The Great Wall of China dates from the Ming dynasty (1368-1644), but
successive invasions from the North proved that it had no more military
utility than the "impregnable" Maginot Line did for the French
in 1940. Gunpowder and artillery long ago had rendered castle walls useless
too.
The failure of walls to provide military security has not discouraged a
tough-talking Pat Buchanan from centering his presidential campaign around
trade walls to enhance our economic security. Unfortunately, economic walls
make no more sense in the modern world than do castle walls for military
protection.
Logic rejects protectionism, for a wider choice of goods at varying prices
benefits consumers. Experience has backed up the logic. The 1930s, of course,
are exhibit A. To save jobs, two Republicans, Representative Willis C. Hawley
of Oregon and Senator Reed Smoot of Utah, crafted a bill to raise a massive
tax wall around the U.S. economy. Signed into law in 1930 by another Republican,
President Herbert C. Hoover, foreign trade plummeted, handsomely aided by
the retaliatory tax burdens erected by other governments. The ensuing mass
unemployment and desperation throughout the industrial world led to dictators
and semi-dictators, who, in turn, took the steps from trade war to actual
war.
Learning this lesson, 1945's victorious allies were determined to work to
reduce tariffs and eliminate other barriers to international cooperation.
The much-denounced GATT, or General Agreement on Trade and Tariffs, was
the primary means chosen to promote open international trade. To be sure,
multilateral agreements have blemishes and raise sovereignty issues, but
there is no gainsaying that GATT has worked. World trade has been kept relatively
open and now tops $4 trillion per year in merchandise alone, not to mention
an enormous daily volume in services, investments and financial transactions
across national borders.
Not that economic logic and facts are likely to deter a bellicose Pat Buchanan.
It is easy to arouse tribal resentment, but a wall around U.S. business
is the last way in the world to appease Americans' longing for a better
life. Protecting companies from competition will not make us rich. On the
contrary, open trading, both foreign and domestic, is the key to wealth.
We should make trade easier, not harder.
Protection may work in a distorted way in the short run, holding a few visible
jobs in companies that would otherwise "rightsize" or disappear.
But it cannot work in the long run to boost jobs and wages. Protectionism
rewards the inefficient and penalizes the efficient. As economist Ludwig
von Mises put it, "The history of mankind is a long record of obstacles
placed in the way of the more efficient for the benefit of the less efficient."
A few politically visible jobs are protected by interference at the cost
of many better-paying jobs destroyed elsewhere.
Over the longer run, government protection fails to create jobs and prosperity
in the most protected industries. Take the maritime industry, for example.
Once a great seafaring nation, the United States became much less competitive
during the 20th century. Heavily subsidized and unionized, our domestic
maritime trade is completely reserved to American-built, American-owned
and American-crewed vessels. The consequence has been high-priced monopoly
service between U.S. ports, costing consumers higher prices for goods and,
yes, costing U.S. sailors their jobs.
How has the maritime industry fared under its 75-year protected monopoly
created by the Jones Act of 1920? In 1950, the U.S. flag fleet consisted
of a thousand ships; a half-century of subsidy later, there are less than
200. In 1950, U.S. flag vessels carried 43% of America's foreign trade;
today they carry less than 4%. In 1950, 57,000 Americans had jobs in our
merchant fleet; today less than 9,000 go to sea in U.S. flag ships.
A 1991 International Trade Commission study put the inefficiency costs of
the Jones Act at $3.6 billion to $9.8 billion annually.
Protectionism simply cannot work. Technologies and industries rise and fall,
expand and contract, come and go. The reasons are diverse but foreign competition
is one of the minor factors in our huge, global-size economy. Economic change
is an asset, not a liability, as new technologies and cost reductions bring
wider consumer choice. We have nothing to fear from better or cheaper foreign
products.
Centuries ago, the English King Canute stood at the water's edge and forbade
the tide to come in. He was no more successful than America can be in trying
to keep out foreign goods and services in the age of the Internet and global
economics. The daily ebb and flow of the tides is central to global ecology,
just as trade is to a global economy.
The National Center for Policy Analysis is a public policy research institute
founded in 1983 and internationally known for its studies on public policy
issues. The NCPA is headquartered in Dallas, Texas, with an office in Washington,
D.C.