"Protectionism"

by: David Sirota

Mon Feb 02, 2009 at 17:55


A very quick note on the term "protectionism" and the Establishment's selective use of it as lobbyists descend on the Senate to try to kill the Buy America provisions Barack Obama campaigned on.

Let's just say you are among the very small minority of people in the world (most of whom were at Davos last week) who believes the whole concept of "protection" is bad, no matter what is being protected - kids, water, air, jobs, etc. Let's just stipulate that, and let's not have a debate about whether your fringe position is moral or just. Let's for a moment ignore the verifiable fact that every economy in the world including ours is protected. Let's even ignore the fact that supposed "free" trade agreements include all sorts of tariff protections for corporate profits (copyrights, patents, etc.) yet are still called "free" trade agreements, while anyone wanting to put minimal tariff protections for the environment or human rights in such agreements is slandered as a "protectionist." Let's just put all that aside for a minute and get to some basic definitions.

If you are one of those people who hates "protection," even you will admit that when it comes to economic policy debates, "protectionism" is a term that has been used for the better part of a century as the word to describe tariffs. Smoot-Hawley tariffs, for instance, were labeled "protectionist," and tariff proposals today have been labeled "protectionist."

But now, suddenly, every corporate lobbyist in Washington, D.C. is claiming that Buy America laws are "protectionist," even though they have absolutely nothing to do with protecting the economy through high tariffs. Buy America laws simply say that American taxpayer dollars - when spent specifically to stimulate the American economy - should be spent on American goods that are made with American labor. How is this "protectionism" in the way that word has been defined for the better part of a century?

The answer is that it's not in any way shape or form.* Indeed, the definition of the term "protectionism" is being changed by the corporate outsourcers that won't get a piece of the pie if Buy America laws are in the stimulus. Why? Because when even Businessweek says that without measures to make sure stimulus money stays in the country, the stimulus will be undermined, corporate outsourcers need to resort to trying to change the definitions of words in order to defend their profits.

* Tellingly, corporate lobbyists - when pressed on this point - resort to conjuring fantastical hypotheticals claiming that basic Buy America laws will prompt tariffs in other countries. But again, these are fantastical hypotheticals based on wild speculative fearmongering - and not rooted in anything resembling fundamental, dollars-and-cents reality. America's economy is the largest in the world, and the dirty little secret is that because of that reality, no country can afford to shut down access to our market, Buy America laws or not.  
David Sirota :: "Protectionism"

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"Protectionism" | 34 comments
I went through some of the theory (4.00 / 3)
I just wrote this piece Buy American and someone somewhere wants to argue this bogus protectionist absurdity,  is going to have use mathematics, the theory itself to argue government expenditures with these levels of economic indicators should not be going first and foremost to U.S. workers for U.S. jobs.  

I included Byron Dorgan's entire op-ed.

Absolutely right protectionism does not mean pure stupidity, to simply give away the entire economy of the United States.  It means prohibitive tariffs which no one is recommending.  

To me these corporate lobbyists are simply trying to run some failed public relations messaging campaign that if one is interested in being economically strong or even having any assemblance to real trade theory versus these glorified giveaways and outsourcing trade agreements..then they are bad.

I wouldn't be surprised next if we see images of serial killers with the capital lettering across those faces saying Protectionist!.

It's beyond absurd, another black hole of non-debate debate.

NoSlaves.com  


The Economic Populist

Secondary spenders (4.00 / 2)
Also note that the U.S. still has a huge trade deficit and anything that gets our economy running will have a big impact on other nations, anyway.  Give a guy in this country a job and he'll go shop at Walmart.  Other countries have nothing to complain about.
[ Parent ]
yes (4.00 / 2)
that's what I see, we make so little that they already will get quite the "stimulus" with the requirement that all jobs go to US workers, etc.  

Even worse it's supposed "US" companies complaining because they have already offshore outsourced so many jobs and want to increase their profits further....even though the money is U.S. taxpayer money for which the U.S. goes into deeper debt.

NoSlaves.com  


The Economic Populist

[ Parent ]
Free Trade (4.00 / 3)
I'm much more in favor of free trade than David, but it is important to point out how un-free "free trade" usually is.  The U.S. Constitution guarantees free trade among the states with just twelve words*.  NAFTA is hundreds of pages long.

