April 04, 2008

Real Free Trade, Real Protectionism

I’m very happy that Tom is seriously critiquing free trade at TM; this is necessary, particularly since as we enter a stage of economic crisis, there’s going to be a deluge of not-very-serious free-trade bashing, for a variety of motives.

I, myself, have always been skeptical of “protecting” American industries, but not because I have any problem with tariffs. Too often, Washington has given Detroit a helping hand through a series of bailouts and sustained corporate welfare checks. The results have been much like those in the welfare-addicted inner cities: dependency and lethargy.

Say out loud names like “Ford,” “Pontiac,” “GM,” “Chrysler.” What are the first associations that come to mind? It’s different for everyone, but I’m positive that “innovation,” “cool,” “ahead of the curve,” “dynamic” aren’t amongst them. 

So here’s my ultimate fantasy of a solution, one which would both avoid all the downfalls of corporate welfare, but then still reflect that fact that we want to keep industries in America and understand that there are structural differences between countries in terms of wages and standards of living.   

5% tariff on all imported goods + 0% income tax. 

This magical plan (which, I doubt, I’ll see in my lifetime) would generate plenty of money to run a limited government, would protect American industries, and allow families to keep the fruits of their labors, as opposed to taxing the middle class in order to bail out corporations, or, worse, establishing “fair trade” bureaucratic institutions. Also, the tariff would be universal, the same for everyone, thus, no more stupid trade deals with “North America” and South Korea, no more lobbyist doing their dirty work for a particular industry. We’d instead have, well, actual free trade, along with a renewal of our sense of a national interest.

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