Tag: Protectionism

The Wonderful Logic of Nancy Pelosi


Here is a pretty pickle. The Speaker of the House, Nancy Pelosi, has stated that she will fight against any US-UK Free Trade Agreement because of the Irish border. Yet some in the European Union have indicated that they will compel the Irish government to enforce the EU’s border and harden it up to protect the single market from the dangers of American goods in the event of a trans-Atlantic deal.

The great scare is that chicken washed in chlorine or hormone-treated beef might enter the EU single market via Ireland. Like a zombie apocalypse, this would somehow spread as far as the Ukrainian and Turkish borders, infecting all citizens of EU-occupied Europe with American standards. Quelle horreur! The consequences for Europe could be dire; lasagna might actually be made with beef.

Richard Epstein contrasts two recent actions by the Trump Administration — the imposition of tariffs on steel and aluminum, and the blocking of a foreign company’s attempts to take over an American tech firm — to demonstrate when national security concerns justify restrictions on trade … and when they don’t.

Trump’s National Security Excuse for Trade Protectionism Is Almost as Bad as the Economic One


National security is the justification President Trump will employ if he takes action against aluminum and steel imports. As the president said last week, “I want to keep prices down but I also want to make sure that we have a steel industry and an aluminium industry and we do need that for national defense. If we ever have a conflict we don’t want to be buying steel [from] a country we are fighting.”

Really? Just what sort of military scenarios is the Pentagon feeding the White House? The top two suppliers of steel imports to the US are Canada and Brazil. Russia and China, on the other hand, are fifth and eleventh with 9% and 2% of imports, respectively. Indeed, as trade expert Phil Levy points out, the US currently has defense treaties with five of the 12 countries picked for potentially higher tariffs. Levy adds that the report itself notes that Defense Department steel needs require a measly 3% of US steel production.

This supposed national security reason looks like a paper-thin excuse for trade action. Then again, cooking up an economic justification would be even harder, as Trump’s quote about prices suggests. Although the US metal manufacturing industry produces some $60 billion in value-added output, according to the Cato Institute, domestic manufacturers that use steel generate nearly $1 trillion.

Richard Epstein responds to the Trump Administration’s proposals for revising NAFTA, answers some frequent criticisms of free trade, and explains whether a legal challenge to a NAFTA withdrawal would hold up in court.

Trump’s Flawed Protectionism


In the midst of the din over Charlottesville, let’s not overlook the Trump administration’s controversial stance on free trade. This smoldering problem has risen to the surface in the delicate negotiations that the United States now is undertaking with China over the status of American intellectual property rights, and with Mexico and Canada over the North American Free Trade Agreement. Before looking at the particulars of these two disputes, it is instructive to set out the intellectual case for free trade, which Trump has consistently misunderstood.

The basic insight here is that ordinary contracts between private parties are not neutral; they produce gains for each party. If I swap my horse for your cow, it is tempting, but wrong, to say that no value has been added for the parties because we have the same horse and cow after the transaction that we had before it. So why worry, the argument goes, if the trade does not take place? This facile argument ignores that these transactions are costly to complete. Why would two parties waste money to organize a trade from which neither side has gained? Even this simple trade is a positive-sum game that produces for each side a net advantage that exceeds the costs of putting the deal together. I could desperately need a cow for milk or breeding, and you might need the horse to pull a plow. The trade allows both of us to get greater value by the more efficient deployment of existing resources. That short-term advantage has long-term effects, by letting me breed horses while you breed cows.

But there is a catch. In general, bartering is inefficient because it is rare that any random pair has the goods that the other side wants in just the right amount. But introduce money, so that the sale of each animal no longer depends on the purchase of the other, and the gains from trade become ever more salient.

Richard Epstein reacts to the Trump Administration’s exhortations to “buy American” and tackles common misperceptions about international trade, NAFTA, trade deficits, and manufacturing.

Richard Epstein looks at the legal and policy controversies emanating from the office of the president-elect.

Member Post


One of my persistent criticisms of Donald Trump the candidate is his protectionist stances on trade. There is no economic merit to propping up outmoded or inefficient domestic industries and businesses at the expense of international trade that permits production of goods and services at their lowest opportunity cost. Note the words “economic merit.” There […]

Join Ricochet!

This is a members-only post on Ricochet's Member Feed. Want to read it? Join Ricochet’s community of conservatives and be part of the conversation. Join Ricochet for Free.

Member Post


“The Choice”, subtitled “A Fable of Free Trade and Protectionism” by economics professor Russ Roberts, is a novel patterned after It’s a Wonderful Life, and is set in 1960. The George Bailey character is Ed Johnson, who runs the Stellar Television Company of Star, Illinois, and is an opponent of free trade. Unlike the usual […]

Join Ricochet!

This is a members-only post on Ricochet's Member Feed. Want to read it? Join Ricochet’s community of conservatives and be part of the conversation. Join Ricochet for Free.

Why I Might Choose Clinton Over Trump


shutterstock_57845491shutterstock_155865416I can’t stand Hillary Clinton. She is a criminal that should be behind bars for life. However, nothing in her views (as fluid as they are) makes me think she would start a trade war with China. On the other hand, Donald Trump has made demagoguery of China a feature of his campaign. Larry Kudlow’s reassurances notwithstanding, there is a real significant possibility that Trump embraces the same devastating protectionism that kicked the great depression into high gear. In my opinion, nothing is as dangerous to our general prosperity and security as this. Therefore, until I can feel moderately sure that Trump won’t start a trade war, I can’t support him or even stand by and not vote against him.

