Is protectionism America's future? Pat Buchanan praises Bush's barriers

"For the first time in more than two decades, trade barriers are moving in the wrong direction. This isn't the 1930s ... but Pat Buchanan is one happy camper these days."

So writes Steve Moore in a long and anguished column in the Washington Times titled, "A Comeback for Protectionism." A free-trade purist at Cato Institute, Moore is right to be alarmed.

Americans, souring on what global free trade has done to them, are again turning to the philosophy that converted America from 13 rural colonies into the mightiest industrial power the world had ever seen – in a single century.

The economic patriotism of Hamilton and all four of the presidents on Mount Rushmore is getting a rehearing for the best of reasons. Free-trade globalism has failed America.

The numbers do not lie. After throwing open U.S. markets, we are now running a $500-billion-a-year merchandise trade deficit, largest in human history, equal to 5 percent of our $10 trillion gross domestic product. And what has a decade of these soaring trade deficits produced?

First, a farm crisis. American farmers are the most efficient on earth, but they cannot produce food for less than in foreign lands where the environmental rules are lax, and the labor is plentiful and cheap.

While America still runs a modest surplus in farm goods, it has been shrinking under free trade. That $200 billion farm bill Moore bewails is simply a bailout of U.S. farmers whom free traders sacrificed on the altar of their Moloch, the Global Economy.

Second, a crisis in manufacturing. U.S. companies have been closing factories, shedding workers and building plants in Mexico and Asia. As goods produced by $2-an-hour foreign labor poured into the United States, they have killed off many remaining U.S. factories. America has been de-industrializing as rapidly as the British, before German submarines finally awakened the Brits to the truth that free trade is not free.

Third, a growing U.S. dependency on foreign producers, not only for oil but the necessities of our national life and national security.

Fourth, these mammoth trade deficits have poured hundreds of billions of dollars into overseas coffers, that foreigners have used to buy up U.S. assets. According to Bridgewater Associates, foreign-owned U.S. assets rose from 33 percent of U.S. GDP in 1990 to 78 percent today. Foreigners now own 22 percent of U.S. corporations, 24 percent of U.S. corporate bonds and 48 percent of our liquid Treasury market.

But trade deficits of 5 percent of GDP cannot continue indefinitely. Eventually, a currency begins to fall, as has been happening to the dollar, and the price of the foreign goods on which America now depends rises. And as prices rise, Americans buy less from abroad.

The problem? The world has become dependent on the American consumer. But, if Americans can no longer afford all those foreign goods, and they begin buying less, these nations will go into recession and be unable to service their foreign debts.

In 1997-1998, the United States, with a bull market and a roaring economy, bailed out the bankrupt regimes of Asia and Latin America. By buying their exports, giving them IMF loans and running a huge trade deficit, we pulled them out of the ditch and onto their feet.

But America's economy is no longer booming. With the dollar falling, we cannot afford to forever buy up foreign goods. And with the U.S. budget now in deficit, the willingness of Americans to bail out foreign bankrupts is going to disappear. We may just be headed for the terminal crisis of the Global Economy.

Yet, the president is now being bashed for the most sensible decision he has taken to put America first: the imposition of tariffs on foreign steel being dumped into the United States, which had put 30 U.S. steel companies in bankruptcy.

What happened? The EU, its huge trade surplus with America at risk in any trans-Atlantic trade war, chickened out and backed down. The president prevailed. The EU will not impose retaliatory tariffs. Smart fellows.

As for the U.S. steel mills Bush sought to protect, consider this item buried inside the free-trade Wall Street Journal.

Under a headline, "Steelmakers Post Improved Results for 2nd Quarter," a reporter writes: "Buoyed by import tariffs, the country's two largest steelmakers reported vastly improved second-quarter results, as mills operate at nearly full capacity and prices rise.

