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'Free trade' that isn't free
'Neither tariffs nor trade protection is the problem'

Our Buy American Mention of the Week!
by Roger Simmermaker
March 26, 2008

Along with the ever-increasing volume of imports into this country are the ever-increasing hits to the free trade faith among the people in it. The free trade, free market fall from grace didn't just begin with fears of a 2008 recession, but it might come to a decisive and definitive close with the 2008 elections.

It's no surprise Americans are becoming more suspicious of foreign competition. A Sept. 5, 2007, poll as reported by the Associated Press showed 58 percent of Ohioans favor more restrictions on foreign imports, and that it would make Ohio's economy better. Free trade Republicans and especially John McCain should take note, for no Republican has ever won the presidency without winning Ohio.

But the American angst with free trade isn't limited to just one state. Eight-six-point-three percent of all Americans would like to block Chinese imports until they raise their product and food-safety standards to the level of U.S. standards, and according to a June 2007 Consumer Reports magazine poll 92 percent want country-of-origin labels on meat and produce. An August 7, 2007, Zogby poll showed one in three Americans would be willing to pay four times as much for American-made toys and 63 percent were willing to join a boycott of Chinese-made goods in general.

Part of what the faith in free trade and free markets has needed to endure is the ability of globalists to pull out the twin bogeymen of tariffs and protectionism at will as the great bringers of the Great Depression. In the famous NAFTA debate between Al Gore and Ross Perot in 1993, Al Gore said the Smoot-Hawley tariff bill "was one of the principle causes, many economists say the principle cause, of the Great Depression in this country and around the world." But of course the undeniable, historical fact is that the Smoot-Hawley tariffs were enacted over eight months after the Great Depression started. Even Ronald Reagan fell for the politically correct lie about the tariff bill when he said "the Smoot Hawley tariff helped bring on the Great Depression."

The "many economists" Al Gore spoke of that say the Smoot Hawley tariff bill caused the Great Depression don't appear to be among the most prominent. Nobel Prize winner and free trade advocate Milton Friedman blamed the Federal Reserve for bringing on the Great Depression. Former Federal Reserve chairman Alan Greenspan said that it was brought on largely from mistakes the Federal Reserve made in tightening credit after the stock market crash of 1929. Nobel Prize winner Joseph Stiglitz, who served in the Clinton/Gore White House as chairman of President Clinton's Council of Economic Advisers, in his book "The Roaring Nineties," said the Great Depression was caused by insufficient government regulation rather than excessive government regulation. Tariffs, of course, are a form of government regulation. And most recently, current Fed chairman Ben Bernanke stated the Great Depression was caused by none other than the Federal Reserve.

These comments by Bernanke are nothing new. A Dec. 7, 2005, "Wall Street Journal" article about the current Federal Reserve chairman revealed that he is a self-described "Great Depression buff" much like the way others interested in American history are Civil War buffs. The article talked about a book Bernanke was going to write about the Great Depression, including the factors that caused it. The word "tariff" was nowhere to be found in the article.

What does all this mean in the light of America's faith in free trade and free markets, which is almost always accompanied by a repudiation of tariffs and trade protection? Neither tariffs nor trade protection is the problem. They weren't the problem in the 1930s and they aren't a policy problem to be feared today. As former Republican presidential candidate Rudy Giuliani said in an April 30, 2007, interview with "Business Week," "We have a tendency to under regulate. Then we have scandals, and we swing wildly in the other direction."

The recent Bear Sterns dilemma has free market advocates distancing themselves from free market rhetoric. On March 14 before the Fed intervened to bail out Bear Sterns, President Bush said, "In a free market, there's going to be good times and bad." After the Fed announced actions to stabilize the markets over the following weekend, Bush changed from talking about "free markets" on March 14 to calling them "financial markets" on March 17 while Treasury Secretary Henry Paulson spoke of "currency markets."

The problem is that our financial institutions, which President Bush described on March 17 as "strong" and "functioning efficiently and effectively," want a free market "hands-off" approach until problems arise, and then they want the government to intervene with a "hands-on" approach. Then the Fed rushes in with taxpayer money where we aid private U.S. banks with public U.S. tax dollars. What this proves is that we don't have a free market system at all. "Free" would mean "without cost," and the taxpayer bailout will cost us all. It's just that no one knows exactly how much yet.

Even after the Bear Sterns bailout, Bush continues to warn us of "trade protection" as the primary danger to America's supposedly strong economic fundamentals. John McCain warns against proposals to renegotiate NAFTA because it might compromise U.S. exports. If you've ever played poker, you know that everyone who sits at the table has to ante-up the same amount to share in the pot.

In this case, the pot is the lucrative U.S. market. Mexican producers don't ante up the same amount as American producers for the privilege of competing for the same market. Mexican producers have a lower-cost access to the U.S. market than American producers, which is blatantly unfair to American companies who wish to keep their factories in America and employ their own people. To claim that we should avoid amending an unfair trading system merely because it might compromise the success of any companies exporting to Mexico that might be benefiting from the unfair system is not the American way.

John McCain defends free trade by claiming NAFTA, which turned our mild trade surplus with Mexico to a large trade deficit, as a success. American tariffs and trade protection are not the problem. Lack of adequate tariffs to level the playing field by mindless faith in free trade and free markets followed by Federal Reserve intervention which can lead to catastrophes like the Great Depression is the problem. Capitalism, which is defined by Merriam-Webster as private or corporate ownership of capital goods, isn't violated by tariffs and regulation. It's violated by government ownership of private assets like those of JP Morgan and Bear Sterns. We wouldn't be in this predicament had we not blindly believed in free trade and free markets. America's founding fathers were trade protectionists, not free traders. Abraham Lincoln once said, "By the tariff system the whole revenue is paid by the consumer of foreign goods...the man who contents himself to live upon the products of his own country pays nothing at all." The founders realized that the terms "free trade" and "free markets" in any form are nowhere to be found in the U.S. Constitution.

John McCain is surely smart enough to realize this. After all, his mentor Teddy Roosevelt was quoted as saying duties (tariffs) "must never be reduced below the point that will cover the difference between the labor cost here and abroad." In today's terms, that means tariffs must never be cut to a point that would fail to level the playing field and make competition fair for all participants. According to the U.S. Constitution, we have a duty to regulate commerce with foreign nations. If we didn't have such a tendency to under regulate as Rudy Giuliani rightly pointed out, we would not have to swing so wildly in the other direction.

Roger Simmermaker is the author of How Americans Can Buy American: The Power of Consumer Patriotism. He also writes "Buy American Mention of the Week" articles for his website www.howtobuyamerican.com and is a member of the Machinists Union and National Writers Union. Roger has been a frequent guest on Fox News, CNN and MSNBC and has been quoted in the USA Today, Wall Street Journal and US News & World Report among many other publications.


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