What Protectionists Get Wrong Is the Economics

by Don Boudreaux on November 2, 2022

in Myths and Fallacies, Trade

Arguing with protectionists is like playing whack-a-mole.

Mr. Y__:

Thanks for your follow-up note charging that I “don’t understand that most people that oppose free trade come from a totally different value place than where economists and libertarians are…. Most [people] that back muscular tariffs don’t care a lot about the pure economic effects of trade. We economic nationalists oppose globalization because we feel something major in terms of community and loyalty is lost by Americans relying on foreigners as much as we do.”

Hmmm.

You correctly suggest that it’s possible to accept the economics of trade and still support protectionism. Indeed, all policy choices reflect value judgments: People can fully agree on the positive analysis of trade yet disagree over what is the best trade policy. But I believe you to be incorrect to insist that most disputes over trade today ultimately reflect, not disagreements about the economics of trade, but instead disagreements over fundamental values.

If you’re correct that I and others who continue to repeat the basic economics of trade “talk past the most serious of globalization’s opponents,” then we wouldn’t hear and read so much economic nonsense about trade. We’d not encounter politicians insisting that tariffs increase employment, or warning that trade deficits destroy jobs. We’d hear no pundits assert that free trade imperils ordinary Americans’ incomes and results in America being “de-industrialized.” We’d never read any thinktank paper ‘explaining’ that government must restrict imports in order to raise workers’ wages. We’d come across no proposals to use export subsidies as a means of enabling American companies to compete against “unfair” foreign competition. No pundit would describe an economy under free trade as a drunk donkey, or advocate industrial policy as a means of ensuring that American workers gain better comparative advantages.

We’d encounter no such complaints about free trade, or any such promises about tariffs and subsidies. Yet overwhelmingly the complaints that we encounter about free trade are precisely what I detail in the previous paragraph. These complaints are all about free-trade’s allegedly harmful economic effects – effects that can, it is further asserted, be corrected only by protectionist interventions.

I’d intellectually respect someone who advocated protectionism in the U.S. by saying “I understand that tariffs and subsidies won’t increase overall employment in America. I understand that tariffs and subsidies will, instead, simply destroy jobs in which labor is employed productively and create jobs in which labor is employed wastefully. I further understand that the U.S. trade deficit is neither a sign nor a source of economic trouble. And I concede that the protectionism that I endorse will slow economic growth, leading over time to the living standards of nearly all Americans being lower than would arise under a policy of free trade. Still, I oppose free trade because, according to my values, I think we Americans should rely more upon each other for our goods and services and less upon foreigners.”

A protectionist who says such things is the kind of protectionist who you believe is typical. But, as I say, while I’d intellectually respect (as I nevertheless disagree with) such a person, I’ve never encountered any such protectionist. Every protectionist I’ve encountered over the past 40 years is a man or woman who gets the economics wrong. He or she believes both that greater abundance is created through the engineering of artificially greater scarcity, and that politicians and bureaucrats, spending and investing other people’s money and guided by political impulses, allocate resources better than do private market actors spending and investing their own money and guided by market prices.

I challenge you to send to me evidence of a protectionist who admits that protectionism is economically harmful. I don’t deny that such persons exist. I’ve just never encountered one. I admit that the experience would astonish me.

Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030

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