What? A free-market economist supporting tariffs? Well, I never! But all the pearl-clutching by the globalist Republican establishment, and by many Democrats as well, misses the point. Allow me to explain.
President Donald Trump has recently imposed tariffs, i.e. import taxes, on foreign steel and aluminum. This follows earlier tariffs imposed on foreign solar panels and some household appliances. This should be no surprise since he ran on the issue of protecting domestic manufacturing from foreign predation.
Note I said, foreign "predation", not foreign "competition".
The theoretical case in favor of free trade is elegant and well-established. If trade is based on real market prices that reflect comparative advantage, then by all means let it be free. But that is not the real world. In the real world, international trade is controlled by a myriad of government institutions and crony businesses.
Many countries subsidize their domestic production for export to the United States. Many countries manipulate their currencies to provide a further price advantage. Many countries engage in theft of United States' intellectual property to give them an even larger advantage. For far too long, the United States has entered into trade agreements that favor other nations over us. Under President Trump, this will no longer be the case.
Yes, some domestic prices will rise as a result of the tariffs. But they should rise. The artificially-low prices were not a result of real market forces in the first place. Establishment globalists of both political parties say that President Trump is starting a trade war. I strongly disagree.
We have already been in a trade war with other nations for decades, and losing because we never fought back. Now we are fighting back.
And we will win. Slightly higher prices are a small price to pay, in my opinion, for better jobs at higher wages in key strategic industries. We need strong domestic steel and aluminum industries for national defense, if for nothing else. Does it make sense to buy military-grade steel or aluminum from China? They are a major strategic opponent of the United States, if not an outright enemy. They are intent on world domination. We have been making them strong at the same time that we have weakened our own industrial base.
Did you know that the United States has been charging a 2.5 percent tariff on automobiles imported from China, while China has been charging a 25 percent tariff on automobiles imported from the U.S.? That is a win-lose trade deal, not win-win. Is it any wonder that General Motors decided to open a production facility in China?
Another thing to consider is that many of President Trump's public pronouncements are a negotiating strategy, not a set of policies. With respect to the announced tariffs, Canada and Mexico were temporarily exempted pending renegotiation of the North American Free Trade Agreement (NAFTA).
Speaking of NAFTA, just because it is titled "Free Trade" does not mean that it is - any more than the Affordable Care Act meant that health care would become "affordable".
If NAFTA was truly a free trade agreement, it would consist of a single twelve-word sentence on one page, "There shall be free trade among the United States, Canada, and Mexico". Instead it consists of over 1,000 pages of implementing legislation, regulation, and administrative rule-making.
The idea of globalization means different things to different people. To the economic idealists, it means open markets and free trade. But to the world's elitist-globalists it means manipulated markets and managed trade.
It is a movement away from national sovereignty and toward one-world government with one-world currency controlled by one-world central bank. The latter has been the dream of the progressive globalists ever since Karl Marx.
Already we are seeing nations from the European Union, Japan, and elsewhere talking about coming to the negotiating table on trade with the United States. This is a good outcome, not a bad one.
We will maintain our national sovereignty. We will rebuild our economic strength. And in doing so, it will lead to a more prosperous and more secure world.
Paul Prentice is a fellow in Economics, Centennial Institute at Colorado Christian University.