The danger of dabbling in protectionism

U.S. industrial capacity has never been larger — it is 66 percent above what it was when NAFTA took effect in 1994, and 15 percent above what it was when China joined the World Trade Organization in 2001 — and real U.S. manufacturing is almost back to where it was in 2007, the year the recession began. Manufacturers’ output is 11 percent above what it was in 2001 and 45 percent above 1994. (These statistics are from the Federal Reserve Bank of St. Louis, via George Mason University’s Donald Boudreaux, curator of the Cafe Hayek blog.) U.S. exports are 85 percent higher than in 2001 and 200 percent higher than in 1994, and about 800 percent higher than in 1975, the last year of a U.S. trade surplus. The net inflation-adjusted worth of U.S. nonfinancial corporations is 62 percent more than in 2001 and 200 percent higher than in 1975, before globalization accelerated. During 44 consecutive years of annual trade deficits, the U.S. economy has created a net 70 million new jobs, non-farm employment is 87 percent higher than in 1975, and the unemployment rate (3.6 percent) is the lowest in 50 years. So, from what exactly does the nation need protection?…

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Until noon on Jan. 20, 2017, when they underwent conviction transplants, most Republicans were rhetorically and even theoretically opposed to protectionism, which is government telling Americans what they can purchase, in what quantities and at what prices. Most Democrats have no principled objection to protectionism, which accords with their basic agenda of bossy government allocating wealth and opportunity. The Democrats’ presidential candidates, however, are uncharacteristically reticent when the subject is protectionism. This is because the Center of the Universe, a.k.a. Iowa, exports one-third of its agricultural products. The United States, which in 2012 sent $30 billion in agricultural products to China, last year (according to the Financial Times’ Demetri Sevastopulo and James Politi) sent only $13 billion worth, largely because of China’s retaliatory tariffs. But a spokesman for the American Farm Bureau says: “You can’t campaign to get rid of tariffs [in Iowa], and then go to Michigan, where they expect [tariffs] to bring back manufacturing.”

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