The Biden administration adopts the same flawed mantra of “fair trade” that previous administrations used to sanctify protectionist policies. Biden’s team “largely abandoned the idea of ââfree trade as an end in itself,” The New York Times reported. US Trade Representative Katherine Tai recently touted the Biden administration’s intentions to “shape the rules of fair trade in the 21st century.” What could possibly go wrong with such high suction?
Thirty years ago my book “The Fair Trade Fraud” was published by St. Martin’s Press. This book has been translated into Japanese and Korean and adapted as a textbook at the University of Chicago, Duke University, American University, University of Texas, and many other colleges. This book exposed fair trade as one of the great intellectual frauds of modern times. It is also a moral illusion that could lead to endless conflicts and economic disaster.
When politicians call for fair trade with foreigners, they are using a concept of fairness diametrically opposed to the normal usage of the word. In exchanges between individuals – in contract law – the test of fairness is the voluntary consent of each party to the market: “the free will which constitutes fair trade”, as Senator John Taylor wrote in 1822. When politicians talk about unfair trade, they don’t mean buyers and sellers didn’t agree voluntarily, but federal officials disapprove of deals made by US citizens. Fair trade means government intervention to direct, control or restrict trade.
Fair Trade often involves a politician or bureaucrat picking a number out of thin air and forcibly imposing it on foreign businesses and American consumers. Fair Trade meant that Jamaica was allowed to sell to the United States only 970 gallons of ice cream per year, Mexico could only sell Americans 35,292 bras per year, and Poland could only ship us 51. 752 pounds of barbed wire. Fair Trade meant allowing each American citizen to consume the equivalent of one teaspoon of foreign ice cream per year, two foreign peanuts per year, and one pound of imported cheese per year.
American protectionists have always found moral pretexts to denounce “unfair” imports. In the 1820s, protectionists proclaimed that trade between England and America could not be fair because England was advanced and America was relatively backward. In the 1870s, protectionists announced that trade between the United States and Latin America could not be fair because the United States was relatively rich while the countries of Latin America were poor. In the 1880s, protectionists warned that trade could not be fair if the interest rate between trading nations differed by more than two percent. In 1922, Congress effectively defined “unfair competition” as any foreign cost of production advantage that existed for some reason on a product.
Since then, US definitions of unfair trade have proliferated almost as fast as the number of DC trade lawyers. In the 1980s and early 1990s, the U.S. government penalized foreign farmers for not paying wages to their wives and children, foreign governments for not forcing foreign companies to buy more U.S. products, and foreign companies to resort to part-time work, to make charitable donations. , and failing to charge US customers the highest prices in the world. Federal law currently assumes that foreign competition that prevents US companies from raising prices is unfairly harming them.
The most common foreign âunfair trading practiceâ is to sell a better product at a lower price. Xenophobia is the basis of American anti-dumping law. The US Department of Commerce views cheap imported goods as Trojans, insidiously undermining the US economy. The US government has imposed more dumping penalties on low-priced imports than any other government in the world.
The dumping law forces foreign companies to run an almost endless gauntlet of American bureaucrats. Anti-dumping laws make it an offense for a company to sell the same product at two different prices in two different markets, 25,000 kilometers apart. Dumping only became a major trade problem in the 20th century, perhaps because our ancestors had not studied economics enough to become paranoid about minor price changes.
âFair tradeâ is increasingly a rallying cry from both Conservatives and Liberals who apparently believe there is hidden wisdom buried in the basement of federal agencies. But it is impossible to overstate the folly of some protectionist regimes. In 1816, Congress imposed high tariffs on sugar imports in part to support the value of slaves in Louisiana. Sugar producers have been “protected” almost since then. The sugar program relies on import quotas and other interventions to double or more the prices of US sugar from the world price, costing consumers $ 4 billion a year. Since 1997, Washington’s sugar policy has cut over 120,000 US food-manufacturing jobs. More than 10 manufacturing jobs have been lost for every sugar producer remaining in the United States. America’s sugar producers will never become competitive unless there is much more global warming than even Swedish teenager Greta Thunberg predicts.
The principles of fair trade intentionally sacrifice some industries for others. A 1984 Federal Trade Commission study estimated that steel import quotas cost the US economy $ 25 for every additional dollar of profit for US steel producers. Restrictions on imports of steel crankshafts in 1987 hurt manufacturers of truck diesel engines, restrictions on imports of ball bearings in 1989 crushed dozens of U.S. industries, and restrictions on flat panel displays. Computers devastated computer makers in 1991. More recently, Trump’s steel and aluminum tariffs, along with the foreign retaliation they unleashed, destroyed an estimated 300,000 jobs. But the Biden team is perpetuating Trump’s tariffs (which were widely denounced when they were first imposed).
American politicians take advantage of allegations of foreign injustice. For US trade policy, need is the basis of law, and political campaign contributions are the measure of need. The more politicians claim to discover unfair foreign practices, the more power they take over what Americans are allowed to eat, drink, drive, and wear. Each new definition of unfair trade becomes a pretext to further restrict the freedom of American citizens.
The myth of fair trade is that politicians and bureaucrats are fairer than markets – that government coercion and restrictions can create a fairer outcome than a voluntary agreement – and that prosperity is best achieved through arbitrary political manipulation. , rather than allowing each individual and business to pursue their own interests.
If a foreign nation blocks our ports, it is an act of war. But if American politicians block our ports, it is supposed to be of public service. Protectionism claims that the government can enrich citizens by selectively raising the prices of politically favored items. Protectionists defend Washington’s version of Adam Smith’s invisible hand: Americans automatically benefit from any trade restrictions politicians are bribed to impose.
As soon as a politician or federal bureaucrat accuses foreigners of unfair trade, any subsequent trade restrictions are deemed to be justified. Protectionists profit because most journalists in Washington are simply “amnesic stenographers.” Journalists base their commercial articles on government press releases and rarely delve below the surface of the latest edict. Few journalists take the time to sift through the details of foreign perfidy to recognize how often the US government’s accusations fail the laughter test.
Trade gives consumers everywhere a chance to benefit from increases in productivity everywhere. As Emerson observed, âIf a talent is born anywhere in the world, the community of nations grows rich. Trade binds humanity together by working for mutual benefit. The expansion of trade between the end of World War II and the 1980s produced the greatest era of prosperity in world history.
The government cannot make trade fairer by making it less free. It shouldn’t be a federal crime to charge American consumers low prices. The time has come to end the medieval pursuit of a “fair price” for imports and to stop allowing government officials to end their unlimited economic power over American consumers and businesses. Sadly, the fair trade demagoguery will continue as long as politicians are greedy, lobbyists generous, and journalists clueless.
James Bovard is the author of 10 books, including “Public Policy Hooligan” in 2012 and “Attention Deficit Democracy” in 2006. He has written for The New York Times, The Wall Street Journal, Playboy, The Washington Post and many others. publications. This article was originally published by the American Institute for Economic Research.