(* and those twelve words, "The Congress shall have Power To...regulate Commerce...among the several States," are only a small percentage of one freak'n long sentence.)

Exactly (4.00 / 2)
Our "free trade" agreements aren't free of protections - they are only free of protections for humans. But protections for corporations? That's what those thousands of pages in trade pacts are chock full of.
[ Parent ]
even worse (4.00 / 2)
The tariff schedule of China alone should make people realize there is nothing about the theory of free trade in those agreements.

here is a tariff schedule.  Click on the link and the zoom (image is too detailed for regular post).  

I'm all for intelligent, strategic trade based on the theory..that would be one refreshing change.  Labor arbitrage, hunting around to exploit workers, i.e. the means or production, are not supposed to be mobile for the theory to work.    (to equilibrium).  

NoSlaves.com  


The Economic Populist

[ Parent ]
I've been slow (4.00 / 3)
I'm a knee-jerk free trader; it just seem obvious to me we want all people on this planet to do well, not just those in this country.  As such, I've been very slow to pick up on just how bad these agreements really are.  My defensive shields were set to high for quite some time, which is a geeky way of saying I put my fingers in my ears while singing "I can't hear you, law-de-da..."

While my basic opinion hasn't changed my understanding of the facts have radically altered in the past few years.

My hope is to improve things enough that I start disagreeing with you and David more often; but for the time being, we are all on the same side on this.  At the moment, I just don't see how we could possible push too far towards "protectionism" given the current realities.

[ Parent ]
Protections? Hell yes. (4.00 / 1)
They protect the professional workers from foreign competition. They protect those who engage in labor, wage, tax and environmental arbitrage. They protect the rich from the complaints of the exploited.

Free Trade has never been free, especially for the millions of Americans that have lost their livelihoods as a result of it. Indeed, much of our own economy has been effectively cannibalized, so it's proving quite expensive. All our trading partners have protectionist policies we don't have. We've unilaterally disarmed.

The only concern I have about this is the possibility for trade wars--something which clever trade reps could avoid if they cared to do so. But beyond that, it also occurs to me that our trading partners that are export dependent economies might not mind a little protectionism if it restores some of our standard of living and hence, disposable income, with which to spend on their stuff.

When plunder becomes a way of life for a group of men living together in society, they create for themselves in the course of time a legal system that authorizes it and a moral code that glorifies it.

-- Frederic Bastiat, "The Law", 1850

[ Parent ]
Let's stipulate that you are correct (0.00 / 0)
My response is sort of like, "so?"

Look, Republicans have spent the past 30 years becoming master manipulators.  They draw up lists of good words and phrases and bad words and phrases and when they need to support or oppose a policy they simply grab a term as needed.

An economic debate?  People don't like protectionism.  My opponent is a protectionsist.  Q.E.D.

We all know this stuff.  It really isn't that hard nor is it "sinking to their level" to respond in kind.  Language is important.  It is how we communicate.  I don't have too much patience for those who wish to disengage and cry into their beer.

are people opposed to 'protectionism' of their country? (0.00 / 0)
link?
[ Parent ]
NYT yesterday admitted that the same countries complaining about US protectionism (4.00 / 2)
are doing it themselves -- World Leaders Wary of U.S. Economic Measures -- http://www.nytimes.com/2009/02...

... To be sure, for all the foreign criticism over the help for the Detroit automakers, European countries including France, Britain and Sweden have offered up billions in aid for local auto manufacturers. What's more, France has long protected the French companies it calls "national champions" from the threat of foreign takeover while providing huge subsidies for its farmers. ...

Economically speaking (0.00 / 0)
In Economics terms a subsidy looks an awful lot the same as a tariff. We put a 63 cent per gallon tax on Brazilian ethanol, or we could have subsidized each gallon of Iowa ethanol by the same amount (oh wait, we already do, so we have a protectionist policy combining tariffs and taxes).

There are places to protect your economy, especially with tsunami like changes like Malaysia voided off a few years back, but long term they damage. Sometimes short term they damage. Go read John Dunne, good on balancing the need for government intervention with the costs of government intervention, and when it's appropriate.

Sorry, John Dunning (0.00 / 0)
Ibid.
[ Parent ]
Subsidy (4.00 / 1)
All that is true, but none of that relates to the Buy American clause of the stimulus.  This isn't a subsidy and has no impact on what individuals or businesses can purchase, only on how the specific stimulus is spent.  Other countries can (and should) provide stimuluses for their own countries and have their own Buy Local clauses.

