America Is Hardly A Bastion Of Free Trade

Tyler Durden's picture

Authored by Andrew Smith via The Mises Institute,

Rhetoric has recently trumped reality. It has become a misconceived bit of common “knowledge” that the United States of America is a bastion of free trade. Little could be further from the truth. The “freest” nation on earth, as we are taught to believe, imposes a staggering number of tariffs, import and export bans, sanctions and embargoes. Yet somehow “free trade” is blamed for the financial ills of the unemployed in the formerly industrial Midwest. Instead of taking a serious look at our existing trade policies, and maybe reducing some of the regulations, President Trump promised Midwesterners that their inefficient factor jobs that have been outsourced to the “right to work” south and overseas will be brought back by imposing new import taxes on specific companies. It is a naïve and ignorant notion that singling out countries and taxing the goods they import into the US will somehow help the unemployed while having absolutely no effect on the country’s general productivity and standard of living. Besides, we’ve already been doing that for far too long.

The US imposes tariffs on over 12,000 different goods and services. No that is not a typo — over 12,000. Some of these tariffs are so significantly prohibitive that they are effectively outright bans.

Sugar, for example, is one product that Americans get gouged on, paying an average of $277 million more per year than they should. That is $277 million per year that would otherwise be used to consume other goods, invested in growing businesses, creating jobs, and raising real wages. This is nothing new. The original tariff was imposed as a “temporary” protection for US sugar farmers, that was more than 80 years ago. It has protected US sugar farmers, but has also decreased the productivity of the sugar farmers’ land. The laws of absolute and comparative advantage would dictate that the land on which sugar cane and sugar beets are grown and harvested should be used to produce goods in which these particular regions can more (cost and time) efficiently produce.

Sugar is not the only good, not by a long shot.

Even America’s favorite snack while watching America’s “favorite” past time — peanuts — are significantly more expensive than they otherwise would be because of measures to “protect” the US peanut farming industry. Specifically, the government imposes a 131.8 percent ad valorem tax on shelled nuts, even higher tariffs are applied to unshelled peanuts. The peanut farming industry is a $1 billion industry, annually. The question is how much are those numbers padded by the tariff, and how much less would consumers be paying for peanuts if peanut farmers weren’t a privileged class. A further example that demonstrates how inefficient these tariffs are is the import tax and quotas placed on rubber tires. In 2012, President Obama bragged about creating “over” 1,000 jobs in the tire manufacturing industry resulting from the measure. One account estimates that in 2011 alone Americans paid an additional $1.1 billion for tires, or roughly $900,000 per “job created,” than they otherwise would have. The same estimation concludes that 2 retail jobs were lost for every 1 manufacturing job created by the tax.

Tariffs are not the only way that the US government engages in what many would call “fair trade” instead of flat out free trade. Embargoes placed on several countries for so-called diplomatic purposes also distort international trade. Worse than the distortions they create, they don’t work for diplomatic advancement either. History tells us — and as 19th century classical liberal Otto T. Mallery (and many others before and since) did — when goods don’t cross borders armies do. Contrary to popular belief it was not the European Union being created, it was not the United Nations mandating a beach bonfire kumbayah between countries, and it wasn’t the US military presence around the globe that has prevented another World War. It has been the increasingly open global market, the economic entanglements and the consequential benefits that nations reap when trading with others.

Before “heaping absurdity upon absurdity” as Bastiat put it in his famous essay The Petition of the Candlestick Makers maybe first we should take a look at the existing pile of absurdity that is US trade policy. To be clear, trade policies can carry many nuances. Tariffs don’t always necessarily only effect price, they could quite possibly effect profit margins of overseas corporations and create employment. They do always necessarily reduce prosperity. Even in the event that new jobs are created, they are likely to be less efficient jobs — either in cost, time or both — than their overseas counterparts. The best way to increase the number of jobs and the wages paid to those jobs is to increase the productivity of industry. First steps toward that should consist of tax reform, regulatory reduction, encouraging capital formation and accumulation, and repatriating the trillions of dollars stashed offshore as a result of high taxes and burdensome regulations.

