"America Needs to Negotiate Better Trade Deals."
A common cliché of protectionism is this one: the United States government needs to negotiate better deals for American companies.It is time to call a spade a spade. This is fascism. Fascism is the economics of a government-business alliance. There should be no government-business alliance. The government should not be involved in business. Whenever government gets involved in business, it is always done to favor certain businesses at the expense of all the rest of them. It always involves a repression of decision-making on the part of individual buyers and sellers. There are no exceptions. There are always going to be a few winners and a lot of losers. But we do not see the losers. This is what Frederic Bastiat in 1850 called "the fallacy of the things not seen."
If I say this to the standard conservative, he nods his head in agreement. He is convinced that the government is up to no good when it intervenes into the free market. Then, a few minutes later, he tells me that the government should actively negotiate better trade deals for American businesses. In other words, his default setting on trade is fascism. He does not understand this. He does not understand economic logic, and he does not understand the meaning of the so-called business-government alliance.
There is only one legitimate justification for tariffs: as sources of revenue. In the United States Constitution, originally, the United States government was not allowed to tax individuals directly. This was done in order to restrict the power of the federal government. The federal government was allowed to tax liquor, which it did. The other main source of income was from tariffs. A tariff is a discriminatory tax placed on imports, but the Constitutional justification for it in 1787 was to restrict the power of the federal government to tax people directly through income tax assessments.
Once the 16th amendment was announced as having been passed, the justification for tariffs disappeared. From that point on, the tariff was just another discriminatory tax against imports and exports.
Yes, it is a discriminatory tax on exports. Because foreigners cannot sell all that they could otherwise sell to Americans, they cannot get their hands on United States dollars. When they cannot get their hands on United States dollars, they do not order American goods or invest in American companies. So, import restrictions are always export restrictions, and vice versa. I realize that almost no Americans or any other nationality understand this, because it involves economic reasoning, and people are not adept at economic reasoning.
NEGOTIATING AGAINST LIBERTY
This brings me to the idea that governments should negotiate tariffs and other quotas with foreign nations.
Why should any government agency negotiate in favor of any American business? What is the economic logic of this? This is one more example of government interference into the operations of the free market. Yet Americans who claim that they do not want government intervention in the marketplace loudly insist that some American trade negotiator has an obligation to get a better deal for America.
For America? For a collective? For all of America? How? The government cannot achieve this in any other field of economics. It is always discriminatory. There are always winners and losers. How is it possible for trade negotiators to get a better deal for all Americans? They can't. It's a myth.
The free market is not about getting a better deal for America, or the state of California, or Los Angeles County, or some municipality. The free market is an extension institutionally of personal liberty. It is an extension of the idea of private property. The idea of ownership mandates the idea of dis-ownership. If I cannot legally sell something, I do not possess full ownership. So, the government's task should be clear: to defend my right to buy or sell irrespective of anyone else's opinion. If this leads to a so-called national trade deficit, it is none of the government's business. If it leads to a national trade surplus, it is also none of the government's business.
Most people don't believe this. They honestly do not believe that the free market is an unplanned institutional result of the right of private property. They believe that the market and international trade is not a free market, but rather an extension of the federal government.
The federal government's task, as defined by agents of the federal government, is to interfere with the market process. Most voters accept this intellectual justification of federal power in the case of the discriminatory sales taxes called tariffs. They love this with respect to bureaucratic negotiators who go in front of other nations' bureaucratic negotiators and try to get a better deal.
A better economic deal is promoted by the free market. A better economic deal is never promoted by the federal government.
The only way for a government to negotiate with another government is to threaten negative sanctions. The threat is this: "We will raise our tariffs if you don't lower your tariffs." This is a threat to impose a discriminatory tax on American consumers.
In the past, this threat has led to trade wars. These are tariff wars. These are competing wars to expropriate wealth from citizens on both sides of the border. Government negotiators threaten to steal from importers and exporters of goods in their own nations.
If you want to understand a tariff negotiator's threat, watch this.
In 1969, I wrote an article: "Tariff War, Libertarian Style." It was published in The Freeman. I ended with this:
The statist tariff war is irrational. It argues that because one's citizens are injured by one restriction on foreign trade, they can be aided by further restrictions on foreign trade. It is a contemporary manifestation of the old cliché, "He cut off his nose to spite his face." It is time that we accept the implications of David Hume's two-hundred-year-old arguments. The best way to overcome restrictions on trade, it would seem, is to establish policies that encourage people to trade more.I can no more get this idea across to so-called libertarians who favor government agencies as negotiators for business than I can convince Pat Buchanan that discriminatory taxes on Americans are a bad idea. The mindset is simple: "The government is here to help us, and we should make it stronger."
Anyone who argues in favor of tariffs, and anyone who argues in favor of tariff negotiation by government agencies, is afflicted with this schizophrenic mindset.
I suggest that if you are so afflicted, that you do what you can to reduce the affliction. Sit down, and say to yourself over and over, "The federal government is not here to help me. It is here to help special-interest groups that are acting against my interests."
The best response to a foreign nation that increases tariffs against American imports is to lower tariffs against that nations exports. Sellers of goods in that nation will then have lots of dollars to spend, and they will have to spend it somewhere in America. Trade, after all, is a two-way street. The more trade there is, the wider the range of choice for Americans. This is the case for free trade. The case for free trade has never been about aiding certain special-interest groups at the expense of Americans who want to trade.
The best approach for negotiating better deals on trade is to allow buyers and sellers on both sides of the border to do all of the negotiating. Get the United States government out of the negotiating business.