In fact, this global crisis requires each country to provide their own stimuluses.  The U.S. isn't big enough to save the whole world on this.  One major benefit of the Buy American clause is it encourages other countries to get into the stimulus game themselves.

[ Parent ]
How? (0.00 / 0)
How is a stimulus required to go to American businesses not a subsidy for American business? It might not be quite as easy to interpret as a targeted subsidy, but say if there's $5 billion for American green energy, well, that sure discriminates against any foreign green energy companies trying to compete in the US and many foreign markets.

Sure, other countries can play too. But I have trouble seeing where a game of global subsidies is so much better than our early Depression game of global tariffs.

[ Parent ]
Definition (4.00 / 1)
I say it isn't a subsidy because it paying a business money to work with others.  Purchasing is not the same as subsidizing.

A subsidy would be if the government came in and gave financial assistance to some group, like say the Banks or corn growers.  The bailout is a form of subsidy.  Giving people tax breaks to buy something is a subsidy.  Purchasing local products is not a subsidy as it does nothing (directly, at least) to make that product cheaper with a competing product.

[ Parent ]
Let the Chinese impose tariffs (4.00 / 1)
they can collect them on all the stuff we don't sell them.

~* the * Will * to go on *~
When you use misleading terms like "free trade"... (0.00 / 0)
...you are allowing the corporatists to frame the argument.  What we have is a pro-corporate or inhumane laissez faire method of trade.  There is nothing free about it except that the current "free trade" policies allow corporations to scour the world looking for populations to exploit and environments to destroy without any repercussions.


If you're for fair trade, fine, implement such a bill! (0.00 / 0)
But "buy american" has nothing to do with that. It doesn't distinguish between nations that trade fairly and those who distort the competition (by keeping their exchange rate at an artificial low, for instance). It's just an unilateral move that discriminates against all foreign products, and foreign governments will retaliate by making sure their tax bucks aren't spend for US goods. What's to be gained from this for the US? Nobody has published a serious calculation yet proving that the profits will outweigh the losses. And economists have for decades now held the position that generally all nations profit from international free trade. Of course, there are exceptions from the rule. But nobody has proven yet that this situation now is an exception. So, why part with that successful model now, a policy that helped making the US the leading economy of the world, when there isn't a compelling case that this is warranted? You want to base your economic measures on wishful thinking now? D'oh.
[ Parent ]
I was arguing against the use of the misleading term "free trade".... (0.00 / 0)
...like I mentioned what we have is a pro-corporate or inhumane laissez faire method of trade that in a very Orwellian way is called "free trade".

And by the way historically the industrial might of the US was built during a time of substantial tariffs.  In fact for most of American History we had substantial tariffs.  What is called "free trade" today in many ways didn't begin until the very late 70's and 80's, which actually corresponded to an economic decline in this country.

Regards,

[ Parent ]
Ok, there sure is reason for criticism on free trade.... (0.00 / 0)
..as it is practised today. No misunderstanding, I'm very sympathetic towards the fair trade movement. I just try to make a stand against what I see as unreasonable protectionism that will hurt us all (the US, too) and creates dangerous precendents for a new round of isolationism.

As for the historical economic development of the US, imho the huge domestic market, and all those readily available resources was even more helpful than tariffs (btw, wasn't it a fight AGAINST tariffs that led to Independence? Hmmm...). And it should be reason for some reflection that most of the strongest increases of economy happened during a time when the US was almost totally open for immigrants...  

[ Parent ]
According to Galbraith's "The Predator State" (4.00 / 3)
the American Left's focus on "free trade" as the problem is wrong-headed.

"The Scandinavian countries are the most egalitarian capitalist countries on earth. They have universal unions, high minimum wages, and a strong welfare state. But as trade campaigners often neglect to acknowledge, they also are highly open. They practice free trade. Business there is free to import, export, and outsource. Business there is free to hire and fire, change lines of business, and otherwise conduct itself as it sees fit. And yet, the Scandinavians enjoy, most of the time, the lowest unemployment rates in Europe. How can this be so, if markets are always pressing for wages to be cut? The secret in this policy mix is not, as many imagine, industrial policy or job retraining, though these have some role. The true secret lies in the aggressive regulation of wages...The problem in short is not foreigners and trade. The big problem is that unions, laws, regulations, and standards have been undercut by conservative policies right here at home."


