Tariffs

Meet the Free Traders Who Don't Like Global Trade Agreements

Trump's unusual fusionism puts anti-WTO libertarians on the spot.

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Donald Trump campaigned more vigorously for tariffs and against trade agreements than any major-party nominee, Democrat or Republican, since at least World War II. In setting his sights on the postwar trading order, the 45th president is being bolstered by an unusual bloc of supporters: free traders against trade agreements.

During the campaign, Trump called the North American Free Trade Agreement "one of the worst economic deals ever made by our country." In early December, the president-elect promised "retribution," including a "tax on our soon to be strong border of 35%," directed at "any business that leaves our country for another country, fires its employees, builds a new factory or plant in the other country, and then thinks it will sell its product back into the U.S." Rep. Justin Amash (R–Mich.), arguably one of the two most libertarian members of Congress, reacted as you might expect: with a cutting tweet. "This would be a 35% tax on all Americans—a tax that especially hurts low-income families," he wrote on the platform. "Maybe the slogan should be #MakeAmericaVenezuela."

But that second congressional libertarian, Rep. Thomas Massie (R–Ky.), reacted quite differently. "Bilateral trade agreements are a wonderful thing," Massie tweeted at me, after I criticized the new GOP positioning on tariffs. "Global government, not so much."

Libertarians have long been sensitive to the paradox near the heart of international tariff-reduction projects of the past seven decades. On one hand, increasingly free global trade flows have irrefutably played an outsized role in lifting a billion people out of poverty in the last quarter-century alone. On the other, multilateral trade agreements by definition create institutions, such as the World Trade Organization (WTO), beyond the direct reach of sovereign democratic polities.

Those of us who have accepted that trade-off have found ourselves for decades having to both defend and try to improve from within the "Washington consensus" on liberalizing tariffs. But now that that consensus has been repudiated at the polls all over the Western world, it's time for the other side of that intra-libertarian argument to make its free trade case within an imperfect vessel.

Take Daniel Hannan. Before and after the United Kingdom's historic vote to exit the European Union, Hannan, one of the most articulate defenders of global free trade you will ever hear speak, defended "Brexit" as a corrective exercise in recapturing national sovereignty. "All of the polls were very clear that the biggest issue was democracy. Immigration was a very distant second," Hannan told Reason's Nick Gillespie in November. "People wanted a sense of control and I think that's a perfectly legitimate thing." At a Reason Foundation event the same month, Hannan said he's interested in starting up an organization to promote a true free trade deal between Washington and London.

And yet the nationalists Hannan hitched his wagon to do not share his views on government intervention into markets. Brexit leader Boris Johnson complained during the campaign that "when we want to change tack on tariffs, we can't—because we have given up control." Now that Johnson et al. have resumed control, one of the paradoxes they're grappling with is that a replacement trade agreement with the E.U. could take as long as a decade to hammer through. Nationalism and tariff reductions are not a natural mix, turns out.

Donald Trump knows this very well. At press time, the president-elect was floating a broad-based 5 percent import tax, which would, in addition to directly reducing the purchasing power of Americans, pose legal challenges to just about every trade deal the U.S. has signed. What's more, Trump's politicking on the issue appears to be changing public opinion: A remarkable 73 percent of Republicans, according to a December Economist/YouGov poll, approve of "imposing stiff tariffs or other taxes on U.S. companies that relocate jobs."

Thus far Trump's political success has prompted longtime free-traders, such as Vice President–elect Mike Pence and Club for Growth co-founder Steve Moore, to change their spots on the issue. Others, including House Majority Leader Kevin McCarthy (who told reporters "I don't want to get into some type of trade war"), appear to be holding the line.

So the ball's in your court, Thomas Massie, Daniel Hannan, Ron Paul, and all the other libertarians who have argued for years that free trade agreements aren't the same thing as free trade. The postwar liberal trade order certainly has had its defects. Here's hoping the additional sovereignty won't come with an untenably protectionist price tag.

NEXT: Brickbat: Caught in a Hammerlock

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  1. If it takes a treaty, it’s not free trade, but managed trade. It may be freer than it was before, and that’s a good thing, but it should never be substituted for true free trade whenever possible. At least it moved us in the right direction.

    The last thing we need is more tariffs and more controls on the economy. Look at the history books (or just google it) for the Smoot-Hawley Tariff act and how it helped plunge not only the US, but the whole world into the Great Depression.

    Given the recent massive expansion of the money supply and then adding this bit could turn into a replay of the 20’s … and their consequences, the 30’s.

    1. It’s somewhat like the debate on lowering taxes versus cleaning up the system of tax regulations; the inputs and outputs look very similar on paper, but the rules involved end up being very different (and so the opportunities for rent-seeking and the like both now and in the future are very different).

      A free market in proper capitalism, so it’s full of risk. To a degree, it’s understandable that states (like people) seek to mitigate risk by pooling interests through blocs, but that doesn’t work when nations are half-assing with one toe in the free market pool and one toe in a mercantilist hot tub ? all that temperature confusion does in make them have to pee.

