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Trade and National Defense

Retired Rear Admiral (USN) Paul Rohrer has a letter in today’s Wall Street Journal.  I sent this letter in reply:

Admiral Paul Rohrer argues that U.S. national defense is compromised by the Air Force’s award of a tanker contract to EADS, an aerospace company in Europe (Letters, March 25).  The bulk of Adm. Rohrer’s case, however, is mere standard-issue protectionism.  And the facts of which he complains strengthen, not weaken, U.S. national defense.

For example, Adm. Rohrer gripes that “EADS has received tens of billions of dollars in illegal subsidies from the French and other European governments.” Translation: European taxpayers now foot part of the bill for Uncle Sam’s weaponry, giving Americans more resources to spend (if they wish) on national defense and European governments fewer such resources. Likewise for the Admiral’s complaint that “European defense acquisition policies are already highly protectionist.”  Translation: European governments pay unnecessarily high prices for their weapons, giving those governments less bang for the buck (or, explosion for the euro).

The end result is that America’s defense capacity is strengthened both
absolutely and relative to Europe’s.

Donald J. Boudreaux

It’s always possible, of course, to argue that the duty of each government to provide reliable national defense requires that no foreign suppliers be relied upon for any military supplies — or, indeed, for supplies of any sort (such as food, clothing, electronics, and pharmaceuticals) that might be used by the military.  Reliance upon foreign suppliers means that if “we” go to war, “our” military might no longer have access to some materials and outputs necessary for fighting a war.  “We” would then be at the mercy of foreign governments whose troops and tanks and terrorists stand ready to humiliate and conquer “us.”

Apart from emphasizing the fact that as a country grows more prosperous, the government of that country enjoys greater capacity to arm its military with the latest weaponry, I’ll say no more here about the alleged national-defense exception to the case for free trade.  But I will recommend that you read the relevant sections (on national defense) in this brilliant 1954 monograph by Leland Yeager.  (See especially, on national defense, Chapter 4.)  Here is one paragraph from Yeager’s monograph:

The assumption is false that a government can know in advance just
which weapons and industries will be most important in some possible
future war. Constant technological change is a leading feature both of
modern war and modern industry. Furthermore, modern industry has proved
itself remarkably able to convert and reconvert between peacetime and
wartime production. Incidentally, among the industries that, so far,
have been most easily convertible are those in which the United States
has a Comparative Advantage, such as automobiles, electronics,
elaborate office equipment, and industrial machinery. These strategic
industries typically do not need tariff Protection, and Free Trade
would enlarge their peacetime markets. (By contrast, the industries
that typically clamor for continued or increased Protection—handbags,
pottery, fish, nuts, cheese, hats, wine, toys, and so on—can turn much
less readily to war production.) The moral is that the United States
should not partially freeze its industry by Protectionist policies into
a pattern that might well prove, if war finally came, to be out of
date—and all at the cost of a sure loss in real national income. Even
from considerations of national defense, it would probably be wiser to
adopt Free Trade and other policies contributing to general economic
strength and to rely, if war cut off foreign supplies, on the
conversion of peacetime industry to wartime purposes that would in any
case be necessary.

Finally — and please forgive my unforgivable vanity — I discuss the national-defense issue in Chapter Five of my book Globalization.