We’ve mentioned before the curious fact that economists go into convulsions at even the slightest scepticism towards free trade dogma.
Even the slightest whiff of protectionism is seen as a massive threat to the global economy. But as Tim Carney* reminds us, the whole thing is silly because the world of untrammeled free trade, where countries do little to protect their native industries is a myth. That world doesn’t exist:
If you dig a bit further into the legislative and lobbying priorities of those politicians and businesses now fighting off “protectionism,” you see that by “free trade” many powerful folks in Washington really mean whatever policies help well-connected multinational businesses.
Free trade, on an individual level, means I should be able to buy something from someone in France without governments getting in our way. Similarly, if I need something made, and someone in Taiwan is willing to make it, governments should not interfere.
But the leading official voices for free trade today are the same people who have authored and championed bailouts for our banks and manufacturers and frenetic spending to prop up our companies. Also, today’s free trade evangelists regularly trample on the notion of free trade by backing subsidies for manufacturers and exporters.
For instance, newly confirmed Commerce secretary Gary Locke, during his two terms as Washington State governor, was very close to Boeing and Microsoft. In 2003, he pushed through a $3.2 billion package of special tax breaks for Boeing. More to the point, he heads an agency that spends taxpayer dollars to support American companies.Nevertheless, Locke has long espoused “free trade.”
Exempting our largest exporter from tax laws that apply to other businesses is effectively an export subsidy. The Department of Commerce is, in essence, providing corporate welfare. But these government interventions don’t seem to bother today’s free-trade evangelists.
We’d say there are some free-trade evangelists who do argue against this stuff — and company-by-company corporate welfare seems an especially dumb way to go about things — but the point is that the world isn’t falling apart because the US (or Japan) has an export subsidy. There are barriers to truly free trade everywhere you look and yet they don’t seem to be dangerously ravaging the global economy.
Perhaps it has less to do with practicality than with language. A tax break to improve the competitiveness of your homegrown companies is ok. But a tarrif!? Propose that and you’re a dangerous, head-in-the-sand radical.