The Immorality of Protectionism

  • December 1, 2023
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The 2024 campaign, and that means new efforts by politicians to pander to economic nationalists and protectionists by calling for new trade wars and trade controls. This will surely happen even though the Biden Administration has done very little to reverse the protectionist policies that Donald Trump imposed during his term. For example, new so-called “Section 301” tariffs, which have been in place since 2018, are still in effect and are only now being “reviewed.” In response to a possible change to these new trade barriers, a bipartisan group of legislators has already called on Biden to keep these taxes in place. Moreover, candidate Trump, now campaigning for 2024 has recently called for an additional 10-percent tariff (i.e., tax) on all imports. 

Politicians who support these taxes and regulations like to frame it all like it’s some kind of public service to the community. These arguments generally employ some sort of feel-good language like “tariffs level the playing field for Americans workers.” 

In reality, of course, calls to raise or maintain tariffs are nothing more than a call to raise taxes on Americans. Describing these taxes as a burden only for foreign workers or foreign importers requires either dishonesty or impressive levels of ignorance about how trade barriers work. 

In practice, tariffs mean Americans are forced to pay higher taxes on goods when those goods are obtained from a foreign country. Or, in some cases, Americans are banned altogether from purchasing certain foreign goods. Moreover, tariffs are only the most straightforward way of taxing Americans for goods that come from abroad. There are also countless non-tariff barriers including a wide variety of regulatory restrictions that mandate foreign goods conform to environmental and labor mandates. “Rule of origin” restrictions require mountains of paperwork tracing the origins of various raw materials used in the manufacture of goods that may later be exported to the US. The idea here is that if, say, foreign goods imported from low-tariff Country A are created with “too many” raw materials from the high-tariff Country B, then Americans must pay a higher tax rate. 

In all this, potential American importers who don’t follow all these rules with excruciating attention to detail are open to prosecution, imprisonment, confiscation of goods, and the imposition of heavy fines by American bureaucrats. Many protectionists may delude themselves into thinking the tax police who oversee foreign trade only target foreign parties, but that is utterly untrue. The only way to be reasonably sure of avoiding prosecution, of course, is to spend money and countless man hours on compliance officers, attorneys, and consultants to help navigate the labyrinth of federal regs. If mistakes are made in this process, then one is likely to hear from the Feds that “ignorance of law is no excuse. Enjoy federal prison.” 

Protectionism  means Americans who are already taxed and regulated to the skies via income, sales, and property taxes must endure additional levels of taxation and regulation to get their hands on foreign goods. All these additional costs and taxes imposed at the import stage naturally filter down to the entrepreneurs, small business owners, and ordinary people  who benefit from access to less expensive foreign goods. For many small and medium-sized businesses especially, additional costs imposed on imports can mean the difference between a viable enterprise and a bankrupt one. 

Bizarrely, protectionists often act like they have the moral high ground—as if calling for higher taxes and more power for the government bureaucracy were some kind of great service to the working man. Protectionists like to cloak their calls for higher taxes in the mantle of “America first” or as striking a blow against the latest foreign bogeyman.  In reality, protectionism is nothing more than old fashioned interest group politics. Protectionists want higher taxes and more government control in order to gain an advantage for some very specific sliver of the American public. Often, the people who benefit are wasteful and expensive American workers and managers who cannot compete in an international market. Their efforts would better be employed in some enterprise where they can compete. Yet, protectionists want to protect this group at the expense of other groups, such as hard-working middle class business owners who rely on access to foreign goods to provide products and services. In this respect, protectionists are no better than any run-of-the-mill Progressive who wants more taxes on one group in order to subsidize some other group. Even worse, protectionist laws only mean anything if they are enforced. In other words, protectionists’ demonstrated preference is for policies that impose prison sentences and fines on peaceful Americans whose only “crime” may be attempting to buy and sell goods without the proper government paperwork. 

There’s no moral high ground here for the protectionists, just unfounded self-righteousness. Of course, if protectionists don’t want foreign goods in their country, they are welcome to avoid purchasing such goods. Protectionists are also welcome to try to convince other people to not purchase those goods. One could also advocate against domestic regulations that drive up the cost of domestic production. A good start would be abolition of minimum wages, laws that favor labor unions, and countless costly environmental regulations. On the other hand, it’s a lot easier to politically harness fear of foreigners and foreign competition. This fear is easily weaponized as a way to trick people into signing off on yet another tax increase or spate of government regulations.

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