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A View from the Altar / Lessons from Utopia: Free Trade
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Lessons from Utopia: Free Trade

Some time ago, the Obama administration accused China of cheating on its free trade deals involving vehicle tires.  Well… of course they are.  And so are we.  In the days of Marco Polo, you could have international free trade.  A guy with a boat showed up and bought whatever was for sale, hauled it back to Europe and sold it for whatever people would pay.  That was free trade, mostly.

Trade stopped being free on the day pirates took to the waters and raided a ship, and one nation or the other had to bear the cost of security.  Nowadays, the United States bears most of the cost of suppressing piracy.  We have a big navy, and it’s expensive, and while China, India and others send boats to diddle around the edges of piracy, it was the USA that sent Navy SEALS to shoot Somali pirates dead.  After that, Somali piracy pretty much dropped out of the news.  How free is trade, really, when one side has to bear the cost of security on the high seas and the other does not?

Trade with China is being skewed because the Chinese currency, the yuan, is not allowed to trade at its market-determined value.  The Chinese government intentionally undervalues its currency in order to make Chinese goods cheaper abroad.  The United States has fussed about that, but China hasn’t budged.  Now that the Obama administration has gone on a borrowing binge and threatens to repay our debts with fiat dollars, China has expressed alarm.  Although I do not favor printing worthless dollars, I note that it would serve to level the import/export field with China.

This all serves to remind us that there is no such thing as free trade.  The international trade and monetary system has many other factors which serve to tilt the playing field in favor of this or that player.  Environmental laws, labor laws, tax structures, domestic energy laws, the monetary system, organizations such as OPEC which exist only to restrain trade, security situations, political meddling in other countries’ internal affairs, sanctions and embargoes — all these mean that free trade is a fantasy.  It does not exist.  In our world today, it cannot exist.

Some may argue that free trade is an ideal that we should work toward.  But the ideal is so far from possible that the idealists merely hurt Americans’ long term interests.  Sure, we get tires a bit cheaper, but in the long run we end up losing the ability to make our own tires.  And television sets.  And cameras.  And DVD players.  And cell phones.  And cars.  And steel.  And computer memory chips.

Actually, it’s a pretty big list of stuff Americans used to make for themselves but can’t any more.  In the power plant business, an enormous proportion of the materiel is made overseas and merely assembled here.  Is AVFTA calling for another Smoot-Hawley tariff?  No, falling into the ditch on the opposite side of the road is another big mistake.  But we need to tell the free trade fantasists that they’ve had their run at it, and it’s time for a more realistic assessment of what international trade relations can be.  I have no objection to importing Chinese tires.  But if the net result is that American tires cannot be sold over there and that someday tires can no longer be made over here, then something drastic needs to change.

otherbrothersteve@gmail.com

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