In his SOTU speech, Barack Obama announced that his Administration is (unconstitutionally and thus illegally) negotiating trade agreements with the EU and countries of the Pacific Rim. Free trade proponents – including Iain Murray of the pseudoconservative American Spectator – applauded him, as they are ideologically aligned with him. In defense of their (and his) free trade agenda, they have regurgitated their standard litany of lies about trade.
Murray falsely claims that:
“The benefits of free trade are many, and accepted by virtually all economists. They include reductions in the cost of living, greater choice and increased quality of goods, higher incomes on both sides, economic growth and, perhaps most important in an increasingly corporatist America, a reduction in the effectiveness of lobbying. Protectionism provides the reverse in all of these cases, and would be just as foolish now as when the Smoot-Hawley law deepened the Depression. (…)
However, that last benefit in the list I just provided has not escaped the eye of special interests. Indeed, most of the free trade agreements which America has negotiated in recent years have been heavily influenced by lobbyists, not only from industry, but also from the environmental and labor organizations. They have consistently insisted on inserting measures into the agreements that maintain protections for their interests and reduce the scope for the full benefits from free trade.”
All of his claims are blatant lies.
There are NO benefits from free trade. None whatsoever. It is protectionism that brings about the benefits he claims, not free trade.
How do we know it? From the facts – from the results of real life, not theoretical theses put forward by Murray and others living in their academic ivory towers.
Increased quality of goods? Don’t make me laugh. The goods that the US imports from China and other “developing” countries are of abysmally low quality, made from weak materials in a poor fashion, breaking down after little time of use, and many of them – including toys and food – are poisoned with lead (toys) or melamine (food). The problem is so grave that one American mother raised that question in a 2007 GOP presidential debate. Virtually anyone who has bought anything made in China will attest to the poor quality of Chinese goods.
Reductions in the cost of living? Rising incomes on both sides? Is that a joke? Since the ratification of the first “free trade” deals in the 1990s, the real wages and real income of low-income and middle-class workers has remained flat in inflation-adjusted dollars. The only Americans who have seen their incomes rise since then have been the wealthy – the CEOs of large corporations who are happy to ship jobs overseas (mostly to China).
Greater choice? China’s price-dumping, flooding of the US with extremely low quality goods, and refusal to implement any environmental or labor standards has undercut and undermined American companies and to the flooding of store shelves with Chinese products, leaving Americans with little choice other than these low-quality products.
Reduction in the effectiveness of lobbyists? Don’t make me laugh. It was precisely lobbyists – and no one else – who wanted and secured the passage of all free trade deals ratified by the US, from the WTO to the GATT to NAFTA, to Most Favored Nation status for China, to the disastrous KORUS FTA.
American workers and voters did not want these disastrous free trade deals. Indeed, they vehemently protested against them and urged their Congressmen and Senators to vote against them (especially against the KORUS FTA).
It was the greedy CEOs of large multinational corporations and their lobbyists on Capitol Hill who campaigned for and secured the passage of these disastrous (for America) deals.
Economic growth? That’s the most idiotic claim Murray has made. Free trade has done nothing but stymie US economic growth. Historically, the US economy has grown fastest when operating under protectionist (economically nationalist) policies: protective tariffs.
Indeed, this is what all history – of all countries – shows. It proves that protectionism is what brings about fast economic growth, while “free trade” (i.e. being a dupe who borrows money to buy foreign products and destroys his own industry) leads to economic stagnation.
Protectionism (economic nationalism) is the trade policy of ascendant economic powers; free trade, the policy of descending, declining ones.
EVERY country which ever became an economic power became one by protecting and nurturing its industrial base – England under the Acts of Navigation, France under Jean-Baptiste Colbert and Napoleon Bonaparte, Britain until the mid-19th century, Prussia under the Customs Union (1834-1871), unified Germany under Bismarck and his successors, the US from 1861 to the 1960s, postwar Japan, China today.
NO country ever became an economic power by indulging in free trade, which is only for dupes and idiots and leads to economic disaster.
The US became the world’s economic superpower – indeed, was once the economic envy of the world – because from 1861 until at least the 1960s it protected and nurtured its industry with tariffs that effectively barred most foreign products from the US and protected its industrial base while not hampering competition between domestic producers in any way (and antitrust legislation ensured that such competition would stay alive in the US).
Thus, the US became a world producer of everything, an economically fully self-sufficient country, supplying not just its large population but the entire world with all sorts of products, from alloys, to cars, to planes, to everything else. By the 1940s and the early 1950s, it accounted for 50% of the world’s industrial production, partially due to the damage WW2 inflicted on Europe but partially due to the protection of the American industry (which was indispensable in winning that war by producing weapons for the US and its allies).
This was because, from its founding until at least the 1960s, the US followed the preceipts of the Founding Fathers, especially Alexander Hamilton: Trade surpluses are preferrable to trade deficits. It does matter where things are produced. There is no free lunch. Manufacturing, not finance, is the nation’s economic muscle.
But today, the US hardly manufactures anything and has become dependent on foreign countries – especially China – on all sorts of products, including the necessities of life.
“Free trade” has been a total disaster for the US. Since 2000 alone, thanks to free-trade policies, over 55,000 factories across the country have been closed and relocated overseas, mainly to China, and 6 million good, well-paying manufacturing jobs have been shipped – mostly to China. The only reward is the dubious privilege of buying low-quality Chinese goods.
Before NAFTA’s ratification, the US had an annual trade surplus with Mexico; since 1993, however, it has had a trade deficit with that country every year and the 2012 trade deficit was the largest between the two in history. After ratification of the KORUS FTA, America’s trade deficit with South Korea jumped threefold in April 2012 alone. Our trade deficit with Japan is the largest ever between us.
America’s trade deficit with China is the largest ever between any two countries in human history: $300 bn in 2012.
Not just between the US and China, but the largest between any two countries on God’s green Earth in all recorded human history!
And yes, trade deficits do matter. A lot. They decrease the country’s GDP while increasing the GDP of the country you’re buying from. This is not surprising to anyone who knows economics 101: to be able to buy something, you have to earn the money to buy it – or borrow it. If you borrow money, you’re driving yourself deeper into debt. If you buy it with the money you’re already have, you’re transferring your income to the other guy. He earns money and you lose it.
If he sells you more than he buys from you, he makes more money at YOUR expense than YOU do at his expense. In other words, on net, he earns money at YOUR expense: he takes money from you, while you lose money.
Producing goods creates jobs (all goods have to be made by someone). If you buy goods from a foreign country, you’re creating jobs in THAT country rather than yours, and increasing the income of THAT country rather than yours, while you lose money and jobs (or, at minimum, the opportunity to create jobs at home).
That country gains and you lose.
If you buy more from abroad than you export, you’ll have to borrow money to buy those things, thus driving yourself deeper and deeper into debt.
Those “economists” who support free trade clearly don’t even know Economics 101, or the Basic Facts of Life 101.
Free trade has also been a political disaster for Republicans. They’ve been complicit in its making, indeed often leading the campaign for it, and helped destroy most of American industry. Might the wiping out of most factories in the Midwest and the Northeast have had anything to do with Republicans inability to win those states and their foolish advocacy of free trade?
Illinois and Michigan haven’t voted Republican since 1984; Pennsylvania, not since 1988; Ohio, not since 2004.
By contrast, from 1860 to 1924, Republicans – then known as The Party of Protection – put 12 presidents only in the White House. The Democrats put only 2.
In short, the claims of Iain Murray and other free traders – none of whom have ever built a great nation – are blatant lies.