At the Asia-Pacific Economic Cooperation (APEC) forum last month in China, Barack Obama championed the proposed Trans-Pacific Partnership (TPP) trade agreement, which, if enacted, would be the world’s largest trade agreement, accounting for more than 40 percent of world GDP.
“What we are seeing,” Obama told those in attendance at the APEC summit’s opening session, “is momentum building around a Trans-Pacific Partnership that can spur greater economic growth, spur greater jobs growth, set high standards for trade and investment throughout the Asia-Pacific.”
The other TPP countries (Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam) are the largest export market of the United States, accounting for $942 billion or 61 percent of total U.S. goods exports in 2012.
According to the Office of the United States Trade Representative,
When complete, TPP will unlock opportunities for American workers, families, businesses, farmers, and ranchers by providing increased access to some of the fastest growing markets in the world.
TPP will provide new market access for Made-in-America goods and services, strong and enforceable labor standards and environmental commitments, groundbreaking new rules on state-owned enterprises, a robust and balanced intellectual property rights framework, and a thriving digital economy. It will also include commitments that will improve the transparency and consistency of the regulatory environment to make it easier for small- and medium-sized businesses to operate across the region. By opening these new markets to American products, TPP will help ensure that we are not left behind by our competitors in a vital region of the world.
The agreement has been negotiated in secret, “with only select government officials and corporations able to see the text.” WikiLeaks has released several draft chapters, “charging that it will hinder affordable access to medicines globally, increase online surveillance, and impinge on civil liberties while benefiting Big Pharma and other corporate interests.” Organized labor, environmentalists, and progressive economists are united in opposition to the TPP. Rep. Alan Grayson (D-Fla.) terms the TPP a “sell-out to foreign corporations that will gut our manufacturing base and make our trade deficits soar.”
Many conservatives are in favor of the trade pact. Republican senator and presidential aspirant Rand Paul wants the Obama administration to “prioritize negotiating the Trans-Pacific Partnership by year’s end.” The Heritage Foundation supports the TPP just as it has supported each of the U.S. government’s previous trade agreements.
Many other conservatives oppose what has been called “Obamatrade.” And for a variety of reasons. But some conservatives go a step further. Their criticism of trade agreements masks their opposition to free trade.
Conservative opponents of free trade often emphasize that they are merely making a distinction between free trade and the “free trade agenda” even as they criticize “free-trade purists,” America’s “monstrous trade deficit,” and “blind faith in unrestricted free trade.”
Former Assistant Secretary of the Treasury Paul Craig Roberts has called free trade “a no-think cult that permits a greedy few to destroy America’s economic position for their own gain.” He claims that “the known necessary conditions for free trade to be mutually beneficial do not hold in today’s environment where factors of production are as mobile, if not more so, than traded goods.”
The editor of the paleoconservative Chronicles magazine has stated that free traders are “international socialists to the marrow of their bones.” One writer for the magazine bemoans American’s “stubborn, ideological commitment to free trade.”
Conservative columnist and former Republican presidential candidate Pat Buchanan credits protectionism in the 1800s for making the United States “the greatest industrial power the world had ever seen.”
The platform of the Constitution Party maintains that “since the adoption of the 1934 Trade Agreements Act, the United States government has engaged in a free trade policy which has destroyed or endangered important segments of our domestic agriculture and industry, undercut the wages of our working men and women, and totally destroyed or shipped abroad the jobs of hundreds of thousands of workers.”
Articles in conservative magazines often lament the decline of manufacturing, the stagnation of wages, the loss of high-paying jobs, plant closings, the shrinking of the middle class, the waning of the American Dream, the reduction in the standard of living, and the exodus of businesses and jobs to China and Mexico. Although this is often blamed on the convergence of globalization, outsourcing, excessive government regulations, big government, high corporate tax rates, the Export-Import Bank, immigration policy, and multinational trade agreements, the concept of free trade is sometimes obliquely disparaged and on occasion explicitly so.
The alternative to free trade is some form of protectionism. A tariff is placed on some imported good. Some domestic industry is protected from foreign competition. Import quotas are imposed on certain items. Trade regulations are implemented. Restrictions are placed on the importation of certain commodities. Trade barriers are erected. A government trade bureaucracy is established.
But regardless of how protectionism is carried out, there is no getting around the fact that protectionism is central planning.
Conservatives rightly criticize the centrally planned economies of communist countries such as the Soviet Union, Cuba, Venezuela, and North Korea, as well as the socialism and extensive government intervention in the economies of European countries. But when conservatives call for protectionist trade policies to be undertaken by the U.S. government, they are actually calling for central planning by the government and its hoard of economists.
Free trade means that trade is conducted between entities residing in different countries without being hindered by tariffs, quotas, barriers, regulations, restrictions, or dumping rules.
Free trade needs no trade organizations, trade agreements, or trade treaties.
Free trade does not destroy jobs, industries, or communities.
Free trade is fair whenever it doesn’t involve government subsidies, crony capitalism, or a government import-export bank.
Free trade takes place between individuals and businesses, not countries.
Free trade does not concern itself with trade deficits, nationalistic campaigns, or the form or actions of the government in any country.
Free trade does not result in winners and losers; trade is mutually beneficial or it would not take place.
Free trade is not dependent upon a certain set of conditions that must first be met.
Free trade is not based on efficiency, factors of production, or the distinction between absolute and comparative advantage.
Free trade is not beholden to the economic philosophies of Adam Smith, David Ricardo, or some dead Classical or Austrian economist.
Free trade is ultimately about freedom. Most arguments for free trade miss the real issue. Free trade simply means that every individual and business in every country is free to trade in any way with any individual or business in any other country.
All forms and levels of protectionism require central planning. Government bureaucrats must determine which industries need protection; which countries should have the importation of their goods restricted; how to erect a particular trade barrier; which items should be subject to tariffs; how much of a tariff to impose; what exemptions should be given; below what price dumping is determined; which goods should be subject to import quotas; what the magic number of the quota should be; what the duration of the tariff, quota, or restrictions should be; and how often to reevaluate the need for some degree of protectionism.
But is the state responsible for protecting American industries from foreign competition? And if so, then is the state capable of determining the “correct” amount of protection required?
Protectionism is central planning. It should be rejected just like wage, price, and rent controls, minimum-wage laws, usury laws, price-gouging laws, and other forms of government economic planning.