The fight against free trade is as old as trade itself. In recent decades, “protectionism” has become a forbidden word never to be uttered by politician or pundit. This stranglehold must be broken, and a protective tariff put back on the agenda.
President William McKinley, among the early Republicans felled by “lone-nut” assassins, remarked:
“[W]hether a thing is cheap or dear depends upon what we can earn by our daily labor. Free trade cheapens the product by cheapening the producer. Protection cheapens the product by elevating the producer. Under free trade the trader is the master and the producer the slave. Protection is but the law of nature, the law of self-preservation, of self-development, of securing the highest and best destiny of the race of man.”
Early free trade propagandists, from David Ricardo and Adam Smith to Henry George and Karl Marx, were in the employment or orbit of the British East India Company – the literal “Pirates of the Caribbean.” America’s founding fathers, even Jefferson and other anti-Federalists, were keenly aware of the dangers of free trade and supported some form of protective tariff. Rather than see the new nation turned into Europe’s slave plantation, tariffs were used to fund the government and to protect America’s infant industries.
America’s first tariffs were designed by Treasury Secretary Alexander Hamilton, who made the case to Congress in his Report on Manufactures. With occasional interruptions by reactionary regimes like that of Andrew Jackson, tariffs ranged from 10% to nearly 45% at the height of the Civil War, and contributed the largest share of the federal budget until 1913, the infamous year that birthed both the income tax and the Federal Reserve System.
A tariff is a tax on imported goods, paid buy the buyer of these goods to the Federal government. Tariffs are not typically meant to stop trade, but to offset the competitive advantage of cheap labor or “product dumping,” where one nation sells at a loss or with public subsidy to attack another nation’s industries. One example of this is America’s dumping of artificially cheap grain on Mexico, India, Egypt and other developing nations. This is a lose-lose situation, destroying the agricultural economies of developing nations and forcing farm labor into low-wage factory jobs to undercut American industry. Wall Street, not “big business” per se, is the architect of this conspiracy.
American free trade – represented by NAFTA, CAFTA and similar agreements – is an unmitigated failure, with all agreements pulling down wages and regulations to the lowest common denominator, and none providing a net benefit for America. The “giant sucking sound” foretold by Ross Perot has laid waste to industry and living standards. To take one example, America was nearly self-sufficient in textiles and apparel – major industries of North Carolina and other eastern states – as recently as 1999. In just over a decade, these jobs, and the local economies they supported, have been lost almost entirely to Southeast Asia and Central America, with only niche manufacturers left. The only winners of free trade are financiers, corporate raiders and cartels.
It makes no sense to blame China or Mexico for cheap labor or “currency manipulation,” or even to blame most manufacturers for offshoring jobs. Americans have only ourselves to blame for de-industrialization. We did not as voters and citizens fight vigorously enough against NAFTA and similar free trade agreements, and we do not hold our representatives to account on this issue. Where was the outrage when candidates Obama and Romney both vigorously supported new free trade agreements? The first and most critical step to re-industrialization is to demand a protective tariff on all imports to account for the difference between American living standards and those of our lowest-wage competition.
- An immediate, emergency cancellation of ALL free trade agreements. All foreign nations will be held to the same wage and regulatory standards.
- The application of a 10% general tariff, paid to the US Treasury by any importers of foreign goods or services. This revenue will contribute to the social safety net, lower the burden on income and payroll taxes, and will be used to finance the public infrastructure, R&D and various credits and subsidies needed to rebuild American industry.
- Movement toward an international fixed-rate exchange agreement. We seek to encourage fair trade between nations, and prevent destructive currency or trade wars.