I hope some of FR’s Free Traders will post against this article, and refute this recommendation for a Mercantilist USA.
Let’s argue this subject from an OUTCOME perspective. Not unlike Reagan’s election argument “If you are better off than 4 (or even 40) years ago...”
Yet, the Free Traders argue as if their viewpoint is PROVEN.
It has never been proven. Free Trade has never existed in the history of man.
So, we have two proven outcomes, one where the US abandons most tariffs and opens it’s markets to the Mercantilists without cost, and one where we are the predatory Mercantilist perusing the most favorable outcome to us.
Which one worked best for the American people?
Free traders base their "proof" on idealized models that don't reflect reality. They go back to variations on Ricardo's concept of comparative advantage as their evidence. On paper, it makes sense, if country A is better at producing X and country B is better at producing Y, why not have such a division of labor? The problem with this simple model is that it assumes that capital of country A and B remains in its respective country so that each goes on producing what they're most efficient at. What it doesn't consider is a scenario where cheap labor or other low overhead costs leads to a large-scale flow of capital from A to B, so that B winds up producing both X and Y while A is left with a service/finance sector economy and little else.
Free trade advocates also consistently ignore any and all empirical evidence from history that contradicts their models. They claim that tariffs and trade protection lead to economic stagnation. OK, that's a valid hypothesis, so let's test it against reality: the US economy was "protectionist" for much of the 19th Century, precisely the time during which we experienced the fastest relative growth in GDP in our history, and the time where we overtook the UK and the rest of Europe as the world's manufacturing superpower. So much for tariffs and trade protection leading to stagnation.
I think it is sad conservatives are embracing protectionism. So how far should protectionism extend? Between states? Between cities? And just like I would ask minimum wage advocates, what social science tells us where the limit is? Who decides and how? Why not just ban foreign products?