You have a voice of reason in a sea of b*llsh^t. We have been lied to, cajoled, threatened with dire consequences and mayhem if we don't buy lock, stock, and barrel the promises made for free trade. We were told after the vote on every agreement that our trade balance would improve if we would just go along with each new agreement.

The situation has deteriorated each time. Now, I have to come to the conclusion that our representatives are the worst bargainers in the world or the biggest liars. Your defense of the Constitutional duties of the Congress is the formula for fair trade.

Nations should be free to trade with one another in a partnership basis without being governed by a board of political operatives subject to the control by no one. What we call free trade is in reality the most negotiated and manipulated set of trading rules the world has ever known.

It has actually depressed trade rather than encouraged trade. As proof of this, when one economy falters, the whole world stumbles. We, as a nation, are the consumer market for every manufacturer in the world, without regard for the repayment in kind for the export of our products.

The truth of the matter is, we are expected to share our wealth with every other third world country until we become a third world country. This is the plan for establishing the socialist designed world government dictatorship and we have a number of conservatives that buy this line, hook, line and sinker while maintaining they are for freedom and liberty. What a joke!

What a fun "strange bedfellows" thread this will be!
< /Understatement> and now another voice heard from

Politics determines if 'cheap foreign imports' are good or bad
D.J. TICE
Editorial Writer

Several times in recent months, Washington politicians have moved boldly to defend American industries — notably steel and lumber — against competition from "cheap foreign imports." The imports in question are made unfairly cheap, it's said, by subsidies and market manipulations from foreign governments.
The Bush administration, backed by Democrats and Republicans in Congress, has hiked tariffs to protect American workers and businesses — even though one result, economists agree, will be higher prices for American consumers of cars, homes and a thousand other things.

There's not much to say in defense of such protectionist gifts for special interests. But what's even more embarrassing is the way many politicians' distaste for "cheap foreign imports" passes away like an attack of indigestion when the subject turns to prescription drugs. The U.S. Senate is trying to pass a bill that would allow American-made pharmaceuticals to be "reimported" from Canada, where they sell for lower prices.

Now if there were ever a case of "unfair" foreign competition, this would be it. American drug firms sell drugs cheaply in Canada and other countries mainly because those countries enforce strict price controls. The firms sell drugs into those countries anyway because any sale is better than nothing if the price is higher than the actual cost of making and delivering the pills.
Still, the drug companies have to recoup the underlying cost of developing these drugs someplace. Because of overseas price controls, they have to recover those costs mostly in America's free market. That's why prices here are so much higher.

This is understandably frustrating, particularly for senior citizens who too often lack prescription drug insurance. Many seniors need help getting coverage — though not all do. This is the least poor age group in America. While some elderly really must choose between medicine and meals, others choose between medicine and another week in Maui.
In any case, "reimportation" is a potentially costly way to help seniors. It would mean that American politicians are, in the case of drugs, welcoming competition from imported products that have been made cheap entirely by the heavy-handed interference of foreign governments.

If, as the politicians claim, that sort of "below cost" competition threatens to devastate the American steel and lumber industries, and undermine American self-sufficiency in those essential commodities, isn't it likely to harm America's prescription drug industry, too?
One of these policies on "cheap foreign imports" must be wrong. Both may be wrong.

One important difference in the two situations is that the industries government is protecting — especially steel — are old-line businesses in which America is no longer especially innovative. But pharmaceuticals are a high technology product of the future in which America is the world's undisputed leader.
What's more, in the case of drugs, the only things we're really importing are price controls (admittedly something of a Canadian specialty); the drugs involved are the result of homegrown American ingenuity. In the case of steel, if our leaders weren't protecting us, we could "import" the ingenuity of foreign steel makers.
The benefit of trade is that it allows us to access the distinctive skills of other countries. Why should we use trade policy instead to impose other countries' bad economic policies on ourselves?

