Category Archive 'Protectionism'

21 Mar 2020

Hard Decoupling

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Antique un-PC ad showing Uncle Sam, holding a proclamation and a domestically-made product, kicking the Chinese out of the United States.

Andrew A. Michta also thinks that China’s behavior has been bad enough and her responsibility for the current international pandemic so great that all this should result in a complete reordering of our economic relationship with China.

It won’t be easy or painless, but the role China has played in exacerbating the fallout from the coronavirus crisis ought to force Americans to fundamentally reconsider the relationship.

I flew back from Washington DC to Munich just a day before the travel embargo from the Schengen zone to the United States came into effect. As I watched anxious gate agents, tense flight attendants, and passengers eyeing each other with suspicion, I could not help but think that what I was witnessing was the beginning of a radical recompilation of the mistaken notions that for the past three decades have shaped U.S. and European economic policy, and indirectly, international security. The idea that the People’s Republic of China can become a responsible stakeholder in the international community—that it can “be like us”—is being laid to rest behind the masked faces of petrified Westerners scurrying through airports to get home.

Amidst the 24/7 breathless media coverage and calls for politicians to “do something,” one fundamental question still needs to be addressed forthrightly and in the open: Who did this to us and what to do to prevent it from happening again?

The question about assigning agency and blame is pretty straightforward to answer: The communist Chinese state, which for more than three decades has been draining capital and knowledge from the West, benefiting from our greed and myopia, has just let loose a virus that in the coming months is about to effectively paralyze Europe and the United States and bring severe pain, both human and economic on the world. The “eruption at a wet market” explanation for the virus has to be questioned until we know the full story, if for no other reason than the fact that Beijing suppressed data for two months when the coronavirus first appeared, and even to this day refuses to come clean as to exactly what happened. Indeed, the Chinese Communist Party (CCP) is now spinning propaganda stories that both seek to somehow pin the blame on the United States, and that try to frame their bungling, denial-ridden, heavy-handed reaction as some kind of model for the world.

As a result of all this, the West is now shutting down, at least for a while. The ultimate cost to the world, in terms of new government debt, failed businesses, and human lives and suffering, is difficult to quantify at this point. But there are indications that the fallout from the Wuhan Virus could be transformative.

We must acknowledge our own complicity in what is now unfolding. The belief that globalization, through the radical centralization of market networks, was the unavoidable path forward has been exposed as a grave, near-delusional miscalculation. The offshoring by corporations of supply chains to China has not only eviscerated communities that were previously reliant on manufacturing jobs, but has also brought with it an unprecedented level of vulnerability and fragility to our economies. The populist revolts that have wracked Western democracies for the past several years are in part rooted in the pain that these dislocations have caused. Worse yet, for the past three decades, this offshoring process has favored an adversary that is determined to replace us as the hub of global economic and military power and place itself at the new normative center of the world.

Should the fallout from the Wuhan Virus prove to be as damaging as it looks like it might be, the first casualty should be China’s quest to become the premier manufacturing center for the world.Should the fallout from the Wuhan Virus prove to be as damaging as it looks like it might be, the first casualty should be China’s quest to become the premier manufacturing center for the world. Few corporations will want to again risk being caught in a situation where their entire supply chain has been locked into one country—much less a palpably hostile dictatorship. The subsequent era will, I hope, be one of strategic reconsolidation, with a special focus on onshoring critical supply chains that have been moved to China. Even the siren song of potentially-vast consumer markets in China may end up being more than offset by the trauma we are about to face.

As the dust settles, the United States should be taking a hard look at streamlining our federal and state regulatory framework, tax structure, and all other outstanding obstacles in order to encourage U.S. businesses to come back home.

RTWT

20 Mar 2020

“We Are So F***ing Done With China”

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In late January, China’s embassy in Denmark demanded an apology from daily Jyllands-Posten after it published a cartoon of the Chinese flag with its five yellow stars represented by coronavirus particles.

Tell douchebag modernist composer John Adams to go write a new opera, Kira Davis predicts that era created by Nixon’s opening to China and of the export of industrial production to China and American reliance on cheap Chinese labor is over.

Because this is 2020 and the whole damn world seems to have gone insane overnight, we are now being told that referring to COVID-19 as anything related to China or the Chinese in any way is “racist” and xenophobic or some other bad thing. Even though this virus originated in China. Even though either their food choices or their government is responsible for unleashing this on the globe. It makes no sense, but none of this is making much sense right now. It certainly feels like we don’t have all the information and that’s worrisome given the level of response we’ve been seeing from our government. There is a lot that we, the people don’t know.

But we do know one thing right about now. One thing is becoming more and more clear with each passing moment.

When this is all over we are f***ing done with China.

RTWT

28 Jan 2017

The Triumph of Free Trade

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An elaborate allegorical illustration used as the frontispiece in Jane Cobden’s book The Hungry Forties (1904) which was part of the free trade campaign against Joseph Chamberlain’s pro-tariff movement in 1903. There is a very large sheaf of wheat (the “Fairy Wheatsheaf”) in the centre with the heads of Cobden and Bright near the base (other heads are visible in the grass beneath and around the sheaf but these are hard to identify); to the left is a destitute family which has been impoverished by tariffs; to the right is a prosperous family which has been enriched by free trade. The writing at the bottom of the page is hard to read but it is called “The fairy Wheatsheaf. Free Trade & Protection Contrasted”

Richard Ebling, at the Foundation for Economic Education, explains how free trade triumphed in the mid-19th century making Europe into a great and prosperous modern civilization.

