The Economic Nationalist

To leading free traders, for the United States merely to trade with the world is not enough. In the name of their ideology of free trade, we Americans are also to sacrifice our industrial vigor, to compromise our independence of action, to submit our incomes to increased taxation, and to empower a global bureaucracy as well.

The editors of Investor’s Business Daily (IBD) led Monday,

Starting To Pay Price for Our Protectionism
By INVESTOR’S BUSINESS DAILY | Posted Monday, October 20, 2008 4:20 PM PT

One hopes that the “our” in this title does not refer to the United States; for, before a nation could “pay [a] price for our protectionism,” one would have thought that the nation had actually “to protect” something first. Adhering to NAFTA and joining the WTO wouldn’t count.

But apparently it does refer to the United States. This IBD editorial thus should be interesting.

Trade: As Obama makes political hay off protectionism …

That is: as Mr. Obama pretends that he would act as president to shield America’s industrial base from foreign predation.

… and promises a new Smoot-Hawley era, …

A typically unsubstantiated cheap shot.

… it’s no surprise our trading partners are beginning to look to other markets—such as Europe.

Were IBD’s editors under the impression that “our trading partners”—that is, foreigners with things to sell—did not trade with countries other than the United States? Is there some reason that “our trading partners” should not “look to … Europe”?

When will the globalists at IBD realize that the world does not actually revolve about the Washington-New York axis, and that other nations rightly act in their own interests rather than in ours?

It’s a warning.

I see.

Our No. 1 trading partner, Canada, isn’t stupid.

Regrettably, as Mark Steyn and Ezra Levant could tell you, such an assertion regarding our esteemed northern neighbor is debatable.

When Obama threatened last February to rewrite the North American Free Trade Agreement on his own terms, our northern ally started looking abroad to other markets.

They found a big one in Europe, which seems to have few hang-ups about increasing exports and signing free-trade treaties. Last Friday, Canada and the European Union held the first talks toward an eventual free trade agreement between the two.

Canada is by far the most important foreign country in the world to Americans. We Americans are not indifferent to what goes on there, but, as far as this writer is aware—until the hypothetical day on which the several provinces of Canada choose to apply for admission to U.S. statehood—Canadians remain free to trade with whom they please, without consulting us first.

When this goes through, $ 27 billion in new trade is expected by 2014, according to a joint E.U.-Canada study. Canada will add an extra 0.8 percent to its GDP and see income gains of $ 11.1 billion from the new jobs and higher salaries coming in from Europe.

I see. Are the authors of this “joint E.U.-Canada study” the same folks that once expected that NAFTA would increase the United States’ former trade surplus with Mexico?

Notice, incidentally, that the study’s key claims as summarized by IBD are entirely unfalsifiable. That is, should the E.U.-Canada free-trade agreement now go through, then in 2014 it would be impossible to refute the inevitable claim that Canada owed 0.8 percent of her then GDP to the agreement.

After all, if free trade with the U.S. bolstered Canada’s economy and standard of living by a factor of four since 1994, it makes sense to do more of what brought in that wealth.

So patently false a statement, so confidently stated, reveals some rather deeply twisted thinking on the part of IBD’s editors. Surely even IBD does not believe that Canadians would be living at a Mexican standard today if not for NAFTA. Now, it is conceivable that IBD believes that Canadians would have to begin living at a Mexican standard if, for some unfathomable reason, Canada suddenly cut off all trade with the whole world; but as far as this writer is aware no such proposition is under consideration by IBD, The Economic Nationalist, the Canadian government or anyone else.

IBD’s editors really ought to set their own propositions straight.

Europe’s $ 14 trillion market is an attractive alternative to the U.S. for the Canadians, if it comes to that, and the Europeans are happy to add Canadian investment to the $ 500 billion investment its three largest economies drew in 2007.

Come. Has anyone—anyone at all—asked Canada to choose between trade with the United States, on the one hand, and trade with Europe on the other? The Europeans may indeed be happy “to add Canadian investment” since Canada is a rich country with much wealth to invest; but, if this means that Canadians intend “to subtract Canadian investment” at home, then how is this something for Canada to celebrate? (This writer indeed knows of Ricardo’s insightful, nineteenth-century law of comparative advantage, which however is mostly irrelevant to the discussion at hand. Then again, the Canada that celebrates its creeping Islamization these days by stifling its own, freeborn citizens’ freedom of speech is not a rationally predictable country. One is never quite sure what today’s Canadians might choose to celebrate.)

Canada isn’t the only one responding to these chill trade winds blowing in from the Washington elites in election season.

Well, this is nice to know. For one thing, alas, there are no “chill trade winds blowing from … Washington.” There is the flutter of a mild breeze of suspicion that free trade actually might not be delivering the benefits it has falsely promised all these years; or, more insidiously, that free trade, a failure on its own merits, might be arrogating to itself credit for positive developments with which it has had little or nothing to do.

Trade in this context consists principally of the exchange of goods between nations. Free trade consists principally of a fanatical globalist ideology that masquerades as “trade” when it suits it to do so. One no longer feels entirely sure however that IBD had not deluded itself into believing that trade and free trade were somehow the same thing.

