Wednesday, November 26, 2008

Trade versus Protectionism

Walter E. Williams, Wednesday, November 26, 2008

There's a growing anti-trade sentiment in our country. Much of the dialogue is grossly misinformed. Let's try to untangle it a bit with a few questions and observations. (link)

Since the economic downturn I also have observed the growing protectionist sentiment. Even among people who I suspect are normally conservative you hear comments about how we need to "buy American" and "stop sending jobs overseas."

Last week I attended a screening of a documentary, I.O.U.S.A. This film addressed the problem of the enormous debt burden of the US government as well as American households. About 150 people or so attended the event. Following the film there was a lively discussion that lasted about forty-five minutes. The solution offered by several participants was to buy American made products. Some, went as far as to suggest we should buy locally produced products whenever possible. Not just "buy American" but "buy Tennessee." I fear that as this economic downturn continues that we could see protectionism take on a patriotic fervor. A resort to protectionism will grantee that the current economic difficulties become a world-wide, long-lasting depression.

Protectionism is the worse possible response to the current crisis. I hope rational thought will prevail and the new administration and Congress does not give in to the rising demand for protectionist policies.

This is a good article by Walter Williams. Please read it. One argument he makes is that contrary to popular opinion, we are not losing our manufacturing base. We just make different stuff and it takes fewer people to make it. Manufacturing output is actually growing. People seem to know this in agriculture. It takes a lot fewer farm workers to produce the food we need and markets adjust, yet many people seem to think that they should be entitled to the same manufacturing jobs that their daddy had.

One argument you often here is the demand for retaliatory trade barriers. This is often the disguised as a call for "Fair Trade." Williams makes this argument:

Japanese protectionist restrictions on rice imports force Japanese consumers to
pay three or four times the world price for rice. How much sense does it make
for Congress to retaliate against Japan by imposing restrictions on their
products thereby forcing American consumers, say Lexus buyers, to pay higher
prices? Should our rule be: If one country screws its citizens we should
retaliate by screwing our citizens?
Bad times can bring out the worst in people and people often look for scapegoats. When you combine this impulse to look for places to lay the blame combined with economic ignorance, we may see a demand from the people for the government to really screw us and adopt policies that will grantee this crisis last a long, long time. I hope our representatives are a lot smarter than the people they represent.

Stumble Upon Toolbar
My Zimbio
Top Stories

1 comment:

  1. Yeah, people really need more economic education in these matters. The turn towards protectionism isn't just American, it's a global phenomenon.