Great Britain became the first country in the world to institute a unilateral policy of free trade. For the rest of the nineteenth century — indeed, until the dark forces of collectivism enveloped Europe during World War I — the British Empire was open to the entire world for the free movement of men, money, and goods.

Its economic success served as a bright, principled example to the rest of the globe, many of whose member countries followed the British lead in establishing, if not complete free trade, at least regimes of much greater freedom of trade and commerce.

British free trade policy helped to usher in the age of nineteenth-century free trade, and fostered what has been called the classical liberal era of “the three freedoms” which only came to an end with the First World War in 1914. The German free market economist Gustav Stolper explained these three freedoms in his book, This Age of Fable (1942), written while in exile in America during the Second World War:

    They were: freedom of movement for men, for goods and for money. Everyone could leave his country when he wanted and travel or migrate wherever he pleased without a passport. The only European country that demanded passports (not even visas!) was Russia, looked at askance for her backwardness with an almost contemptuous smile. Who wanted to travel to Russia anyway? …

    There were still customs barriers on the European continent, it is true. But the vast British Empire was free-trade territory open to all in free competition, and several other European countries, such as the Netherlands, Belgium, Scandinavia, came close to free trade.

    For a time the Great Powers on the European continent seemed to veer in the same direction. In the sixties of the nineteenth century the conviction was general that international free trade was the future. The subsequent decades did not quite fulfill that promise. In the late seventies reactionary trends set in. But looking back at the methods and the degree of protectionism built up at that time we are seized with nostalgic envy. Whether a bit higher or a bit lower, tariffs never checked the free flow of goods. All they affected was some minor price changes, presumably mirroring some vested interest.

    And the most natural of all was the free movement of money. Year in, year out, billions were invested by the great industrial European Powers in foreign countries, European and non-European … These billions were regarded as safe investments with attractive yields, desirable for creditors as well as debtors, with no doubts about the eventual return of both interest and principal.

The nineteenth-century victory of free trade over Mercantilism and Protectionism represented one of the great triumphs in the history of classical liberalism. It was the achievement of the Scottish Moral Philosophers and those that are now referred to as the “Classical Economists” in demonstrating the spontaneous order and coordination arising from a free, competitive market system – Adam Smith’s “system of natural liberty” and the cooperative gains for all through a system of division of labor.

The momentous importance in human history of this triumph is not always appreciated for what it was: a crucial institutional transformation that heralded the beginning of the material and cultural improvement of mankind through the private and peaceful associations of humanity for the mutual betterment of the mass of mankind. This transformation continues today, even in the face of the reactionary return to paternalistic government and political interference with human life over the last century.

28 Jan 2017

Trump’s Wrong on This One

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17 May 2016

Know-Nothing-ism Redivivus

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CitizenKnowNothing

Roger Cohen finds that everything old is new again: both the anti-immigrant passion of the late-1840s-early-1850s American Party and the America First isolationist movement of the late 1930s. Like Protectionism (which has been discredited for decades and decades after the Smoot-Hawley Tariff provoked a universal trade war which played an important role in the world-wide Great Depression), Nativism and Isolationism have been for a very long time looked upon as discredited political positions, which it would be intrinsically disgraceful and discrediting to embrace.

Donald Trump proved that none of the three grave historic fallacies of American politics was a third rail that killed candidacies any longer. His supporters in general didn’t know their history and didn’t care.

On the evidence, ethnocentrism is a pretty basic human instinct. Band together with your own. Keep the outsider down or out. In the 1850s, at another moment of American unease, the Know-Nothings swept Massachusetts and won mayoral elections in Philadelphia and Washington on a nativist platform to “purify” national politics by stopping the influx of Irish and German Catholics.

Papist influence was then the perceived scourge through which the Know-Nothing movement, as the Native American Party (later the American Party) was commonly known, built its following. Today the supposed threat is Muslim and Mexican infiltration. Or so Donald Trump, the de facto Republican presidential candidate, would have us believe in his “America First” program.

A know-nothing tide is upon us. Tribal politics, anchored in tribal media, has made knowing nothing a badge of honor. Ignorance, loudly declaimed, is an attribute, especially if allied to celebrity. Facts are dispensable baggage. To display knowledge, the acquisition of which takes time, is tantamount to showing too much respect for the opposition tribe, who know nothing anyway.

Any slogan can be reworked, I guess. America First has a long, unhappy history, the America First Committee having pressed the view that the United States should stay out of the war to defeat Fascism in World War II. …

Well, America First is back, tweaked as Trump’s we-won’t-be-suckers-anymore ideology. …

The know-nothings are on the march. But of course they must know something. Millions of people who vote for Trump cannot be wrong. Perhaps their core idea, along with the unchanging appeal of ethnocentrism, is that politics no longer really matter. Celebrity matters.

Power centers are elsewhere — in financial systems, corporations, technology, networks — that long since dispensed with borders. That being the case, loudmouthed, isolationist trumpery may just be a sideshow, an American exercise in après-moi-le-déluge escapism.

Read the whole thing.

19 Jun 2014

Milton Friedman on Protectionism

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Limitations on immigration (not required by National Security) are nothing other than a species of Protectionism, a way of limiting labor market competition.


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