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Opinion from a Libertarian ViewPoint

Conservatives and the Free Trade Straw Man | Mises Wire

Posted by M. C. on December 18, 2021

Today, we get something quite different, a set of beliefs based upon the notion that because something was “American,” it was exceptional by nature. The limits of time and space only applied to other people, not Americans, and that included laws of economics. In fact, there were not real “laws” of economics, according to these conservative historicists, just epochs of history that came and went and set their own rules.

https://mises.org/wire/conservatives-and-free-trade-straw-man

William L. Anderson

When Ronald Reagan officially announced his candidacy for president of the United States in November 1979, he called for the establishment of a large free trade zone encompassing the USA, Canada, and Mexico. Not surprisingly, the so-called free trade agreement better known as the North American Free Trade Agreement (NAFTA) resembled the usual “managed trade” that falls much more into the category of what Randall Holcombe calls “political capitalism.” Politics has a way of doing that.

For all of the logic of theories of free trade and for all of the prosperity that has come about as international trade has expanded in the past few decades, freedom of exchange over international borders will always have its enemies. On the progressive Left, we have seen the political candidacies of Bernie Sanders and Elizabeth Warren, both of whom are hardcore protectionists.

Conservatives, however, have opposed free trade for decades and seem to be impervious to any arguments to the contrary, no matter how logical free trade policies might be. In a recent edition of the American Conservative, Clyde Prestowitz praises President Joe Biden’s proposal to heavily subsidize the US semiconductor industry. He writes:

President Biden has proposed that the U.S. government invest billions of dollars in the pivotal U.S. semiconductor industry as part of an effort to assure continued global leadership. It is a break with 70 years of U.S. free-trade doctrine, as well as a huge step back to America’s future.

While one can write volumes on the meaning of “invest” in that statement, nonetheless there is much more to understanding just how fallacious this latest conservative argument for “managed trade” really is. President Bill Clinton used that term regularly as a euphemism for more spending, and politicians recklessly have used the terminology ever since.

However, what exactly would be Biden’s “investments”? Will the federal government be financing new capital expenditures for US companies and, if so, what are the terms of financing and how will the capital be directed? Government “investments” by definition are political expenditures and require political outcomes, none of which will meet actual needs in the US economy.

Like so many conservatives that call for some forms of autarky, Prestowitz conjures up an American past that in his thinking was made possible only by protective tariffs. He writes:

This is a return to the trail first blazed by Alexander Hamilton in 1791. Hamilton proposed mimicking Britain’s budding industrial revolution by copying its technology, imposing tariffs on imports of manufactures and providing financial incentives for the development of domestic manufacturing.

Hamilton was initially opposed by Thomas Jefferson, who dreamed of an America of yeoman farmers trading produce and raw materials like timber for imported manufactures. The outcome of the debate was determined by the War of 1812, which the U.S. nearly lost for want of manufacturing capability. In its wake, Jefferson yielded to Hamilton, noting that manufactures were “as necessary to our independence as to our comfort.”

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Contact William L. Anderson

William L. Anderson is a professor of economics at Frostburg State University in Frostburg, Maryland.

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