It's possible reimportation, if enacted, will never actually occur. Because of safety concerns, the Clinton administration refused to implement a reimportation law passed several years ago, and the Bush administration may do the same.
Nonetheless, many in Congress, not least Minnesota Sen. Paul Wellstone, seem determined to find some way of controlling drug prices or otherwise reducing drug company profits, perhaps by shortening patent life on new drugs. However it's done, shrinking the rewards for discovering new drugs will have a predictable economic effect of discouraging industry investment in those discoveries.
It's possible we'd be better off legislating lower prices on the drugs we already have, and "paying" for those lower prices by seeing industry invent fewer new drugs. In health care generally, there may come a point where it no longer makes sense to keep developing ever more sophisticated treatments we can't afford. But this would be a difficult policy choice, worthy of careful debate. It seems more likely that policy is being driven today by political calculations.

Few Americans buy steel or lumber directly, but only as materials in cars, houses and other products. So higher steel or lumber prices caused by trade barriers are well hidden. Politicians can get away with picking consumers' pockets to enrich protected interests and enjoy the resulting political rewards.

By contrast, consumers, especially seniors, are well aware of the cost of drugs. What they won't see will be the life-saving and life-enhancing drugs that may never be invented if price controls take effect.
That's why encouraging "cheap foreign imports" of drugs is as good for an American politician's health as fighting "cheap foreign imports" of steel.

Write Tice at dtice@pioneerpress.com or at the Pioneer Press, 345 Cedar St., St. Paul, MN 55101.

Boy do you have a simplistic view of the world, as do most worshippers of the law of comparitive advantage. First, it was the Communist Party in 1963 who declared free trade without regard to communist affiliation as a cornerstone of their effort to destroy America. Perhaps they understood something you don't?

Indeed, and if we don't do something about "free" trade, it may cost us our freedom. What would you pay for that "externality"?

You see, when a US corporation flees US regulation (which is the biggest reason they do leave, not the cost of labor) what they are doing is assuming that contracts will be guaranteed and safe transit will be assured. How do they get that? The US military, paid for by US taxpayers. It's a MASSIVE subsidy. What is the risk if those foreign supply lines are interrupted? What is the risk when we export technology? Who has a collective claim on the use of that technology paid for by US taxpayers and perfected by US hourly workers? Was there an implicit contract there?

We are talking real, accountable, actuarial risks here, sonny, not some hokey chimera. It is entirely appropriate for the citizens of a country to freely choose to pay for those risks in the form higher prices for the protection of domestic producers, whether guidance systems for incoming missiles or less apparently technical goods with equally strategic value.

For example, I don't suppose you know that the US is now a net importer of food. 80% of domestic US farm investment is to retire producing fields. Consortia of socialist Slave Party investors, one led by Lloyd Bensten, are buying up land in Mexico and South America to produce food for the US market. Meanwhile the same investors use their tax exempt foundations to fund Envirowack NGOs to control water and runoff "pollution" to put their competition, those US farmers, out of business. That will get them higher prices.

What is the risk of cutting off food? Have communists ever used starvation to coerce or eradicate a population?

It isn't a matter of inherent competitiveness, we are seeing cheaper prices from imported goods in part, because we are willing to accept the cost of risk. Looks a little dicey to me.

Now consider another example of trade subsidy in the assumption of risk, incoming weapons in containers. Containers don't get inspected. Is that a subsidy? How about exotic species or pathogens? Who pays to treat the diseases and eradicate the pests? US medical providers and farmers. Are those "cheaper" prices really worth it? What is West Nile Virus going to cost?

When we use foreign slave labor, aren't we subsidizing slavery? To what degree? You have no idea, do you?

Traditionally, we have used governments to identify unacceptible risks and exercise their power to control borders to apportion them. It is true that in some cases a union for example buys preferential treatment. I would argue that there are actuarial mechanics by which those subsidies could be calculated and apportioned. Until then, we will have to continue to rely upon the judgment of political leaders and hold them accountable.

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