Mr. Dan Ciuriak, an economist formerly with the Canadian government now writing for his eponymous consulting firm takes a closer look at where the ‘free trade is a bad thing’ notion has come from in the U.S. In so doing he goes to the root of the misunderstanding (free trade is, mostly, not a bad thing) and with real-world examples highlights how this notion is so reliably proved wrong.
After a digression into how flawed calculation and nomenclature allows free-trade critics to ‘prove’ their fallacious points the paper gets into three specific examples seen recently and their effects. Videlicet: Section 232 tariffs America imposed against steel and aluminium imports, Section 301 tariffs against China and finally the UK’s exit from the European Single Market a.k.a. Brexit.
First, 232 tariffs have not helped the U.S. heartland. Retaliatory tariffs have had manifestly negative employment consequences and applications for exemption number in the tens of thousands annually. The department overseeing this has asked for a U$223m budget for 2025 with 611 positions. A perfect lose-lose outcome.
Next, Section 310 tariffs aimed at China with a view to rectifying a trade deficit have been ‘..a spectacular flop..’
Finally, even the most Chauvinistic supporters are now struggling to point to the benefits of Brexit. The dis-benefits are much easier to find:
The increased trading costs, new tariffs levied by the European Union against British goods and all manner of structural inefficiencies introduced into Britain’s relationship with former EU trading partners has had negative consequences borne most heavily by smaller businesses.
The rest of the note takes 1980 as the watershed year in the United States from which manufacturing declined rapidly as an agent of economic progress and runs through the milestones since that have chronicled the shift. BUT, noted also is the fact manufacturing’s decline went hand in hand with a new dynamism in service and higher value-added activities located on the coasts and around certain university town clusters. This bifurcation argues the author is the place from where the development of today’s ‘populists’ and ‘elites’ can be traced.
In conclusion he winds up “..tariffs will not roll back technology and bring back Happy Days America. Nor are they the solution to America’s income distribution problem, the erosion of the social safety net that is a critical feature of an industrial economy, or in any way help America cope with the coming age of artificial intelligence and machine knowledge capital.”
The analysis is sound, but I felt the paper was flawed in one important respect which I believe is the implication that tariffs are always and everywhere a bad thing. I’m not sure Japan and the Asian Tigers could have emerged without fostering key domestic capabilities via exclusionary import controls. The reason there’s such a groundswell in favour of tariffs in the U.S. presently, IMHO, is because they don’t, always and everywhere not work.
Therefore, to begin a more constructive dialogue with tariff-boosters acknowledging this up front would be a good opening gambit for a more productive dialogue. Just saying.
You can read the work in full via the following link Misunderstanding America.
Happy Sunday.