two years of pretending to be for free trade, the Clinton administration,
backed by the Republican leadership in Congress, finally 'fessed
up. In their dealings with China and Mexico, they shredded two centuries
of economic wisdom, repudiated every principle of sensible economic
relations, and kicked taxpayers and consumers in the teeth.
the Nafta and Gatt debates, this would not be news. Real free trade
has few friends in the capital. Just as D.C. interferes with the
rights of business, it curtails and prohibits imports and exports,
fiddles with exchange rates, and doles out foreign aid. Real free
trade would mean no subsidies, no trade taxes, no loan guarantees,
and, for Heaven's sake, no bailouts of foreign banks and governments.
trade would also require people like Mickey Kantor and Newt Gingrich
to surrender their power over economic life. They would no longer
be able to reward their friends and punish their enemies with trade
interventions. That's why we should no more expect Clinton and the
Republican leadership to give us free trade than we should expect
them to stop taxing income and capital: it's not in their interest
to do so. They can only be stopped by public pressure and threats.
the least, they should not be able to get away with calling trade
intervention a step toward freedom, as they did during the Great
Trade Debate, 1993-94. As they sang of the glories of free trade,
they cast opponents of trade treaties as protectionists.
it didn't require the mind of Murray Rothbard to notice that Nafta
and Gatt were mercantilist impersonators of free trade. These treaties
were loaded with subsidies, regulations, loan guarantees, bureaucracies,
and trade-war artillery. For the U.S. government, among the most
import-restrictive in the world, to extol them as the essence of
liberty was worthy of Orwell.
free-market opponents of Nafta and Gatt were under relentless attack
for opposing the treaties as pseudo-free trade. But the smearbund
did not refute our arguments; in the tradition of wartime state
propaganda, they called us isolationists and tried to shout us down
as irresponsible wreckers of political consensus. Meanwhile, those
willing to do the work of the state and its interest groups received
lavish corporate subsidies and public approval by the Clinton administration
and the Republican establishment.
treaties barely passed, the political parties blew off their free-trade
posturing, and the government began a round of unprecedented trade
intervention. It wasn't a "trade war," because the victims couldn't
shoot back. But in terms of expense to the consumer and taxpayer,
it was the most costly protectionism in history.
White House zoomed export subsidies on wheat sales to China, the
same country it had accused of horrible trade crimes only two weeks
earlier. Under the deal, the Chinese government will save $2 billion
off the market price for American wheat. The difference is paid
by the taxpayer, who is robbed by the Department of Agriculture,
which buys the wheat and sells it again at a discount. By lifting
demand and diverting resources, this policy also drives up the price
of wheat for the American public.
subsidies have long been part of U.S. policy. (Stalin, for example,
bought American wheat for less than American taxpayers could.) Such
subsidies are designed to benefit particular domestic industries
at the expense of the consuming public, and the elite's foreign-policy
scheming. They are pure protectionism and should be stopped.
U.S. government once claimed these subsidies as necessary because
other countries employ them. That's like saying: "foreign governments
are punishing their people to reward their special interests; we
should copy them."
Kantor had told us such practices were a relic of the past, thanks
to Gatt. That was just one of his tall tales, and this policy proves
it. Notice too that the Chinese aren't accusing the U.S. of "dumping."
They, unlike our trade officials who spend billions litigating anti-dumping
suits, know a good deal when they see it. The Chinese welcome below-cost
wheat so long as it lasts, but let them return the favor to U.S.
consumers, and Kantor will throw a fit.
our bipartisan government threatened to increase taxes on American
imports from China by $1 billion, it brutalized Chinese industries
not being subsidized. This is the world record for threatened trade
sanctions, a dubious honor. And who would pay for these sanctions?
You guessed it: American consumers of imported goods like Chinese
bicycles, surfboards, and fishing rods bikers, surfers, and fishermen
justification for this threat of a tax increase (that's what higher
tariffs are) was the claim that China failed to protect "intellectual
property rights." But what exactly does this mean? Movie studios,
for example, can't get the kind of overseas patent and copyright
protection they want for their products, says Mr. Kantor, a former
this is the risk of being an exporter. If Hollywood doesn't like
the way the Chinese government handles these matters, it should
lobby Beijing, bribe its officials, send Sharon Stone over, or simply
shut up. It should not lobby Washington to play high-stakes games
where American prosperity is put on the line. American consumers
should not be taxed because big corporations claim their profits
aren't high enough. Moreover, it's not the job of the U.S. government
to be world policeman in this sense either.
U.S., at the behest of powerful U.S. industries, ordered China to
shut down 29 factories. When China mostly complied, it was not a
victory for free trade, but an example of imperialism. The Chinese
initially said this was an invasion of their national sovereignty,
and they're right. No one put Mickey Kantor and his friends in charge
of the laws of other nations.
hidden reason for the sanctions is that China hasn't joined the
World Trade Organization, the bureaucratic monster created by the
recent Gatt treaty. Mr. Kantor wanted American consumers to be looted
until the Chinese surrendered. If we needed evidence that the WTO
and free trade are opposites which savvy observers did not this
who trumpeted Free Trade were the same folks who brought you the
$50 billion handout to Mexico, which was really a bailout of U.S.
investment houses and big banks that risked their capital in a socialist
country. When a foreign economy falls apart under real free trade,
we'd say: tough. Capitalism is the profit and loss system.
But under Nafta, profits are private and losses are socialized.
the Nafta trade bloc was rammed through Congress, U.S. exporters
were breaking piñatas and shouting, Olé;! But as the peso fizzled,
so did their profits. In the old days, investors scrutinized the
soundness of foreign currencies before investing, and took their
lumps if they were wrong. Now, the more vulnerable their position,
the more they can count on long-run profits at others' expense.
trust a government-to-government trade deal. They were rare in the
19th century when trade was largely free, but in our century of
trade wars and real wars, they are more common than ever. Government-to-government
trade deals ultimately subvert free trade, for their purpose is
to reward favored business, prevent territorial competition for
low-tax environments, and squeeze small business out of the international
government intervention, here or abroad, skews the producer-consumer
balance, makes economic life more uncertain, and strengthens the
state. That's why economic life should be protected from any taint
those few horrid weeks in January 1995, Clinton and the Republican
elite implemented the hoariest mistakes of mercantilism, looted
the consumer, put Wall Street on welfare, and expanded the power
and reach of the central state.
there nothing to be grateful for? Well, Messrs. Clinton and Gingrich
have stopped lecturing us on free-trade theory until they start
campaigning to spread the Nafta disease throughout the rest of this
hemisphere, and the state's propaganda apparatus swings into action