Scheve and Slaughter extends the sensible Proposition that Protectionism is driven by increasing Income Inequality; very close to the Truth, but still a shade off. Actual Income Inequality, unless absolutely dire, does not raise the Beast of Protectionism. The Economy is a game of expectations: small Incomes mean little under a widespread Market for high-paid labor, where most Labor can possess the expectation of eventually landing a good Income Job. The Rationale of Income redistribution fails in countering the rise of Protectionism solely because Offshoring and Trade are draining the mass of high-paying Jobs from this Country. Highly paid professionals can proclaim the advantage of Trade, but echos in an empty hall, if Trade erodes the niche social classes of Employment. I utilize this later expression to highlight the real resentment present in the American Labor Movement, which consists of a reaction to the inability to draw Social esteem from their employment.
There remain real causes for Protectionist sentiment: the real Cost of Trade, the high Energy expenditure Costs of Trade, the Cost of Transactional flows of Capital, and the inferior corrosion of Product Quality. Governments underwrite various Production Costs in every nation, Costs which often are well-hidden to the unwary Eye. One of the most evident hidden Costs is that of Shipping, where many nations minimize Portage Costs way below Normal Structural Costs. Other nations transport Trade Goods under their own Bottoms, and sell these Ships fuel well below World Market cost. The Energy Costs of Trade stands very high, I personally estimate an equivalent BTU usage of 22 gallons of fuel per ton over domestic production, unless Air Freight is used; here it costs about 17 lb. of fuel to transport one Pound of Trade Product over 10,000 miles. The Cost of Transactional flows of Capital in Trade stands immense, my estimate states these Costs average around 11% of Trade Value, and is the arena where the great wealth from Trade is created. The corrosion of Product Quality need not be defined; if you do not believe this Statement, buy your Toothpaste from China.
Governments have enough problems in trying to protect their own Citizens from Product fraud of all types, they cannot protect the Citizens of the World effectively; a real rationale for a limited, well-regulated Trade pattern. Income Inequality, at the same time, derives as much from the Distortions introduced by Trade, as from actual Trade Advantage. A limited, well-regulated Trade pattern (there I go using that phrase again) allows for far greater supervision of Employment patterns, as well as providing natural reinforcement for proper Wage Scaling. One hears Economists discuss Externalities in almost everything, the one Exception being Trade. I would personally prefer filling my Pickup gas tank one extra time, rather than bringing an extra ton of foreign-manufactured Imports into this Country from China–can’t We find Someone around here to produce that ton at a competitive Price? lgl