He’s a funny fella, Trump. With a single tweet he’s got everyone denouncing tariffs and other protectionist policies, with even the BBC writing articles on how damaging they are. Suddenly everyone is a proponent of unfettered free trade, which until last week was the preserve of libertarians versed in Austrian economics and fans of Tim Worstall’s blog.
I mean, up until a few days ago we had the EU mandarins and Remainers assuring Brexiteers that tariffs will be implemented once Britain departs without anyone from the mainstream media pointing out this will hurt the EU more than it will Britain. In fact, most were insisting the exact opposite. Yet with a single tweet representing perhaps three seconds of thought, Trump has inadvertently got everyone agreeing on how stupid import tariffs are. Not that anyone running the EU, which operates some of the most protectionist policies anywhere in the world, understands free trade. But it does give the Brexiteers some ammunition with which to respond to the threat of tariffs in ongoing negotiations.
Tariffs don’t make economic sense of course, and free trade does make us richer on aggregate. But the ZMan makes a reasonable point here:
The hidden cost of free trade is a lot of people you don’t know losing their jobs or seeing their wages cut. When you’re the guy getting the pink slip, the cost is not hidden and that has a social cost, as well.
This is a point many Remainers miss about Brexit: not everything is about economics. Britain may well be worse off economically after leaving the EU, but many British people don’t believe wrecking whole communities through mass immigration (which is often highly localised) is an acceptable price to pay for half a percentage point increase in GDP. Of course, the financial gurus in London don’t mind because it’s not their communities being wrecked. Note that the strongest proponents of open borders work in professions which are closed shops, hence immune from the influx of cheap labour. If Polish accountants, Portuguese doctors, and Romanian law firms could compete freely for business in London, we’d see a wholesale change in attitude from the ruling classes.
The ZMan goes on:
The fact is, a nation is its people. What defines France is the shared character and shared heritage of the people we call French. What defines a people is not the cost of goods or the price of labor. What defines a people is what they love together and what they hate together. It is the collection of tastes and inclinations, no different than family traditions, that have been cultivated and passed down from one generation to the next.
Perhaps mass immigration has brought economic benefits to Europe, but it has also brought about an erosion of social trust, particularly in certain areas where unskilled migrants are concentrated. Did anyone ask the people who live in these areas their approval before upending their society? Or did we all assume that provided everyone gets richer on aggregate, such societal costs are acceptable (particularly if you and I don’t actually have to pay them)?
It’s the same with trade. I am all for free trade, and I don’t believe in tariffs for the reasons people say. However, there needs to be an acknowledgment that there are both winners and losers of free trade, and even though the winners vastly outnumber the losers, we should not glibly deny that losers exist. For decades, the consensus among the ruling classes has been that the losers of global free trade shouldn’t be considered at all – unless they can cause political trouble like farmers in France, or have family and friends in government like lawyers everywhere – and they are acceptable casualties in the battle for economic growth. Well, regardless of what the solutions to their plight are – assuming there are any – I believe we should start by acknowledging that there are losers of free trade, and understand their concerns. It’s easy to wave a hand and say “they can do something else” and make references to blacksmiths and motorcars, but retraining is pretty difficult in a town flooded with low-skilled migrants. And blacksmiths didn’t go out of business because the state encouraged cheap car plants to be built next door while punishing those who used anvils.
Consider NAFTA, for example. This has allowed Chinese companies to set up in Mexico with no intention whatsoever of supplying goods and services to Mexico, instead using it as a back door to the USA while bypassing their environmental and social regulations. Sure, the US now gets flooded with cheap goods making everyone richer on aggregate, only swathes of the country now consists of condemned towns perishing under an unprecedented opiate crisis. This is progress how?
A big part of Trump’s presidential campaign was acknowledging the losers of free trade and globalisation, which went a long way to propelling him into the White House – while his rival hob-nobbed with billionaires and poured scorn on the unemployed working classes. His latest comments on Twitter have now got everyone discussing the folly of tariffs in general, but also forcing them to acknowledge the social costs of free trade policies and the people who’ve found themselves disenfranchised. While this remains just a tweet and doesn’t translate into bone-headed protectionism, I don’t think this is a bad thing. Hopefully some sensible policies will come out of this, not least between Britain and the EU.