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Free Trade: Trump, Clinton, Obama, and Ryan. Who is Right?

29 Jun 2016

I hate to beat a dead horse, but the issue of trade keeps coming up in the news, whether from Donald Trump and the Trumpists or from Paul Ryan or from Hillary Clinton and Barack Obama, all claiming to have the right position on trade and the place of the United States in the global economic world.  Let’s sort through this mess first to find out who stands for what, if anything.

Trump is a protectionist, that is pretty clear.  He likes trade, when it benefits the nation directly—protectionism is a sub-set of a certain kind of nationalism.  He also likes trade when it benefits him directly, and it is possible he would favor the same kind of cronyism if he were president.  I am not condemning or praising him for now, just describing.

Paul Ryan, current Speaker of the House of Representatives, is more of a globalist, which means he does favor free trade but also some of the potential and real costs that might be included by some types of globalists.  He appears, for example, to favor very open borders for immigration.  But Ryan probably will not be willing to accept much in the way of a managed trade, at least not in theory, although it is not entirely clear that he or anyone else in Congress has read the TPP agreement to determine whether it really does promote genuine free trade or is a smokescreen for crony capitalist globalism.   I do not know the answer to that, nor do I know the entire text of TPP.  I have only read a few portions—but what I read made me uneasy.  I also don’t believe Ryan would favor (in theory at least) giving up sovereignty of the United States, though, again, in practice, I am a little suspicious.

Hillary Clinton and Barack Obama appear to be in the same camp.  They are globalists but also elitist globalists, who not only favor open borders (whether for political or sincere reasons) but also a global economy that is also a “managed” economy—managed by their allies and themselves.  This view also includes a healthy dose of cronyism, as we can see from some of the deals Clinton made while Secretary of State.  This approach is akin to a George Soros and the “Remain” group in Great Britain.  In Britain, for example, the Remainers favored the EU so much that they did sacrifice that nation’s actual trade and exchanged it for managed trade, with substantial regulation.  Hillary Clinton, Obama, and the Remainers are all willing to cede sovereignty of the nation as sincere globalists.

Who then is right?  They are all wrong, but some are partly right.  And Adam Smith was completely right.  Smith was definitely right to distrust government, collusion of businesses among themselves, and government collusion with businesses, when it came to trade.  If trade is good (of course there are exceptions, such as war) then let it be free.  Don’t say it is free but in reality hem it in with all sorts of side deals and regulations.  But what about immigration?  Open borders are fine in theory, but legal open borders, not the problems we are encountering now.  On the one hand, if one ignores illegal immigration, the average wage level of many jobs declines, making those companies that employ such people more competitive (lower costs and lower prices).  On the other hand, the competition for labor can drive out many Americans who are legal citizens.  Should we care about that or not, purely from an economic (not a terrorism) standpoint?  I am inclined to go down the middle.  Illegal immigration cannot be allowed, but free and legal immigration (after background checks and strict vetting and even a modicum of preparation for assimilation) ought to be allowed.

On the issue of sovereignty, some would dismiss this as an old, worn-out political concept.  They might say it is meaningless, since a nation can always take back what it gave to other nations or organizations.  Technically, that is true.  But that doesn’t mean the issue ought to be thrown into the dustbin of history.  But let’s pass over this issue until some later date.

Trump is wrong if he expects to engage in tariff wars and to resort to protection for favored industries, in the name of preserving American jobs.  This has been tried, and it has failed, most notably in Great Britain in the 1960s and 1970s.  It also risks making the nation less competitive in the longer run, as many industries and jobs would be artificially protected from competition when they should have simply disappeared to make room for more and better jobs (Schumpeter’s “creative destruction”).  No doubt this is painful for a nation, and the government can do a few things to ease the transition.

Ryan is wrong insofar as he advocates open borders in such a way that he turns a blind eye to the illegal immigration problem.  Otherwise he is correct to advocate free trade—IF what he means is truly free trade. Again, I don’t know whether he has read the TPP and I cannot be completely sure it is more harmful than helpful to free trade.  But he needs to read it if he hasn’t and make an intelligent, and non-political, decision on his own view.  And he should be honest enough to tell the truth. Finally, he cannot afford to be anywhere near potential crony capitalists, as to some, it looks like he is cozying to just a bit much.

Clinton and Obama?  They would sell their parents for political influence.  But worse, they also believe the ideas of elitism.  It sounds nice to talk about free trade, but I haven’t ever heard Clinton or Obama talk about genuine free trade.  They hedge every statement on it.  Moreover, they both favor open and illegal immigration.

I have said it several times.  I really like and want free trade, but when I say “free trade,” I mean free.  I hate cronyism in any form, and I do not believe protectionism will be to the benefit of the citizens of the United States.  We need to get this right or we risk making our economy worse than stagnant.  I am not telling anyone how to vote—yet.  That may come in the Fall.  After all, voting for a candidate involves a whole package of views and a voter must weigh the various views and choose the best he or she can.  But next to clear absolutes like abortion and the LGBT issue, this economic issue ranks pretty high.