Free Trade: Reagan and the Austrian School vs. the World of Today

I was raised to respect the Austrian School of economics. From the hardliners at the Foundation for Economic Education (FEE) and Reason to the more moderate libertarians like Milton Friedman and President Reagan, the conservatives of my generation (I’m 62) knew several things with absolute certainty:

· Taxation is Theft.

· The most important goal of our Founding Fathers was limiting the size and scope of government.

· The Invisible Hand of the Free Market delivers the best results for the consumer.

At the same time, however, we recognized certain other fundamental truths of government:

· Government is instituted to protect society from external enemies and internal criminals.

· Government needs to build roads and bridges.

· Government needs to provide a framework of stable currency, the rule of law, corporate structure, intellectual property protection, and an investment system in which people can work, and earn, and accumulate wealth.

How did we square these two sets of rules – the opposition to government and a clear need for government?

By understanding the importance of both, and balancing them, all with an eye to the cardinal rule of obeying the Constitution.

Yes, we need police and courts and prisons; yes, we need an army and navy and air force. A nation as big as ours will need its government to do many expensive things, so we must always be on our guard to do these things as cost-effectively as possible.

When the left has proposed other expensive things – unconstitutional things – one of our responses has rightly been, “We can’t afford to do the things we have to do; don’t propose more costly unconstitutional things that we can’t afford anyway.” It still happens, of course; the Left is more adept at their goal of violating the law than the right is at obeying it.

Nowhere is there a better example than in the current debate – referred to online as “What Would Reagan Do?” – about tariffs and free trade.

President Trump has proposed a high tariff barrier to force foreign governments to reduce the massive barriers – both tariff and non-tariff – that they have erected against American exports.

And the natural response of good Reaganites and Friedmanites is to look back in our memories and recall how Ronaldus Magnus and the great professor from the Chicago School referred to trade and tariffs.

At the time when Reagan and Friedman were rightly singing the praises of the free market, the United States had two general levels of tariffs in place: low duty rates for goods made in most-favored-nation (MFN) countries, and the high rates (ranging from 30 to 60 percent) that we assessed on Warsaw Pact members.

We basically didn’t trade with our main enemies – the Soviet Union, East Germany, Czechoslovakia, Cuba, North Korea, etc. We didn’t export to them and we didn’t import from them … but if by some odd chance we unexpectedly imported something from a third country that had been made behind the Iron Curtain, we walloped it with huge tariffs (known as Column 2 duties) that were five to ten times the rates we assessed on the products of Canada, Western Europe and our other friends.

These high tariffs are still in place, in fact – they never went away – but the list of countries they cover was greatly reduced. Since the Soviet Union broke up, the Column 2 tariffs only applied Cuba and North Korea for years, though Russia and Belarus were recently added back in, due to Russia's Ukraine invasion.

It’s been a while, and I must admit, I don’t know for sure if the question was ever asked of them, but I don’t recall either Reagan or Friedman ever calling for the elimination of the Column 2 tariffs.

My issue remains -

I’m just not hearing a desire for a zero tariff deal from especially Navarro and increasingly, DJT.

Several nations have offered that, so why don’t we do it?!?! Sign it! I’ll go back to singing DJT’s praises!

I think it’s important to remember - and so many seem to have forgotten - we mostly didn’t trade with the Soviet bloc *by their choice*, not ours! Sure, there would have been limits (defense/weapons)- but it was the *Soviets* hung up on the idea that buying western good was stealing the sweat from their worker’s utopia!

We - not just the US, but the western world - won the Cold War because our system proved to be better. It simply became impossible for the communists to keep promising that western-style prosperity was only another 5 year plan away.

Nearly 50 years of 10 consecutive 5 year plans to make their own, keep the rapacious global capitalists from stealing, and just wait... the worker’s paradise. Just let “us” - the politburo, the Soviet councils - keep centrally planning for you!

Bullshit. Reagan used trade as a weapon. All those wheat deals with Russia? Think those were just straight up trade or did they have a political goal?
Reagan had DOD buy every Chrysler product he could find for the military.
Reagan put a 45% tariff on Japanese motorcycles to protect Harley Davidson.
With a threat of tariffs, In 1981, Reagan and Japan reached a “voluntary export restraint” (VER) agreement, limiting Japanese auto exports to the U.S. to 1.68 million vehicles annually for three years, starting in 1981.

And it’s utterly unimaginable that Reagan would have moved all of America’s manufacturing to Red China.

Quit with the dishonest revisionism. People today bend and shape Reagan into any shape they want if they think it can harm Trump or prop up globalism.

“I’m just not hearing a desire for a zero tariff deal from especially Navarro and increasingly, DJT.
Several nations have offered that, so why don’t we do it?!?! Sign it! I’ll go back to singing DJT’s praises!”

Because it isn’t JUST about tariffs. The EU offers that zero, BUT they want to arrest peo0ple for praying, they want to fine and otherwise sodomize US tech companies for not censoring online content. They threaten to arrest Elon for not censoring twitter. They massively violate free trade by cheating, bribery (legal there), and subsidizing companies.
Airbus is massively subsidized and does not compete fairly against Boeing. They won’t allow US manufactured cars in freely because of engine displacement and a dozen other restrictive rules.

Zero doesn’t mean they aren’t screwing us a dozen other ways.

And then there is one other thing. Tariffs and excise taxes pretty much funded America from it’s founding until 1910. There will be a permanent 10% tariff at least as a money raiser for the US treasury. That relieves the tax burden on America.
We do not want zero tariffs. Tariffs provide an incentive to manufacture here, and that creates good jobs.

Basically, America is a market everyone wants to sell in. If you go to the local strip mall and want to sell your wares, you have to pay to open a store.
If foreigners want access to the wonderful US consumer, they should pay for the privilege.

We are in a massive trade deficit. They HAVE to sell here to survive. We don’t need them the way they need us.
Trump is right, and the investor class is furious with him. Trump is aligned with Main Street, not Wall Street, and that’s refreshing.

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