“Protectionism” Stinks

by | Sep 10, 2001

Free trade across international borders is not just good for business or good for job-creation. It is good — period. So said President Bush in a remarkable speech earlier this year, when he made the case for free trade on unabashedly moral grounds. “Open trade is not just an economic opportunity, it is a moral […]

Free trade across international borders is not just good for business or good for job-creation. It is good — period.

So said President Bush in a remarkable speech earlier this year, when he made the case for free trade on unabashedly moral grounds. “Open trade is not just an economic opportunity, it is a moral imperative,” he told the Council of the Americas in May. “Trade creates jobs for the unemployed. When we negotiate for open markets, we are providing new hope for the world’s poor. And when we promote open trade, we are promoting political freedom. Societies that open to commerce across their borders will open to democracy within their borders — not always immediately, and not always smoothly, but in good time.”

You would expect a president who speaks so stirringly about the virtues of free trade to be impervious to pleas for protectionist measures like import quotas and tarrifs. Yet barely a month after Bush’s paean to free trade, he invoked Section 201 of the US trade law and announced that he would move to punish foreign steel producers for engaging in “unfair trade practices.” Their sin? Selling steel at a good price to Americans who want to buy it.

In recent years, as the world price of steel has dropped, steel imports to the United States have more than doubled. That has been a boon to American consumers, holding down the price of everything from trucks to tools to “tin” cans. Of course, no American company is compelled to buy steel from a foreign supplier; every imported bar and ingot has been purchased by a willing buyer from a willing seller at a mutually agreed price.

You wouldn’t know that to listen to the domestic steel lobby, though. For years, US steelmakers and steelworkers have been accusing overseas producers of “dumping” steel on the American market — and demanding that Washington intervene to stop them. The chairman of U.S. Steel, Thomas Usher, is thrilled that Bush has yielded to this pressure. (Bill Clinton, to his credit, resisted it.) The administration’s new protectionist stance, Usher crowed, “sends a message to our trading partners that the United States will no longer be a dumping ground for the world’s excess steel.”

But the Korean, Italian, Japanese, and Indian steel being imported to the United States is hardly being “dumped.” It is going into new houses and new cars, into filing cabinets and food containers, into industrial machinery and home appliances. It is adding value to the nation’s economic output and contributing to the employment of countless men and women. And it is doing so at a lower cost than if the steel were coming from Usher’s company.

Naturally, the steel industry isn’t happy to be losing business to foreign competitors. It’s understandable that Big Steel lobbies the government to beat up on its competitors. What is not so understandable is why a president who knows how immoral protectionism is — and Bush certainly seemed to know in May — would agree to do it.

The “Section 201” action Bush has set in motion is supposed to help US steelmakers by limiting the amount of foreign steel sold in the United States. Last week, the Commerce Department announced new “antidumping” duties of up to 33 percent on imported steel.

But if that’s a good idea, why not help US wineries by limiting imports of French and Italian wine? Why not help US weavers by slapping a quota on imported Oriental rugs? Why not help US filmmakers by imposing punitive duties on foreign movies?

Because in every case, far more people would be hurt than the small number who are helped. Artificially hiking the price of domestic steel (wine/rugs/movies) might be good for a few steel mills (vineyards/ rugmakers/studios) and their workers. But it would be bad for the thousands of manufacturers whose costs would rise, the tens of thousands of employees whose jobs would be made less secure, and the millions of American consumers who would be forced to pay higher prices.

In any case, quotas only delay the inevitable. “Erecting barriers to imports will only postpone needed consolidation of the US steel industry,” says Daniel Griswold, a trade scholar at the Cato Institute. “The industry hasn’t been losing jobs because of unfair imports, but because of relentless technological change” — particularly in “mini-mills” that can produce steel more cheaply from scrap than the big integrated mills can from coke and iron ore. It is the oldest rule of the market: adapt or die.

Protectionism distorts markets, hurts importers, kills jobs, and sows distrust between nations. But the foremost reason governments should refuse to impede free trade is that it is theft. It steals from the many to enrich the few. It deprives individuals of the right to control their own property — to choose for themselves where to buy the products they want and to sell the goods they own.

“Every citizen who has produced or acquired a product,” wrote Frederic Bastiat, the great 19th-century economist and philosopher of freedom, “should have the option of applying it immediately to his own use or of transferring it to whomever on the face of the earth agrees to give him in exchange the object of his desires. To deprive him of this option … solely to satisfy the convenience of another citizen, is to legitimize an act of plunder and to violate the law of justice.”

Jeff Jacoby is a columnist for The Boston Globe. This is an excerpt from his weekly newsletter, Arguable, and is reprinted with permission. To subscribe to Arguable at no charge, click here.

The views expressed above represent those of the author and do not necessarily represent the views of the editors and publishers of Capitalism Magazine. Capitalism Magazine sometimes publishes articles we disagree with because we think the article provides information, or a contrasting point of view, that may be of value to our readers.

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