Colombia is also preparing to sign a free-trade deal with Europe, as its own free-trade accord with the U.S. languishes after House Speaker Nancy Pelosi blocked it in Congress last April.

Yes, and? Look: if the U.S. will forgo tariffs on imports from certain, selected countries then, as far as I know, imports from Colombia are about as good a candidate as any. Be that as it may, Colombia remains free to import goods from Europe under such terms as seem good to Colombians. Colombians are not obliged to consult Mrs. Pelosi first.

U.S. allies are wise to seek other partners no matter what the U.S. climate—the U.S. downturn no doubt plays a role too. But it started with noises out of the U.S. about pulling up the drawbridge.

“It started”? What started?

Drawbridges, incidentally, exist for the purpose of being pulled up. Otherwise, they haven’t much point, have they?

With a global downturn, free trade makes more sense than ever.

This may be the first substantially true statement in IBD’s entire editorial.

That ought to be an election issue for the U.S., which needs to stay globally competitive.

Not actually. One realizes that the proposition is hard for the wanna-be tough guys at IBD to grasp; but our domestic economy is not some basketball game, in which we take one end of the court and the Chinese, or whoever, take the other. If wise, one protects what is already one’s own; one does not let oneself be goaded into competing for it.

What the U.S. “needs,” far more than “to stay globally competitive,” is to stay domestically productive. Now, IBD would undoubtedly counter that we want “access to global markets,” but this is a ruse. We already have “access to global markets.” The question there is not whether we have access to global markets but rather whether we produce things foreign participants in global markets wish to buy. They’ll buy when it suits them to, under conditions it suits them to impose, and not otherwise. In the meantime, our own, neglected domestic market is what ought to concern us.

Sadly, it’s not.

Canada and Colombia are effectively defending themselves from the anti-trade vortex in the U.S. by turning to other markets. The Europeans have no intention of imitating the mistake made by the U.S.

“Anti-trade vortex”? My goodness.

No one would be wise to imitate a mistake, but IBD’s perceptions of which U.S. actions are mistakes and which are not is simply delusional. Importing millions of immigrants from the Third World is a mistake of colossal proportions, but you and I probably should not ask IBD about that.

But maybe IBD has some persuasive evidence it wishes to share:

“It’s never a good sign when the U.S. becomes protectionist,” Philippe Favre, special ambassador for international investment and chairman of Invest in France Agency, the country’s foreign investment arm, said in recent comments to IBD.

Like many European officials, Favre thinks the sentiment has been brewing for a while. “If you look at the last two or three years, there was the U.S. preventing foreigners from buying ports,” he said. “The Chinese wanted to buy an oil company and they were stopped. Then you have the contract for (air refueling) tankers refused to a European company (EADS).”

Mr. Favre, a Frenchman, is not principally concerned with the national security of the United States, nor should he be; but IBD’s editors are Americans and thus should know better.

Another failure was the World Trade Organization talks. “We have seen since 9/11 a U.S. trend to be more wary of the rest of the world,” Favre said. “We probably underestimated the impact (of the attack) on the people and the country in the E.U.”

Agree or disagree, there’s no doubt that protectionism will make America poorer and less influential, protecting nothing.

Such logic. It’s lucky for IBD’s presumably Ivy League-educated editors that they never had to submit this editorial as a freshman English-composition essay at State U.

Outsourcing is particularly full of misperceptions.

One’s patience with a string of unsubstantiated and counterfactual IBD claims begins to grow short, but let us give IBD one last chance. What misperceptions?

“Look at the auto industry—Japan started by exporting to Canada and the U.S., and now produces cars in the U.S. They did it because the market itself is in the U.S. We see exactly the same thing in Europe. More car plants are going up in Germany and France than Bulgaria and Romania, even though the labor costs are lower there.”

This is not a misperception. It is a well known fact.

Michael Pfeiffer, managing director of Invest in Germany, told IBD that exports are no threat: “We (Germans) are the largest exporters in the world—it’s something we do. We have to do it.”

Why? Germany doesn’t have the diversified economy America does. “One-quarter of German people are employed for export industries,” said Pfeiffer.

The veil slips. Do IBD’s editors actually regret that America still has a more diversified economy than Germany does? Apparently, they do.

With the possibility of a protectionist Democratic president (Barack Obama) working with a protectionist Democratic Congress, the U.S. may be the odd man out when it comes to free trade.

One can hope.

Pity. Because free trade, as any economist will tell you, inevitably boosts the economies of those who engage in it.

Putty. Because tariffs and other industrial protection measures, as any economist with an actual knowledge of economic history will tell you, incubated the Industrial Revolution in England, made Bismarck’s German empire the leading industrial power of Europe, rebuilt Japan from the rubble of World War II, and turned the United States from an agrarian backwater in 1816 to the mightiest industrial power by 1939 the world had ever seen. So much for inevitability.

So others, like Canada, Colombia and Europe, will continue down the free-trade path—toward greater wealth for their citizens—while the U.S. sits on the sidelines.

The world will decide it isn’t going to wait for Nancy Pelosi to come around on free trade—it’s going to leave the U.S. in the dust.

That’s dust IBD’s editors should put on their supper menu. They are going to have to eat it.

HJH

This entry was posted on Wednesday, October 22nd, 2008 at 12:07 pm and is filed under Trade. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.