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A Protective Tariff

The fight against free trade is as old as trade itself. In recent decades, “protectionism” and "tariffs" have become forbidden words 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, a Lincoln Republican, wrote:

“[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.”

America’s first tariffs were championed 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 Treasury. 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.

In defense of historically high tariffs used to protect America’s infant steel industry from Britain (to make rails for the transcontinental railroad) Abraham Lincoln remarked that if we made our own steel, we’d keep the rails, the jobs, and the money. A protective tariff, preventing the outflow of resources across national borders, allows for the growth of absolute profit in the economy, with technology, goods, services and wages all increasing upward.

American free trade – represented by NAFTA, CAFTA and if Wall Street has its way, the proposed Trans-Pacific Partnership (TPP) – is on the other hand 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, our elected representatives, and Wall Street to blame for de-industrialization. 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 general, protective tariff on all imports to account for the difference between American standards and those of our lowest-wage competition.

Our Demands:

  1. An immediate, emergency, and indefinite suspension of ALL free trade agreements. All foreign nations will be held to the same wage and regulatory standards.
  2. The application of a 15% 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.
  3. The release of low-interest public credit, managed through commercial banks, for industry, agriculture, mining and related fields of production. Cheap credit will allow for rapid re-industrialization, and will be a competitive advantage for exporters of manufactured goods.
  4. Movement toward an international fixed-rate exchange agreement and the establishment of regional development banks. We seek to establish fair trade between like nations, to undermine the predatory IMF and World Bank, and to provide mutually-beneficial assistance to the developing world on the model of the proposed BRICS bank.