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TRADE TARIFF REALITY CHECK

Authored by Miki Pannell

Mainstream media sources are up in arms about possible US trade tariffs on steel and aluminium, conveniently forgetting just how America, Britain and every wealthy nation ever got rich in the first place. While most of the rhetoric is another excuse to diss the Donald, the rising tensions clearly highlight some key points in the free (or not so free) market debate.

 

Backing the Baddies

The mere threat of trade tariffs has been enough to sent right-wing US and UK think tanks and lobby groups into overdrive in their support of open, globalized markets. Yet the arguments have a hollow ring to them. Not least because lobby groups such as the Cato Institute, the Heritage Foundation, IEA or the Adam Smith Institute are phoney facades doing the PR work for bad actors with opaque and hidden agendas. It is certainly not difficult to fathom whether a think tank is indeed a cover for the baddies – just check out who the sponsors are. No-one wants to miss out on the chance of free publicity, unless, of course, you are some major tobacco industry or are covertly promoting businesses that cause massive amounts of misery, environmental destruction, labour market abuses, etc. Besides, the vacuous pro-market propaganda and articles posted online never enter in any kind of detail, lest the authors be forced to back up their work with real research, genuine history or some modicum of empirical evidence.

 

The Free Market History They Don’t Want You to Hear

It is actually incredibly easy to ascertain data on how open free markets really are. There is a wealth of data available on trade tariffs, detailing almost every country in the world over the last two hundred years. This could be summed up using the cases of Britain and the US over the two previous centuries.

Firstly, Britain, during its greatest period of historical expansion (roughly from 1720 to 1860) was hugely protectionist and levied bumper tariffs on imported goods while subsidizing the nascent industries in areas such as textiles. Once Britain had achieved unquestionable levels of power, the country promptly about-turned and dropped tariffs to near zero. This model of a rising nation imposing high import tariffs, infant industry protections and subsidies to nurture business has been practiced on countless occasions. In recent history Japan, Finland, Sweden, Korea and virtually all wealthy modern states have pursued the paradigm.

Yet, the greatest example in modern times has been the rapid expansion of the wealthiest country in history – the United States itself. In the country’s expansion period, George Washington, Thomas Jefferson, Alexander Hamilton, Abraham Lincoln, Andrew Jackson and Benjamin Franklin (to name just a few of the presidents and non-presidents immortalized on greenbacks) were some of the most protectionist policy makers in history. Trade tariffs gradually grew as the US broke away from Britain, and increased from around 20% in the early 19thcentury to 40-50% for the latter part of the century. As late as the 1930s general import tariffs were still high at 20% and protectionism rife.

Following the British model, once the States had established its global domination, trade tariffs were suddenly out of vogue, and, lo and behold, other counties were being coerced into liberalizing their markets. Cue the entrance of the financial heavy mob - the IMF, the World Bank and buddies - to castigate anyone failing to tow the free market line - by refusing loans to developing countries. The stitch-up is almost complete.

 

(Disclaimer: This article has tried to reflect the fallacies of the fake free market arguments, while observing how markets are reverting back to a kind of mercantilism. While we would willingly support genuine free markets, the EU and NAFTA ‘free’ trading blocks have paradoxically shown that ‘free’ means ‘among certain agents with the selective exclusion of others'. The article certainly isn’t supposed to be an endorsement of the Orange One himself!)