    2. If it takes a treaty, it’s not free trade, but managed trade.

      To be fair, the treaty could simply prohibit laws that hinder free trade among the signatories.

    3. And if it involves the reserve currency country (where money drives the trade flow not the physical stuff), ‘free trade’ is code for ‘financial sector protectionism’.

    4. “If it takes a treaty, it’s not free trade, but managed trade.”

      Sorry, but this does not follow.

      1. Governments do not have rights; therefore they do not have “freedoms” in the proper sense. Individuals have freedoms, which government may infringe upon.

      2. It is entirely possible for a government to infringe on economic freedom, but be willing to agree to cease doing so in return for concessions made in a treaty (or even for just the treaty itself).

      3. In this hypothetical scenario, the post-treaty result is clearly “free trade” whereas the pre-treaty situation is clearly not.

      I understand that you might not consider particular trade agreements to engender free trade, but your generalized formulation is facially invalid as stated.

  2. it’s time for the other side of that intra-libertarian argument to make its free trade case within an imperfect vessel.

    Yay!

    Cant’ wait to hear Reason’s “free market” case for their corporatist support for:
    Differential taxation of capital gains and wages
    Differential taxation of capital and wages
    Government granted monopolies of patent can copyright
    Corporate limited liability

    Also would like to their “free market” solution to the problem that the Lockean Provisio no longer holds.

    1. I think Benjamin Tucker’s critique of Herbert Spencer in 1884 could apply to many of the writers at Reason:

      It will be noticed that in these later articles, amid his multitudinous illustrations (of which he is as prodigal as ever) of the evils of legislation, he in every instance cites some law passed, ostensibly at least, to protect labor, alleviate suffering, or promote the people’s welfare. He demonstrates beyond dispute the lamentable failure in this direction. But never once does he call attention to the far more deadly and deep-seated evils growing out of the innumerable laws creating privilege and sustaining monopoly. You must not protect the weak against the strong, he seems to say, but freely supply all the weapons needed by the strong to oppress the weak. He is greatly shocked that the rich should be directly taxed to support the poor, but that the poor should be indirectly taxed and bled to make the rich richer does not outrage his delicate sensibilities in the least. Poverty is increased by the poor laws, says Mr. Spencer. Granted; but what about the rich laws that caused and still cause the poverty to which the poor laws add? That is by far the more important question; yet Mr. Spencer tries to blink it out of sight.

      1. Tucker went on to say, “Praise Kek, you dumb cuck!” #MAGA!

  3. at the very least after a long period of thinking I have come to realize that free trade agreements are at the very least rendered immediate obsolete because by the time a deal is passed technology and by proxy industry have evolved beyond the confines of many free trade deals.

  4. Free trade is a good thing. Getting into trade agreements between a select few countries and with caveats is not free trade. Trading with countries who are gaming the system is not in our best interests. If a country imposes tariffs or anything that limits our ability to trade freely we should respond in kind.

    1. The money that goes offshore in trade has to come back onshore in trade. If they impose tariffs over there it prevents them from earning the dollars that allow them to buy something here. So it doesn’t really matter which side erects the tariffs, the result is same–less trade and less wealth for both traders. The idea of trade agreements is to prevent the tariffs from getting set up in the first place or to remove the tariffs in place that hurt both sides.

      If a trade agreement prevents trade scapegoaters, like Trump and his supporters, from stupidly erecting tariffs that hurt everyone and make everyone poorer than I’m all for trade agreements.

    2. We should respond by smuggling, not tarrifs of our own, which just limits the freedom of your own people

    3. We should respond by smuggling, not tarrifs of our own, which just limits the freedom of your own people

    4. If A = B, and B = C, then A = C, right?

      A: bacon is good
      B: Bacon-Magic is for free AND fair trade
      C: free AND fair trade is magically good.

      what was my point? ugh, I should never post on an empty stomach.

  5. A remarkable 73 percent of Republicans, according to a December Economist/YouGov poll, approve of “imposing stiff tariffs or other taxes on U.S. companies that relocate jobs.”

    One of the tragedies of our time is the widespread belief that Republicans are friends of the free market.

    1. Well said

    2. This is the truth that must be heard – they are not our friends.

      1. We have no friends, except maybe Boston Blackie.

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  9. A tariff is a price, right?. The service bought is sovereignty or maybe employment or a burden shifitng of taxation or some combination of all three. Unless I am mistaken and IIRC from econ, a price increase in one place leads to an increase in economic activity in other places as money seeks a better deal. One may forego a purchase of a tariff burdened product but money will be spent even if through savings and lending. Also, unless the collection of higher prices leads to a burn barrrel full of paper dollars in back of the White House the multiplier puts the tarriff collections back into the economy somewhere else. It’s not like a 5% collection is going to become mulch.

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