of the U.S. losing. The Trump administration has cultivated the notion that the U.S. has been the subject of defective-one-sided trade deals, to which Americans have long shouldered the cost, and he cites the trade imbalance as proof of his assertion.
The Arbitrary Trade Deficit
President Trump uses the arbitrary trade deficit as smoke and mirrors in an attempt to stoke economic nationalism and to protect special interest, by resurrecting tariffs and other barriers.
While there is political merit in “protecting” domestic interests, it unfortunately comes at the expense of economic merit. The white house has asserted that the tariffs imposed have benefited those harmed by foreign competition, but there is never any mention about the costs imposed on those harmed by the tariffs.
Furthermore, American small businesses, firms, corporations, and consumers all gain from global trade in ways not necessarily captured through the trade balance, rendering the trade deficit an arbitrary metric. For example, according to the way GDP is measured, goods and services purchased from abroad are calculated as a cost and is considered a leakage. However, American companies benefiting from imports abroad can leverage more profit by producing globally competitive products at the most economically-cost-effective price. Therefore, it isn’t by the virtue of tariffs that promote and foster American competitiveness but rather by freely allowing companies to choose the most efficient factors of production.
What the president has done through aggressively endorsing protectionism is to create a continuous trend of protectionist policy, [essentially creating a problem with the one hand, only to try to solve with the other]. Those individuals who significantly bear the costs of tariffs will likely seek subsidies to counter the effects of higher prices, thus starting the downward spiral.
The Paradox of ‘FAIR Trade’
Finally, the president has been able to gain traction and garner support from the rest of his GOP constituents, who are normally supportive of free trade agendas, by propagating the policy of ‘fair trade’, which invokes the use of tariffs as a justification to “protect” American interests. Although President Trump has touted the notion of ‘fair trade’, it is a message that negates the one in which we, as Conservatives and Libertarians, applauded during the State of the Union address earlier in the year when the president implied how the U.S. would continue embracing freedom while fighting the encroachment of Socialism. Moreover, why should an administration chock full of so-called free marketeers have to be convinced about the benefits of free trade and less regulations?
The problem with propagating this notion of fair trade is that it is based on a litany of contradictions: Who decides what’s fair? Government? Why should government determine equity? Why shouldn’t the market decide, by allowing consumers to buy what they want, from whomever they want, for as low as they desire. After all, is this not the stimulus that gives life to our market economy? This is what conservatives should be endorsing, not more government regulation.
So, in closing, I question the “merits” of ‘FAIR trade’ and the so-called freedoms the president claims to support:
What is so free or fair about protecting one industry at the expense of forcing higher costs on another?
What is so free or fair about forcing consumers to absorb artificially higher prices that impede the ability to lower THEIR costs of living, raise THEIR standards of living, or allow more disposable income to flow into THEIR pockets?
The president should recognize that government, at no time, can protect one industry without causing harm to several others, and gravitating toward a system that privatizes gains and publicizes losses in the way tariffs do, come at the expense of economic well-being.
