Free Trade and Funny Math
To the devout libertarian, free trade is not a policy option to be debated, but a dogma to be defended. Nowhere is this more true than at that lamasery of libertarianism, the Cato Institute.
But with America running the worst trade deficits in history, the monks are having a hellish time of it. Hence, like the neocons who cherry-picked the intel to stovepipe to Scooter to bamboozle us into believing national survival hung on invading Iraq, they feed us irrelevant truths and deny us the whole truth.
Case in point — the Feb. 22 column in The Washington Times by one Daniel Ikenson, "associate director at the Cato Institute’s Center for Trade Policy Studies." Bewailing the "barrage of hyperbole and misinformation about trade and its relationship to jobs and economic growth," Ikenson assured us, with impressive statistics, that globalism is working out wonderfully well for America.
"(T)he Census Bureau data show that U.S. export growth was phenomenal in 2006, increasing by 14.5 percent. … Exports to Europe increased by 15.2 percent and to China by nearly 32 percent. The growth in exports to Japan was a slower 7.5 percent, but it grew. Since 2001, U.S. exports have increased by more than 42 percent."
Wow. Phenomenal indeed. And it does sound like we are cleaning those foreigners’ clocks. But Ikenson ignored the other side of the ledger.
That the U.S. trade deficit in 2006 rose to an all-time record of $764 billion. That the deficit in goods hit $836 billion. That the deficit with China rose 15 percent, from $203 billion in 2005 to $233 billion in 2006, the largest trade deficit ever recorded between two nations. That the deficit with Japan rose to $88 billion, the largest ever between us.
Under Bush, the U.S. trade deficit has set five straight world records, as has the U.S. trade deficit in autos, parts and trucks. So reports Charles MacMillion of MBG Services, who has for years tracked the decline and fall of American manufacturing.
For manufactured goods, our trade deficit rose to $536 billion, from $504 billion. In Bush’s six years, America has run a total trade deficit of $2.6 trillion in manufactured goods, as 3 million U.S. manufacturing jobs have disappeared and wages in that sector have fallen 3 percent in three years.
Query to Ikenson: If these numbers represent a successful trade policy, what would a failed trade policy look like?
Recall NAFTA. In 1993, we had a trade surplus with Mexico. Some of us warned it would be gone with the wind if NAFTA passed. And NAFTA did pass, through the collaboration of Clinton Democrats with Gingrich Republicans, over the opposition of the American people.
Since 1994, we have run a trade deficit with Mexico every year. In 2006, it hit a record $60 billion. Grand total: almost $500 billion in trade deficits with Mexico since NAFTA. Mexico now exports more than 900,000 vehicles to the United States every year, while the United States exports fewer than 600,000 cars and trucks to the entire world.
This is success?
Where did Mexico get an auto industry? Is it good that our auto industry is being exported? Has the price of a new car plunged because Mexicans get paid a fraction of what U.S. autoworkers earn?
"In 2006, the U.S. economy grew by an additional 3.4 percent," writes Ikenson. True, and China’s economy grew by 10 percent — and by 140 percent over the last 10 years, tripling the growth in the United States. Not only are we shipping factories, technology, equipment and jobs to China, we are exporting our future to China.
Nor should this shock any student of history. For contrary to free-trade mythology, every nation that has risen to pre-eminence and power — Britain before 1860, the United States from 1860-1914, Germany from 1870-1914, postwar Japan, China today — has pursued a mercantilist or protectionist trade policy.
Economic nationalism is the policy of rising powers, free trade the policy of declining powers. For great powers have ever regarded trade as an arena of struggle in the clash of nations. It is no accident all four presidents who made it to Mount Rushmore were protectionists.
"Thank God I am not a free trader," wrote Theodore Roosevelt. "Pernicious indulgence in the doctrine of free trade seems inevitably to produce fatty degeneration of the moral fibre."
Think Teddy might have had a point, Mr. Ikenson?
Probably not. For libertarianism is an ideology, and evidence that contradicts the dogma of an ideology is to be disregarded or denied. For the dogma cannot be wrong.
Indeed, should Ikenson awake from his dogmatic slumber and decide that free trade is failing America, he would not last long as associate director of the Cato Institute’s Center for Trade Policy Studies. The folks who fund Cato are not paying to have dogma debated, but defended. For if the dogma be untrue, then the ideology, the whole system of beliefs, the faith itself, is called into question. And we can’t have that.