October 3, 2009 – Hypocrisy has never been very inspiring. Anti-tobacco admonishments from parents who smoke always ring a little hollow, as does the promotion of public education by politicians who entrust their own progeny to private schools. Increasingly, U.S. President Barack Obama’s enunciated support for free and open trade is sounding a little disingenuous, too. 

As The Economist pointed out last week , when the President speaks, he sounds like a free trader, promising to refrain from raising trade barriers and saying he is committed to expanded trade. But his actions do not follow his words. In his first few weeks on the job, he opted not to veto the notorious “Buy American” provisions woven into the gargantuan stimulus bill. He then failed to act when Congress put the kibosh on a project to open the border to Mexican trucks , as was supposed to happen under NAFTA. Most recently, President Obama decided a couple of weeks ago to show just how much he promotes international cooperation by slapping a 35% tariff on imported Chinese tires.

“Us” versus “Them”

The tire tariff went into effect on Saturday, September 26, immediately following the G20 meeting that took place in Pittsburg on Thursday and Friday. According to Diana Ransom in The Wall Street Journal, President Obama said the United States was levying the tariff “to account for a market disruption caused by an increase in imports.”  The Chinese government responded by launching investigations into imports of U.S. poultry products and auto parts, and may take up its case with the World Trade Organization.
The main thing that needs to be challenged here is the notion that America has somehow been done wrong by China. Most Americans have no reason whatsoever to be incensed at “an increase in imports” of Chinese tires. I might be ticked off if I manufactured a similar grade of tires and was outcompeted by Chinese manufacturers, but no more than if I lost out to a company in a neighboring state or down the street.
Market competition does produce winners and losers in the short run. Businesses that manage to meet demands more accurately, more efficiently, or more quickly tend to prosper, while others fall by the wayside. But in such creative destruction lies the key to economic growth and the material progress of humankind. Customers are the immediate beneficiaries, but in the longer run, the capital and labor that were locked up in less efficient businesses get reallocated to more efficient ones. Short-term pain for some translates into long-term gains for all. Who could in good conscience stand in the way of such a process?

A Love of Labor

Of course, pain is no less painful in the moment for being short-lived. If it can be avoided by shifting its effects onto others—especially if it can be spread around so that no one really notices it that much—some people will be sorely tempted to do so. In fact, this is just what happened in the case of the Chinese tire tariff. It was the United Steelworkers union that filed a complaint back in April, even though, says The Economist, the benefits to them will be “minuscule.” This is because American manufacturers have largely already given up making low-end tires like the ones the Chinese make. The effect of the tariff will simply be to favor imports from other low-cost sources in places like India, Mexico, or Brazil.
Why, then, was the tariff imposed? The Economist bemoans President Obama’s “inability to stand up to his party’s special interests” and complains that he has “given in to the unions at the first opportunity.” Edmund L. Andrews makes a similar point writing in The New York Times, suggesting that this also explains why the White House is dragging its feet on a more general expansion of global trade: “One reason for the United States’ hesitation is that trade-opening agreements are extremely unpopular with organized labor, which is always an important Democratic constituency.” In other words, the Democratic Party is in hock to organized labor, and is more than willing to sacrifice the interests of American consumers, not to mention international relations with China, in order to ensure that union campaign contributions keep flowing.
No union or government has the moral right to restrict voluntary exchanges.
With free trade, as with domestic free markets, the operative word is “free.” Human beings should be free to lead their lives as they see fit, as long as they respect others’ rights to do the same. If two parties want to exchange tires for money, by what right does some third party get to restrict that transaction? If the initiation of force is not involved, what difference does it make if the two transacting parties are in the same zip code or on separate continents? No union or government has the moral right to restrict voluntary exchanges. The fact that free trade promotes peace and prosperity for all in the long run is just another illustration of the deeper truth that the moral and the practical are one and the same.
As the People’s Republic of China celebrates its 60th anniversary this week, the people of China cannot yet boast of the general level of freedom we in the West enjoy, especially when it comes to political liberty. But hundreds of millions of Chinese have risen out of poverty over the past three decades thanks in large part to their increasing levels of economic freedom, including their freedom to trade with foreigners. And human rights are human rights: Chinese have as much of a right to do business as Americans do. If the American President and the Group of 20 want to do more good than harm, they would do well to adhere to some basic tenets of ethics and economics, and let voluntary transactions alone.


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