Free Trade Would Boost the Economy, But It’s Not on the Ballot

“”Contrary to conventional wisdom, imports are not a drag on the U.S. economy or the price we pay to sell goods and services abroad. In fact, rising imports coincide with stronger economic growth,” Scott Lincicome and Alfredo Carrillo Obregon write in The (Updated) Case for Free Trade, a Cato Institute study published in May. “The payoff to the United States from expanded trade between 1950 and 2016 was $2.1 trillion, increasing GDP per capita by around $7,000 and GDP per household by around $18,000.”
“Higher imports are also correlated with higher private‐sector employment in the United States, as numerous industries and workers depend on trade,” they add.”

“Could high tariffs and “buy American” policies compel firms to find domestic suppliers? Well, maybe. But foreign sources were chosen for a reason; replacing them with domestic suppliers will require compromises. “Subsidising electric cars assembled in North America will make them more expensive and lower-quality,” The Economist cautioned of protectionist policies. And since politicized policy tends to breed yet more politicization, tariffs and subsidies will inevitably be further burdened with conditions. “The red tape will raise costs to consumers and taxpayers still further.””

Free Trade Still Promotes Peace, Despite Putin’s Reckless War

“Angell didn’t think that war was impossible, but that it was futile. It’s illogical and uneconomical, even from the invader’s perspective. In a modern, globalized economy, countries do not benefit from wars of conquest anymore. Countries don’t grow richer just because they have more land or a bigger military. In fact, small, peaceful countries like Switzerland and Norway were richer than mighty empires like Britain and Germany, Angell pointed out.
War would be costly even for the aggressor. Integrated financial markets would unleash chaos back home. If you lay your neighbor in ruins, you also destroy your own suppliers and markets. As Mises put it, if the tailor goes to war against the baker, he must henceforth bake his own bread. There’s a cheap way to satisfy the craving for another country’s natural resources: Buy them.

Angell did not deny irrational national passions and the madness of leaders. The fact that Europe’s leaders chose madness in 1914 did not refute his thesis. The fact that no one came out of the war in an improved state rather validates it.

What about the invasion of Ukraine? Does it refute this liberal peace theory? Well, the kind of exchanges in which Russia engages are not the types of free and open trade that enrich a broad segment of independent entrepreneurs. On the contrary, it is mostly trade in natural resources managed by monopolies, controlled by the government. The so-called oligarchs are not so much powerful business leaders as they are Putin’s poodles, safe in their positions only as long as they fall in step and line his pockets.

Despite this, it seems like most Russian oligarchs and businesses were opposed, and remain opposed, to the war, even though they don’t advertise it for obvious reasons. It doesn’t take independent entrepreneurs to understand that upending the relationship with the West would be an economic disaster. An energy system that makes Germany dependent on Russian energy might be terrible for Germany, but it would be self-immolation for Russia to end it.

It seems like the really enthusiastic pro-war constituency in Russia (before February 24) was limited to one man, give or take. And that’s precisely what Kant had in mind when he wrote that the spirit of commerce is not enough to deter the spirit of war, you also need republican institutions that channel that spirit and bind leaders.

In a despotic state, wrote Kant, thinking of all the Putin-like leaders of the late 18th century, the ruler is not affected by doux commerce. While the people suffer, “he goes on enjoying the delights of his table or sport, or of his pleasure palaces and gala days. He can therefore decide on war for the most trifling reasons, as if it were a kind of pleasure party.”

This is a reason why Thomas Friedman’s bastardized liberal peace theory—that countries with a McDonald’s don’t wage war on each other—has fared slightly less well. You can order a Big Mac without a side order of free markets and rule of law.”

“We are in the longest stretch of peace between major powers for 1,800 years, the old archenemies France and Germany almost cozy up too much to one another, and Putin’s invasion is the first attempt to launch a major war of conquest since Saddam Hussein invaded Kuwait in 1990. In a world where peace used to be just a brief interlude while everybody rearmed, something has gone right in the post–World War II era. If you want the whole story, read Steven Pinker’s The Better Angels of Our Nature, but clearly doux commerce has something to do with it.

Proximity and interdependence are not always deterrents, especially if different groups share one pool of resources that they all want the largest share of. Additionally, not all cultures and communities are happily harmonious, and civil wars are often the most vicious. However, the general relationship between trade and peace is a strong one.”

3 Winners and 3 Losers From Today’s North America Trade Deal Announcement

“the USMCA is an agreement that will increase barriers to trade across North American borders and will impose more managed trade. All trade deals are a form of managed trade, of course, but relative to the standards set by NAFTA, the USMCA seems like a step backward.

The main way the USMCA reduces free trade is in the so-called “rules of origin” that will apply to cars built in North America. In order to cross borders tariff-free, 75 percent of the value of materials within a car or truck will have to be produced in North America. Additionally, 40 percent of the steel used in auto production will have to come from U.S. steel plants. The deal also gives the U.S. government the ability to impose quotas on imported cars from Canada and Mexico. That combination of protectionism and increased federal power over the decisions of private businesses is a major black mark against the deal.”

“The intended consequence of several components of the USMCA is to encourage businesses to shift production from Mexico into the United States.”

“the unintended consequence of those new rules might be a reduction in manufacturing across all of North America. When it comes to cars, for example, companies might find it cheaper to simply pay the 2.5 percent import tax rather than comply with the new standards to be able to trade duty-free.”