Imposing more tariffs on more goods and more countries will simply make America a less productive society. Instead we are far better off focusing on producing the goods and services that — as the law of comparative advantage dictates — we are most superior at producing.

 

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WestVillageIdiot's picture

How do our actions compare to China? 

hedgeless_horseman's picture

 

In China, people freely trade food and meals.

I have a friend there who owns some lychee orchards in addition to a few tool and moulding factories. 

He has zero hurdles to sell his lychee, and his canned lychee juice, to whomever wants to buy them in China, at whatever price they agree to.

If I trade our raw milk, cheese, or yogurt freely with my neighbors in America, then I go to jail and lose my property.

It's a crime for Americans to freely sell our raw milk, yogurt, and cheese to our friends and neighbors

 

http://www.zerohedge.com/news/2017-03-04/its-crime-americans-freely-sell...

So, unless you're a dinner guest, mrs_horseman's amazing brie is only for our family to enjoy on the patio at sunset.

Remember, it's for your protection.

Big Brother loves you. 

Big Brother wants to protect you.

curly's picture

HH,

Good looking American brie.

Hope those are not Ritz crackers in the background.

Can't quite read the enscription on that (custom?) cutlery on the table.

 

So It Goes's picture

That Laguiole is super cheap.  Not like the old stuff.

Stuck on Zero's picture

This article is such a stinking pile of dogpoo it's hardly worth glancing at. When 20,000,000 Americans lose jobs because products are dumped here by mercantilist nations the social cost and cost to government is immense. Unemployment, crime, uprooted cities, loss of the tax base, childcare, divorce, broken homes etc. The Author should ask why Japanese products here cost far less than in Japan and why American products in Japan cost double or triple what they cost here. Did it hurt the Japanese. No. It's an island without resources and they are wealthier than Americans. Cagey trading is the answer. Trade is just business and you should always negotiate it to your advantage.

Trucker Glock's picture

Everything I Want To Do Is Illegal - Joel Salatin

The link below is to the article.  He has a book with the same name.  Topic is small, sustainable farming.

http://alcoholcanbeagas.com/sites/acbag/files/salatin_illegal.pdf

farmerbraun's picture

The only way I was permitted to sell my yoghurt in the U.S. was as pet food.
So Pet Plus it was, all the way from Godzone to California. ( yeah I know).
True story.

Falling Down's picture

Agreed. The crony-capitalist BS has to end.

Mazzy's picture

Sugar?  I've been eliminating that.

Milk too.  I'm not a baby cow, so why would I drink milk? That shit gives you man tits.  I haven't had store bought cow milk in just under a year.

Boris Badenov's picture

There's a ton of sugar in milk...

farmerbraun's picture

There is about as much fat and protein as there is lactose in whole milk. It is a balanced food and a good isotonic drink.

 

And you do know that to make human infant formula from cows milk  you dilute   with water to lower the protein % and add lots of lactose to bring the % sugar back to the 7 % found in human breast milk. Add a drop or two of VIt A , D and E, and Bob's your uncle.

farmerbraun's picture

That U.S. Milk might be "exceptional".
It doesn't sound totally good.
I do know that U.S. dairy cows in general have exceptionally short lives.

Mazzy's picture

This article is globalist nonsense.  Tariff the hell out of anything we can't grow here due to climate reasons, or because certain niche items are such a rairity here, but abundant in other countries.

We can do this right if we think about it.

I'd like to see *some* exports taxed too, specifically food.  Are you worried about the population explosion in Africa?  You can thank corn from Nebraska & Iowa, and rice from Texas for that nonsense.

We don't need nearly all the food we grow and waste.  Put some of that land fallow again so we stave off the dust bowl that's barking up our backsides again.

farmerbraun's picture

"I'd like to see *some* exports taxed too, specifically food."