"Never separate the life you live from the words you speak" -Paul Wellstone
Only prejudices here, no facts, and ignoring other evidence, David! (2.00 / 2)
Really, this polemic is a new low, even for you.

you are among the very small minority of people in the world (most of whom were at Davos last week) who believes the whole concept of "protection" is bad, no matter what is being protected - kids, water, air, jobs, etc.
Strawman argument! Who are you talking about? Some extreme capitalists who advocate even life threatening pollution? Even if you could find a handful of examples for that, what has this to do with the majority of people who are against "buy american"?

Let's for a moment ignore the verifiable fact that every economy in the world including ours is protected.
Ok, that's fine. It misses the important point anyway. Because the real problem is that the US wants to unilateraly go one step beyond this established level, by adding a "buy american" rule to the emergency package. It's a verifiable fact that no other G20 government has done this so far. So, they rightfully ask: What about all those lipservices to embrace a more diplomatic apporoach, get in sync with the world and stay away from unilateralism?

"protectionism" is a term that has been used for the better part of a century as the word to describe tariffs
Not at all! There have been lots of international complaints about Japanese protectionism, which consists of establishing bureaucratic hurdles, not tariffs, to slow down imports. And the US has complained about EU customer safety rules for decades and time and again called this protectionism.

Because when even Businessweek says that without measures to make sure stimulus money stays in the country, the stimulus will be undermined, corporate outsourcers need to resort to trying to change the definitions of words in order to defend their profits.
As I pointed out several times here now, the Businessweek story isn't taking into account the effect of other nation's rescue plan moneys being spent on US products. The US is profiting from the efforts of other nations now. But this will stop if "buy american" is implemented. As I already pointed out, the EU and Japan are threatening retaliatory measures and will make sure that their emergency package bucks won't go to the US anymore. What's would be gained from all the world engaging in "buy national"? You never answered that question, and you ignored every waqrning about the international reaction so far, David. Imho you're cherrypicking arguments, and distorting clear cut criticism in order to make your case. That's pathetic.

"Obama and S.Korea's Lee vow to fight protectionism" (4.00 / 1)
http://uk.reuters.com/article/...

South Korean President Lee Myung-bak and U.S. President Barack Obama agreed on Tuesday to fight against trade protectionism, as legislatures in both countries prepare to battle over a bilateral free trade deal.

South Korea and the United States reached the trade deal in 2007, which studies said is expected to boost their $78 billion annual trade by as much as $20 billion.

The bill has not been approved by legislatures in either country but is expected to come up for a vote in the coming weeks in South Korea.

Obama was quoted as telling Lee that trading states should fight the temptation to revert to protectionism, in the two leaders' first telephone conversation since Obama took office, Lee's spokesman said. ...


"Buy american" is a waste of money (0.00 / 1)
"In rebuilding the San Francisco-Oakland Bay Bridge in the 1990s, the California transit authority complied with state rules mandating the use of domestic steel unless it was at least 25 percent more expensive than imported steel. A domestic bid came in at 23 percent above the foreign bid, and so the more expensive American steel had to be used. Because of the large amount of steel used in the project, California taxpayers had to pay a whopping $400 million more for the bridge. While this is a windfall for a lucky steel company, steel production is capital intensive, and the rule makes less money available for other construction projects that can employ many more workers."
http://www.nytimes.com/2009/02...
trade....free?fair? (0.00 / 0)
If all countrys have trade barriers for some type of protection, how is it that the U.S. has such a large trade deficit year after year? Are we just that bad at negotations, or is the interest of the enviroment/majority deliberately ignored to further corporate interests? If we can't change this dynamic with democratic control of all three branches, how will we ever recover? If the answer to these questions is the obvious one, can violent revolution even be avoided, regardless what (I, or) anyone wants? The current trajectory is almost too depressing to dwell on. I am old, so whatever happens will be pretty much beyond me, but I feel the shame of our generation as we pass on a much reduced future to our decendents than our ansestors earned with great sacrafice and passed to us. If nothing changes, the future is blood or slavery!

Government by organized money is no better than government by organized mob..... FDR
"Protectionism" | 34 comments
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