Please tell me why I’m wrong, Ricochet.  I hate the idea that our system has declined to the point that we have for vote for criminals to save us from disaster.


The Rise of American Protectionism


shutterstock_82455109The wedge issue of the 2016 primary campaign is the rising hostility to free trade—and, specifically, to the Trans-Pacific Partnership. On the Republican side, establishment candidates like Jeb Bush, Scott Walker, and Marco Rubio have failed or fallen behind, while Donald Trump maintains a commanding lead going into Florida and Ohio thanks, in large part, to his protectionist rhetoric. On the Democratic side, Hillary Clinton has been veering leftward to fight off a determined challenge from Vermont’s democratic socialist Bernie Sanders, another unapologetic protectionist.

There are of course major difference between the insidious Trump and buffoonish Sanders. The former, for example, favors low taxes and the latter confiscatory ones. Still, the real selling point of each boils down to one issue: In the indecorous language of the pollster, Pat Caddell, Americans feel “they have been screwed” by free trade. Caddell writes as if this virulent falsehood is an undisputed fact. What is undisputed, however, is that Adam Smith’s defense of free trade is in retreat as protectionism becomes the common thread across the both political parties. It is as though the economic unwisdom of the 1930 Smoot-Hawley Tariff Act is back. The question is why protectionism is having a political moment.

One answer is that things have not gone well in the United States. Standards of living have been static at best, and people feel economically insecure. In this environment, it is easy to blame the obvious culprits, like the tide of imports and the systematic movement of American jobs overseas to locations where the regulatory environment is more favorable and where the cost of labor is cheaper.

Member Post


The major critical issue we face is that only 54% of those eligible to vote cast ballots. That’s the average for presidential contests between 1988 and 2012. It is critical because when participation is this low, the voters who do decide to show up can make a huge difference. Many, many people have discussed who […]

Join Ricochet!

This is a members-only post on Ricochet's Member Feed. Want to read it? Join Ricochet’s community of conservatives and be part of the conversation. Join Ricochet for Free.

India, Intellectual Property, and Innovation


Article72Our conversation about Martin Shkreli and Indian pharmaceuticals reminded me that I’ve been having a mental debate with myself for a while. Where better to air my confusion than Ricochet?

As I argued, the case for importing generic medications from India is open-and-shut. I strongly suspect our failure to permit this is more owed to pharma-company rent-seeking and protectionism than to concern for public safety. American consumers are discerning enough to make their own decisions about whether they trust drugs from overseas. If we allowed them to come into the country, rigorous and trustworthy private mechanisms for inspecting overseas drug manufacturing facilities would quickly emerge, just as they have for awarding Michelin stars to restaurants around the world.

But I’m confused about the ideal regulatory regime for medication under patent, and indeed, for intellectual property generally. It’s a challenging problem if you think markets allocate scarce resources more efficiently than central planners do. The legitimate fight between the US and Indian pharma — “legitimate,” in the sense of, “I’m not sure who’s right” — is a case in point.

China is Going to Get Wealthier: That’s a Good Thing


File:Chinese flag (Beijing) - IMG 1104.jpgChina may be having a hiccup in the economic rise it has been experiencing over the past decades. But should China wind up as comparable in economic status to the United States, it might be a good thing all around.

China has had it rough economically for a long time. It was defeated in the two Opium Wars with Great Britain and split between the Spheres of Influence of the Great Powers. The disastrous Taiping Rebellion further disgraced the Qing Empire in the Victorian Era. It was immediately followed by China’s humiliating loss of Korea to the Japanese Empire in the First Sino-Japanese War. This led to the collapse of the Qing Empire, the creation of a republic, and the outbreak of civil war between forces loyal to the Kuomintang-led government and forces loyal to the Communist Party of China. Meanwhile, decades-long Japanese imperial policies matured, prompting Japan to instigate the Second Sino-Japanese War in 1937 and hastening the onset of World War II. The Communists won the Civil War and Mao Zedong came to power, a series of catastrophes in itself.

This century-long period of political depravity clearly doomed the Chinese economy. But following Mao’s demise, China began to slowly to thaw. It began experimenting with free markets in such arenas as farming and businesses, leading to the expansion of its private sector economy. The Party didn’t interfere so long as it didn’t threaten the state sector. Ronald Coase and Ning Wang tell the story of China’s economic transformation in an essay based on their book, How China Became Capitalist.

Back-to-School Trade Quiz


Quiz Trade Cardss1. I am a trade protectionist because:

a. I don’t think people in this country should be able to get cheaper and/or better stuff from overseas. Consumers have too much stuff. Other people here who take cheaper and/or better stuff from overseas and build it into products which they then sell here and overseas are making things way too complicated.

b. I don’t think people who live overseas and who I don’t know and whose languages I probably don’t speak should be able to make a living. I think more people, who I also don’t know but who live closer to my house, should be able to make a living. How increasing the input costs for products a business might make and stifling competition in those products accomplishes this I’m a bit hazy on at the moment. That does not alter the fundamental truth of the proposition.

Donald Trump: A 21st Century Protectionist Herbert Hoover


Hoover-TrumpHere’s a historical fact that Donald Trump, and many voters attracted to him, may not know: The last American president who was a trade protectionist was Republican Herbert Hoover. Obviously that economic strategy didn’t turn out so well — either for the nation or the GOP.

Does Trump aspire to be a 21st century Hoover with a modernized platform of the 1930 Smoot-Hawley tariff that helped send the U.S. and world economy into a decade-long depression and a collapse of the banking system?

We can’t help wondering whether the panic in world financial markets is in part a result of the Trump assault on free trade.