Well specifically you would want to eliminate all price support for exported food. That would be equivalent.

What sort of  export agricultural crops are still given price support in the U.S.?  Quite a few I imagine. And the U.S.  consumers are paying. It's a rort.

Actually it's called "pork barrel politics" . . . . the U.S. invented it.

shovelhead's picture

Can Smithfield import floating pigs or will they have to create their own here?

curly's picture

maybe pigs with wings?

and amazon won't need heavy-duty drones to deliver dry-cured ham

 

Mazzy's picture

Ut oh, looks like the downvote Hasbara-bro has arrived.

BigFatUglyBubble's picture

Maybe it's a downvote zio-algo

BigFatUglyBubble's picture

repatriating the trillions of dollars stashed offshore as a result of high taxes and burdensome regulations.

That didn't work out so good when George Dubya did it. 

Agreed that tariffs or BAT will clobber our economy though.  The only way manufacturing is coming back to USA is if the petro-dollar system is ended.  That is a root of what is screwing us up.  And, of course, Janet's ctrl-P

Fascal rascal's picture
Fascal rascal (not verified) BigFatUglyBubble Mar 20, 2017 8:59 PM

Big fat ugly doooooosh. Bag.

BigFatUglyBubble's picture

Having a few monday night hard beverages, I see.

Fascal rascal's picture
Fascal rascal (not verified) BigFatUglyBubble Mar 20, 2017 9:20 PM

Have a shot of milk on me.

I give my kids vitamin D stuff..

Maybe go crazy and have non homogenized...

Goes good with big slab o beef and potatoes.

Big fat doooooosh. Bet your more of a fish guy.

All good, walleye and perch are fucking awesome.

lester1's picture

This is nothing. Japan puts 100% tariff on Harley Davidson motorcycles!!

Trucker Glock's picture

Smoot-Hawley didn't work out so well.  But, I'm not an economist.

BigFatUglyBubble's picture

Larry Summers is a economics professor at Harvard and he's the super genius who deregulated the derivatives market that caused the 2008 subprime mortgage crisis. I guess all the titles in the world can't give you basic fucking common sense.

https://en.wikipedia.org/wiki/Lawrence_Summers#Summers.27s_role_in_the_d...

curly's picture

Fat Larry's policies going to be screwing the 99.99% for a long, long time.

 

Brucepall's picture

Mr. Smith, and what do you "do" for a living?

Reading you just now, I'd peg you as a dead ringer for an ivory-tower professor, or a public relations marketer... or even (gasp) an economist?   Have anything constructive to add as a real world solution for solving problems and fixing things; besides that our planet needs Comparative Advantage?  LOL, I thought not.  What a waste of ZH print space. 

JailBanksters's picture

I hate anything with the word "Free" in it, the Cost is too high.

Like Free Speech ...

 

malek's picture

"Rhetoric has recently trumped reality."

Uhh, that depends on what your definition of "recently" is...

Sledge-hammer's picture
Sledge-hammer (not verified) Mar 20, 2017 9:47 PM

Some good points made, but why do we have an $800 billion dollar trade deficit?

scatha's picture

As usual instead of clarifying the issue confusion and misdirection.

Every country that imposed trade tariffs as a part of wider industrial policy received enormous benefits, raised standard of living and developed industries capable to compete worldwide.

All of that begins with a first step of government imposed tariffs to benefit  local industry and the working people.

Well, the Misses institute, a phony libertarians, are pushing nonsense on suffering Americans who just want good, decent jobs to support their families. An impossible feat without smart tariffs, sensible capital controls and smart barriers for job outflows as such countries like S. Korea, Singapore, Japan and China and yes, the very United States under Hamilton imposed and benefited from immensely.

The smart tariffs is a step to economic recovery from depression felt by 70% of US population.

