Many mornings I wake up and wonder, “what can I write about today?” “How many ways can I keep saying the same things about overpopulation, trade and immigration?” I’m slowly learning to stop fretting about what to write, because it never fails that something like this linked article comes along.
First of all, it incensed me that Reuters posted this in the “news” section of their site as opposed to the editorial section, because the piece is pure opinion from the perspective of an Asian correspondent, Andrew Marshall, Reuters’ “political risk correspondent,” a self-serving diatribe against protectionism and in support of free trade. No doubt, anything that threatens “free” trade between the U.S. and Asian nations like China, Japan, Korea and Taiwan, among others, does present them with some significant risk. So let’s have some fun dissecting this guy’s arguments. It begins with the very first sentence:
As the world plunged into the Great Depression eight decades ago, governments tried to stem the damage by erecting trade barriers, and only made the crisis worse. The risk is growing that history will repeat itself.
To begin with, prior to the October, 1929 stock market crash, which marked the start of the Great Depression, the U.S. had successfully relied upon tariffs for 153 years to maintain a balance of trade. So too did other nations and trade didn’t suffer for it. At the time, U.S. trade policy was governed by the Fordney-McCumber Tariff Act of 1922, which was widely credited for the boom times of the “roaring ‘20s.” The Smoot-Hawley Tariff Act, which many free trade cheerleaders bash as the cause of the Great Depression, wasn’t even signed into law until June of 1930, a full eight months after the depression was already well underway. And its intent was not to head off the depression. Rather, the intent of Smoot-Hawley was to streamline the tariff-setting process by setting the tariffs in fixed dollar terms instead of in percentages, thus eliminating all the hassle of determining the value of imports to be used as the basis of the percentage.
The Great Depression had nothing to do with tariffs. Rather, the small decline in trade was caused by the depression. We’ve already seen a repeat of that phenomenon with today’s recession, when November’s trade data showed a big drop in imports and exports, due entirely to the worsening global recession.
The specter of beggar-thy-neighbor protectionism has emerged as a key global political risk in 2009. In the major industrial economies and in the developing world, faith in the benefits of globalization is being replaced by growing pressure from labor unions and corporate leaders to curtail free trade.
“Beggar thy neighbor protectionism” is a term used to describe protectionist policies that work against the interests of the speaker using the term, in this case a writer representing Asian interests. By contrast, the protectionist policies employed by China and other developing nations, with the full support of the World Trade Organization, is referred to with high-minded names like “free trade” and “globalization.” Give me a break. “Free trade” hardly describes the trade situation of today’s world when the WTO enforces protectionism in favor of two thirds of its member states – the economies of which it’s trying to boost at the expense of others, most notably the United States.
By the way, isn’t it interesting how the terms “free trade” and “globalization” have become synonymous? Prior to the signing of the Global Agreement on Tariffs and Trade in 1947, the world already enjoyed vibrant trade in spite of tariffs. So wasn’t the world “globalized” already? Free trade has nothing to do with globalization. It is simply a different model of trade, one that doesn‘t work when applied to nations of grossly disparate population density.
There is wide agreement among analysts that protectionism will worsen the crisis this year. The only question is how much.
The Economist Intelligence Unit forecasts global merchandise trade will contract 1.5 percent, assuming moderate protectionist measures. But, it added, “a more aggressive move against free trade could further undermine global economic conditions and prolong the downturn”.
An adoption of protectionist trade policies like tariffs by America may, in fact, result in a worsening of the crisis in places around the globe – especially in those overpopulated nations dependent on their parasitic relationship with the U.S. to sustain their bloated labor forces – places like Japan, Korea, Germany and China. But tariffs would certainly help restore a balance of trade for the U.S. and would be a huge boon to our economy. Those other places would have to find some other way, besides robbing jobs from the U.S., to deal with their unemployment problems.
Despite the risks, many analysts argue that a wholesale retreat into protectionism can be averted, because globalization has brought benefits governments will not want to reverse.
Cheap imports from emerging markets have brought significant benefits to consumers and companies in the developed world.
“This factor, combined with the entrenched nature of global supply chains, is likely to limit the political tolerance for protectionism, at least in the main developed-country markets and in emerging markets that are highly dependent on exports,” the Economist Intelligence Unit said.
Notice that, aside from mentioning “cheap,” the author makes no attempt to identify any of these purported “benefits” of his version of globalization. That’s because, for nations like the U.S., there are none. There’s nothing but downside – the annihilation of the manufacturing sector of our economy, the collapse of the entire economy in general, falling incomes, soaring debt and a steady decline in our standard of living. When pointing out low prices for imports for consumers, free trade cheerleaders never want you to make the connection that consumers are also workers, and that wages have fallen further than prices, destroying purchasing power, eroding our savings and making us ever-more dependent on debt.