Here’s a letter to a long-time friend.
Dirk:
Thanks for your email in which you write that “free trade is in our best interest only if our trade partners trade freely, otherwise we are foolish to let our guard down.”
Your view is widely held, but, with respect, it’s mistaken. The error springs from presuming that protective tariffs are to a nation’s economic security what military spending is to a nation’s territorial security. Just as our government should diminish its military arsenal only if and to the extent that other governments diminish their arsenals, it’s believed that our government should lower its tariffs only if and to the extent that other governments lower their tariffs.
This presumed parallel, however, is a mirage – a hallucination conjured by misleadingly labeling tariffs as “protection.”
Increased military spending and stocking of a nation’s armories does indeed make that nation militarily more potent and, hence, better at protecting its citizens from foreign militaries. To unilaterally disarm would indeed be foolhardy. Protective tariffs are categorically different – indeed, the opposite. Increased tariff rates make a nation’s economy less productive and, hence, worse at protecting its citizens’ economic opportunities and living standards.
Our tariffs do not protect us; our tariffs damage us.
To unilaterally cut tariffs, therefore, is not to economically disarm, it’s to economically arm (if you insist on using military metaphor). If other governments raise or even maintain tariffs, they inflict harm that falls disproportionately on their economies; they economically attack themselves, laying waste to some of their own productive capacities. Those foreign tariffs thus make our economy stronger relative to theirs.
If we – mistakenly supposing tariffs to be the economic counterpart of military spending – maintain (or, even worse, raise) our tariffs because other countries maintain or raise their tariffs, we economically attack ourselves. We devastate some of our productive capacity because we stupidly think that tariffs are a source of economic power in the same way that defense spending is a source of military power.
In fact, a source of economic strength is free trade. Free trade ensures that our economic growth will be faster than it would be with protective tariffs. And if other countries persist in their economically self-destructive ways, a policy of free trade here at home will ensure that America’s economy grows not only absolutely, but also relative to the economies of other countries.
In short, to insist that we must practice protectionism to match the protectionism of other countries is to insist that we must practice stupidity and self-destructiveness to match the stupidity and self-destructiveness of other countries.
A final thought: Because an economy grows wealthier with free trade than with protectionism – and because wealthier economies can afford better militaries – beware of too quickly agreeing to resort to protectionism as a means of strengthening America’s national defense.
Sincerely,
Don