Here is more about fallacy of global free trade that served only oligarchy and fueled despotism in the US and elswhere.

https://contrarianopinion.wordpress.com/economy-update/

SMC's picture

A country that is not self-sufficient can easily be brought to it's knees.

mary mary's picture

America provides the rich with Socialism.  For everyone else, there is Free Trade via Black Market, if you can find it.

Fascal rascal's picture
Fascal rascal (not verified) mary mary Mar 20, 2017 11:35 PM

America gives meek a chance to be elite, but humble.

Am teaching little ones Americana THIS.

Mary mary.. Or hail Mary full of grace?

Or.. Our Father, who art in heaven.

Or.. Aaaaahh laaa laaa laa.. bang, slice, screech, crash..?

Or jew.. kill that fucker who speaks against our temple.

Mary mary quite contrary. You stand on tilted legs.

Cornerstone of mud.

Try teaching little ones better.

Ho chi min?

farmerbraun's picture

O.K. so who thought that the U.S. was ever a bastion of free trade? Surely nobody believed that since  1853 when  . ."Commodore Perry's superior military force was the principal factor in negotiating a treaty allowing American trade with Japan,"  aka the Black Fleet.

 

Not sure why the straw man argument  about free trade is relevant to the question of what is a sensible tariff policy that benefits the U.S.

Taxing shit you can't  always easily  grow enough of  yourselves seems reasonable.  It rewards efforts by domestic producers in difficult market conditions. Like the  Japanese rice tariffs. Japan never wants to be in the position of having no domestic rice production . What's wrong with that?

It certainly doesn't prevent any other country from feeding themselves .

Fascal rascal's picture
Fascal rascal (not verified) farmerbraun Mar 20, 2017 11:24 PM

Fuck n a. Get em. Get em. Get em.

Tom Green Swedish's picture

There should be no tariffs. Instead focus on making better products at a lower cost. Americans choose to buy foreign cars. American companies choose to produce in China and elsewhere. Americans choose to buy less expensive items which are less durable. It is the American consumer who is deciding they want a trade imbalance not the government. If Americans decided they didn't want German or Japanese Cars - most Japanese cars are more American than American cars, or we would focus on manufacturing instead of education, healthcare and restaurant services we wouldn't have this problem. However the reality is far from the truth. Americans don't want to pay for anything (or can't afford to) pay for anything other than cheap Chinese stuff. Doesn't mattter anymore. This consumers just like in the housing bubble have made their decision. The housing bubble was the fault of the idiotic cheap stupid American consumer. Not the fault of the government or the banks. The American Consumer should have known better. But with all our infinite wisdom from our superior educations we still can't figure it out.  I get especially pissed off when I see people driving around in cars who couldn't even figure out how or have the ability to product a cupholder for them let alone take part in production of the entire unit. Yes it makes no sense at all. Every time somebody enables this idiot aka the American consumer they will blow it. The solution - make them do something other than piss their lives away in some dream world.

 

Coincidentally the decline in our trade blanace is directly when the internet becamse prevalent.  Yes you heard it here first. The internet is the source of all of our problems. It does not lead to more productivity. It only leads to dead ends, less security and instability, less jobs. We survived just fine without it. There is no turning back now.

farmerbraun's picture

 Nah!     Pigshit for mine .

Look after your own citizens first  . . . whatever it takes. If it's tariffs to protect your last resort producers   in difficult times   . . .  then do it.  

If export producers are getting fat on subsidy from domestic consumers , then end the pork- barrel politics that sees  agricultural commodities subsidised by domestic taxpayers. Get rid of your corrupt Congress -trougher and Senate  arse - licker.

 

Farmers can stand on their own feet.

Drain the swamp! 

Miss Informed's picture

Better tariffs than letting whole industries and employment collapse. A country without productive industry and mass unemployment is doomed to fail. Another dollar for a t shirt or a pound of sugar is a small price to pay.