Imagine Smith and Jones are competitors. Smith goes to Washington D.C.
and promises to help the campaign of Congressman So-and-So if the
Congressman will pass a law requiring Jones' customers to pay more money
for Jones' product than they would pay for Smith's product.
Smith is using the power of the government to steal money from Jones'
customers, in the hope of stealing customers from Jones.
All of this is unethical -- a violation of "the
Laws of Nature and of Nature's God." Such laws should be
A tariff is a government-imposed tax on the products of one business in
order to benefit or "protect" a special interest group. Tariffs
are therefore called "protectionist" policies. Protectionist
policies protect the most uncompetitive businesses. The less
competitive American businesses are, the lower our standard of living will
Tariffs are usually applied to the products of foreign businesses,
which aren't represented in Congress. It makes no sense to force Americans
to pay more for the products they want to buy. If a foreign business can
create a better product at a lower price, Americans benefit by being able
to buy that product. The money they save can be invested in businesses
which are more efficient and raise our standard of living.
Tariffs on foreign goods are justified by "us-them" rhetoric
which encourages conflict.
"What generates war is the economic philosophy of nationalism:
embargoes, trade and foreign exchange controls, monetary devaluation,
etc. The philosophy of protectionism is a philosophy of war."
"Protectionism is a misnomer. The only people protected by
tariffs, quotas and trade restrictions are those engaged in uneconomic
and wasteful activity. Free trade is the only philosophy compatible with
international peace and prosperity."
Senior Economist, Fraser Institute (Canada)
"For thousands of years, the tireless effort of productive men
and women has been spent trying to reduce the distance between
communities of the world by reducing the costs of commerce and trade.
"Over the same span of history, the slothful and incompetent
protectionist has endlessly sought to erect barriers in order to
prohibit competition – thus, effectively moving communities farther
apart. When trade is cut off entirely, the real producers may as well be
on different planets.
"The protectionist represents the worst in humanity: fear of
change, fear of challenge, and the jealous envy of genius. The
protectionist is not against the use of every kind of force, even
warfare, to crush his rival. If mankind is to survive, then these
primeval fears must be defeated."
Former US International Trade Commission Economist,
and Trade Advisor to the White House
-- Free Trade or Protectionism?
- Protectionism: What It Costs
- LOST JOBS
- HIGHER PRICES
- HIGHER TAXES
- THE DEBT CRISIS
Economists Oppose Protectionist Policies
- Partial List
of Tariffs in the United States
- The 'Fair
- Who Benefits From Free Trade,
and How - Robert P. Murphy - Mises Institute
Tariffs - The Acton Institute
Free Trade Harms the U.S. Economy - The Acton Institute
Unfairness of Fair Trade
Ewart Gladstone's Great Campaigns for Peace and Freedom| The Foundation
for Economic Education: The Freeman, Ideas on Liberty
Tale of Two Tariffs | The Foundation for Economic Education: The
Freeman, Ideas on Liberty
Suggests Benefit in Africa if U.S. Cuts Cotton Subsidies - New York
- From the Concise Encyclopedia of Economics
of Payments, by Herbert Stein
A country is more likely to have a
deficit in its current account the higher its price level, the
higher its gross national product, the higher its interest rates,
the lower its barriers to imports, and the more attractive its
investment opportunities—all compared with conditions in other
countries—and the higher its exchange rate. The effects of a
change in one of these factors upon the current account balance
cannot be predicted without considering the effect on the other
causal factors. For example, if the U.S. government increases tariffs,
Americans will buy fewer imports, thus reducing the current account
deficit. But economic theory indicates that this reduction will
occur only if one of the other factors changes to bring about a
decrease in the capital account surplus. If none of these other
factors changes, the reduced imports from the tariff increase
will cause a decline in the demand for foreign currency (yen,
deutsche marks, etc.) which in turn will raise the value of the U.S.
dollar. The increase in the value of the dollar will make U.S.
exports more expensive and imports cheaper, offsetting the effect of
the tariff increase. The net result is that the tariff
increase brings no change in the current account balance.
by Robert Hessen
from the eighteenth century on, government began to play a more
active, interventionist role in offering benefits to business, such
as tax exemptions, bounties or subsidies to grow certain crops, and tariff
protection so domestic firms would devote capital to manufacturing
goods that otherwise had to be imported. Special favors became
entrenched and hard to repeal because the recipients were organized
while consumers, who bore the burden of higher prices, were not.
Once safe from foreign
competition behind these barriers to free trade, some U.S. producers—steel
and auto manufacturers, for example—stagnated. They failed to
adopt new technologies or to cut costs until low-cost, low-price
overseas rivals—the Japanese, especially—challenged them for
their customers. They responded initially by asking Congress for new
favors—higher tariffs, import quotas, and loan guarantees—and
pleading with consumers to "buy American" and thereby save
domestic jobs. Slowly, but inevitably, they began the expensive
process of catching up with foreign companies so they could try to
recapture their domestic customers.
Trade Agreements and Customs Unions, by Douglas A. Irwin
since Adam Smith published The Wealth of Nations in 1776, the
vast majority of economists have accepted the proposition that free
trade among nations improves overall economic welfare. Free trade,
usually defined as the absence of tariffs, quotas, or other
governmental impediments to international trade, allows each country
to specialize in the goods that it can produce cheaply and
efficiently relative to other countries. Such specialization enables
all countries to achieve higher real incomes.
Although free trade
provides overall benefits, it hurts some people, most particularly
the shareholders and employees of industries who lose money and jobs
because they lose sales to imported goods. Some of the groups that
are hurt by foreign competition wield enough political power to
obtain protection against imports. Consequently, barriers to trade
continue to exist despite their sizable economic costs. Although it
has been estimated that the U.S. gain from removing trade
restrictions on textile and apparel would have been over $12 billion
for 1986 alone, for example, domestic textile producers have been
able to persuade Congress to keep tariffs and quotas on
While virtually all economists
think free trade is desirable, they differ on how best to make the
transition from tariffs and quotas to free trade. The three
basic approaches to trade reform are unilateral, multilateral, and
Some countries, such as Britain
in the nineteenth century and Chile and South Korea in recent
decades, have undertaken unilateral tariff reductions—reductions
made independently and without reciprocal action by other countries.
The advantage of unilateral free trade is that a country can reap
the benefits of free trade immediately. Countries that lower trade
barriers by themselves do not have to postpone reform while they try
to persuade other nations to lower their trade barriers. The gains
from such trade liberalization are substantial: a major study by the
World Bank shows that income grows more rapidly in countries open to
international trade than in those more closed to trade.
by Laura LaHaye
by Jagdish Bhagwati
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