Samizdata

The recent decision by President Biden to slap tariffs on a range of Chinese imports, including electric vehicles, has gone through with relatively little political noise and pushback. There was a time a while ago when certain figures in the Republican Party and part of the mainstream media would have been alarmed by this, given how widely free trade was accepted as a default position, with caveats about protecting sectors deemed vital for security, or because of things such as blatant abuse of intellectual property. Nowadays, it appears that mercantilism, and special interest lobbying power that drives it, is as strong as ever.

The Wall Street Journal writes ($):

The way to defeat Beijing economically is by making America more competitive. This means playing to traditional strengths of innovation, low taxes and regulation, and trade alliances. Mr. Biden has done the opposite. His Administration has blocked critical mineral mining projects. It has attacked domestic fossil-fuel production and petrochemicals, which contributes to pharmaceutical production.

Of course, the question is who is being “defeated”, if at all, by hammering the economy of China? Will it be the Chinese Communist Party, which in many ways is more or less a sort of Mafia, or the regular Chinese people? Let’s not forget that tens of millions of Chinese citizens have been lifted to a standard of living that would have been a shock to those familiar with the terrible Mao-induced catastophes/crimes of the Great Leap Forward in the 50s and the Cultural Revolution of the mid-60s.

While I suppose that deliberately impoverishing China – which is what some people might want to see – is the goal, regardless of the human costs – I see it as right to pursue two broad courses – encourage prosperity around the world and resist the most egregious abuses. It is also a fact worth considering that it is not, in general, prosperous countries that attack other rich ones. It usually tends to be countries that are in decline for various reasons – often self-induced – that lash out against their real or presumed opponents. A China that wants to conquer Taiwan, for example, or mess with the West in various ways, is in my view motivated by a sort of nagging insecurity as much as anything else. China has done far more to harm itself by its clampdowns under Xi than anything that Biden, Trump or whoever is likely to do. And protectionism is, as I explain below, a very blunt instrument that causes widespread collateral damage and self-harm.

The newspaper notes that one bad policy begets another, as politicians try to offset the bad effects of their previous policy:

The Biden tariffs are a classic example of how bad industrial policy is compounded by another bad policy in the name of fixing the first mistake. Thus Mr. Biden wants to use tariffs to raise the price of EVs that he wants everyone to buy. It’s bananas.

It is. The long-term negative consequences of rising protectionism will be complacency, sloth, special pleading, shoddier products, and the rest. This may take years to manifest itself. It is not even as if the tariffs being imposed by the Biden administration are to be offset by large tax cuts domestically. In the late 19th Century, the various administrations after the US Civil War did impose tariffs, but domestic taxes were puny compared with what we have now.

In any event, arguments that protectionism “protects” seem to be as weak as they ever have been. And there are the downstream impacts to consider: by making imports of solar panels, cars, cooking oil or whatever more expensive, it increases costs not just to consumers, but also to intermediate manufacturers who use these things. Import tariffs on steel drive up the cost of everthing made with steel, to give one simple example.

There is also the corrupting effect that protectionism has, as explained by Phillip W Magness:

In economic terms, tariffs deliver a “rent” by transferring a portion of the consumer surplus from exchange to beneficiary producers who no longer face import competition. The collective action advantages of concentrated interest groups enable lobbying efforts to coalesce around tariff-benefitting industries, which then divert resources away from productive economic activities and into seeking favors through the political system. On net, the concentrated benefits received by politically savvy industries are dwarfed by the combination of deadweight losses on consumers and political losses due to rent-seeking to obtain more tariffs.

Magness also notes another myth about tariffs that modern-day protectionists like to lean on:

As Douglas Irwin has shown, the claimed correlations between late nineteenth-century American industrialization and protectionism are both exaggerated and spurious. Economic growth in sectors that did not face heavy import-competition—think of transportation, communication, and utilities—generally outpaced the tariff-beneficiaries of industrial manufacturing. The United States also had the unique advantage of a large, geographically diverse internal commercial base in this period. Nor were tariffs the unambiguous benefit to industry that Cass claims. They raised the prices on imported capital goods like heavy machinery, which likely impaired many of the same industries that benefited from tariffs on their own goods.

In any event, while they are different in many ways, it appears that both Mr Biden and Mr Trump are in agreement that tariffs are great. Whatever other qualities, or the lack thereof, may distinguish these men from each other and may persuade voters to jump one way or the other, or abstain, or just despair, it appears that on protectionism, we are back in an age as if Adam Smith and David Ricardo never existed.