The Mises Institute monthly, free with membership
July 1996
Volume 14, Number 7
Why Protectionism Sells
James Sheehan
Voter opposition to major "free trade" agreements helped
propel a surge in protectionist rhetoric this year. Even
constituencies when should be naturally free trade--Republican
conservatives--have fallen prey to old fallacies.
But mainstream Republicans largely have themselves to blame
for this phenomenon. By allowing straightforward free trade
agreements to be encumbered with special interest favors, they
have opened the door to political controversy.
The policy of allowing consumers the freedom to choose
whatever imports they want is explained in any economics
textbook. A law eliminating bureaucratic trade restrictions could
fit on a single piece of paper. But the thousands of pages of
trade legislation on the books has little in common with the free
trade found in textbooks.
The designers of the lengthy Nafta were so busy doling out
favors to exporters that they virtually ignored the American
consumer. Nafta's promotion of strictly regional commerce
subverts the whole notion of consumer choice. Misunderstanding
the root purpose of free trade, Nafta supporters falsely
predicted an export boom to Mexico which would create 200,000 new
U.S. jobs. The Mexican people, told to expect surging living
standards, are instead suffering through their country's worst
economic collapse since 1932.
Most people are not aware of Nafta's finer details, but their
skepticism of government schemes is well-placed. The legal
entanglements of Nafta's interventionist bureaucracy belie its
free trade label. An environmental commission is siding with
green-movement agitators to kill plans for a cruise-ship pier in
the resort town of Cozumel, a blow to economic development and
the tourist industry.
Another Nafta creation, the North American labor commission,
exists to harass employers. Sprint was subjected to televised
show-trial hearings, which accused the telephone company of
violating worker rights by closing a money-losing division.
Though Congress has failed to enact a single significant reform
of excessive federal regulations, it has somehow found the money
to pay for new international regulation and micromanagement by
Naftacrats.
Meanwhile, those parts of the treaty meant to ease government
restrictions are being ignored. In all three Nafta countries,
cross-border commerce is being obstructed by a rash of customs
and administrative barriers, such as nuisance "anti-dumping"
suits. Deregulation of transportation rules has been suspended
because Nafta officials want to create a brand new trucking
safety bureaucracy.
A recent managed-trade side deal with Canada imposes new
export taxes and price controls on lumber, economic restrictions
which will have the effect of raising U.S. home construction
costs. Special trade barriers are being devised to protect
domestic producers of agricultural commodities such as tomatoes
in order to woo electoral constituencies in Florida and
California.
After the peso crash, the Republican Congress allowed scarce
tax dollars to be sent south of the border to rescue foolish Wall
Street speculators in Mexican bonds. Though trade and investment
subsidies contravene all accepted notions of free trade, the peso
bailout is proclaimed today as Nafta's finest hour by the U.S.
Treasury. The unpopular bailout reinforced the perception that
the GOP's primary concern is helping big business, just when its
reform agenda was being portrayed in the media as an attack on
programs for children, the poor, and the elderly.
The shenanigans of mercantilist trade policies have backfired
on the Republican mainstream, creating a volatile issue. Had
Republicans not been so willing to compromise on principle,
allowing the public interest to be sacrificed to special interest
pleadings, their trade policies would not be vulnerable to
attack.
Government-negotiated trade deals have done much to confirm
the impression that while the GOP preaches economic liberty, it
practices a form of corporate statism in which markets are
managed for the powerful at the expense of the ordinary American
citizen.
Most Americans are not protectionists, and they don't blame
imports for their problems. Yet they have every reason to believe
that government-negotiated trade agreements represent the worst
of Washington politics. Insofar as Nafta-like deals are
associated with free trade, arguments for protectionism will have
an enthusiastic audience on the campaign trail.
Republican leaders, for all their indignation against
"protectionism," have only themselves to blame for the tragic
public contempt for free trade. If they truly believe in free
enterprise, they will start practicing what they preach, and
repeal mercantilist trade deals.
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James Sheehan works for the Competitive Enterprise Institute
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