Conservative Populists and Their Trade Bashing Idiocy

Let’s start with everyone’s favorite conservative, President George W. Bush. Here’s what the President had to say when he raised tariffs on steel from other countries: http://www.whitehouse.gov/news/releases/2002/03/20020305-7.html

The purpose was To Facilitate Positive Adjustment to Competition From Imports of Certain Steel Products

“Positive Adjustment”??? What the hell is that? It’s explained a little better at paragraph 14: I have further determined that these safeguard measures will facilitate efforts by the domestic industry to make a positive adjustment to import competition and provide greater economic and social benefits than costs.

Okay, not much better, but now it will provide greater economic and social benefits than costs. That makes me feel a lot better. Not.

You can see one discussion of the steel tariffs at: http://www.pbs.org/newshour/extra/features/july-dec03/steel_11-17.html

I know. PBS. Liberals. Ugh. Then again, they do quote the Wall Street Journal. Anyway, the economic effect of the tariffs was far from wonderful. For those who think we should still manufacture things in the US, it may surprise you to hear that many manufactured products include steel. Cars, for example, have a fair amount of steel in them. The steel tariffs had the odd effect of raising the price of steel. This raised costs for manufacturers, making it harder for them to compete with producers in other countries.

As one observer noted (http://www.trilla.com/washington_time_aug_15.htm), workers in steel-consuming industries outnumber steelworkers 55 to 1. An economist was quoted in that piece saying that the tariffs will kill 8 times as many jobs in the steel consuming industries as they’ll save in the steel industry itself. And we haven’t even gotten to the consumers yet.

While liberals tend to get caught up in soft touchy-feely approaches like fair trade, conservatives are more into the hard approaches like bashing and competition. I touched on bashing in the last post, so I’ll go more toward the competitive approach.

Some conservatives believe the US is in economic competition with other countries like China. The peak of this concept probably was Michael Porter’s book, The Competitive Advantage of Nations. Sounds great, but it’s still crap.

Nations do not compete economically. Companies do. Dell and HP compete. Toyota and GM compete. Well, okay, not really. GM is losing that one so badly it’s not really a competition. But you say “Aha!” Toyota and GM, that’s Japan vs. the US. Well, actually most Toyotas sold here were built here. And many GM cars are not built here. So it’s not that simple.

Economics includes the concept of “comparative advantage.” For various reasons, some countries are better at producing certain products (or providing certain services). The French make good wine. Maybe it’s in the soil. India provides good call center services and other services – they speak English, are well educated, and they’re available in the middle of the night here because that’s daytime for them. The US is actually quite good at some things. Software is probably our biggest strength at the moment, but we’re also very good at a variety of professional services and we export these quite a bit.

In the theory of comparative advantage, since country A is relatively better at making widgets, and country B is relatively better at making gidgets, A makes the widgets, B makes the gidgets, they trade with each other, and both are better off. It’s actually quite a bit more complicated than this, but that’s the really simple version.

Anyway, you’ll often see the conservatives talking about how we’re competing with China, so we have to force them to revalue their currency, or put barriers up so they don’t take over this or that industry.

Comments are closed.