Export Tariffs: Are They America's Last, Best Hope?


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This is a recent discussion between the Export Tariff Guy and the Free Trade Guy.

ETG: What this country needs is an export tariff.

FTG: How would it work?

ETG: Every exporter would pay a tariff on the retail price of everything it exports.

FTG: So, it’s a sales tax on exports.

ETG: That’s correct.

FTG: And why should the government do this?

ETG: It needs the money.

FTG: So, you are in favor of added taxes.

ETG: Extra export sales taxes, yes.

FTG: So, you want the government to spend more money.

RTG: Correct.

FTG: So, you are a Keynesian.

ETG: Of course not. I am a defender of free enterprise.

FTG: You think that free enterprise is promoted by raising taxes.

ETG: Yes. Sales taxes. On exports.

FTG: Any other taxes?

ETG: Sales taxes on imports.

FTG: So, you want bigger government to help promote free enterprise.

ETG: Yes.

FTG: So do Keynesians.

ETG: But Keynesians are not supporters of real free enterprise.

FTG: What is real free enterprise?

ETG: Free enterprise that is promoted by high sales taxes on exports.

FTG: And imports.

ETG: Right.

FTG: How do taxes on exports promote free enterprise?

ETG: Because they reduce the number of exports.

FTG: How?

ETG: By raising prices to foreigners.

FTG: So, they will buy less from American exporters because post-tax prices are higher.

ETG: Correct.

FTG: Why is that good for free enterprise?

ETG: Because it makes available more American-made goods for Americans to buy.

FTG: Because the goods are not shipped to foreigners.

ETG: Correct. So, consumer prices will fall in America.

FTG: So, this is a subsidy to American buyers of American-made goods.

ETG: Correct.

FTG: This subsidy is paid for by Americans who want to buy foreign goods, but who will cut back because of reduced imports due to reduced exports.

ETG: Correct.

FTG: So, free enterprise requires government subsidies to one group of American buyers at the expense of another group of American buyers.

ETG: Correct.

FTG: But this is not Keynesianism.

ETG: No, it isn’t.

FTG: Why not?

ETG: Because Keynesians want the government to do the spending.

FTG: But you want the federal government to collect sales taxes.

ETG: Yes.

FTG: Won’t the government spend this money?

ETG: Not if it is used to pay down the national debt.

FTG: So, you think Congress will balance the budget.

ETG: Yes.

FTG: And then run a surplus.

ETG: Yes.

FTG: With the surplus, Congress will pay off the national debt.

ETG: Yes.

FTG: Has this ever happened before?

ETG: In 1836. The federal debt fell to zero.

FTG: And you think this will happen again.

ETG: Yes.

FTG: So, in the meantime, the federal government imposes an export tax to increase its revenues and also subsidize American consumers of American-made goods.

ETG: Yes.

FTG: What about the Americans working in the export sector?

ETG: A lot of them will lose their jobs.

FTG: Is this fair?

ETG: You have to break some eggs to make an omelet.

FTG: You mean Congress has to break some privately owned eggs to make its omelet.

ETG: I don’t see it that way.

ETG: How do you see it?

ETG: The American people must restore the free market.

FTG: By increasing taxes, making the government larger, and bankrupting marginal export firms.

ETG: Yes.

FTG: The free market way.

ETG: The true free market way.

FTG: But if foreigners don’t buy American exports, they will not buy dollars.

ETG: True.

FTG: But if they don’t buy dollars, the dollar will fall in value.

ETG: Precisely.

FTG: You mean you want the dollar to fall?

ETG: Yes.

FTG: Why?

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May 29, 2013

Gary North [send him mail] is the author of Mises on Money. Visit http://www.garynorth.com. He is also the author of a free 31-volume series, An Economic Commentary on the Bible.

Copyright © 2013 Gary North