Friday, July 13, 2007

Why I am a Trade Protectionist

Don Boudreaux asked Dani Rodrik the same Question which was uttered in and outside of the Continental Congress in the 1780s. The several States were each setting their own Trade restrictions and Tariffs against each other, as well as against the rest of the World. Those that favored a strong central government for the North American States insisted that the colonial States held insufficient size and economic strength to provide for all their basic economic needs, and both Trade restrictions and tariffs against each other distorted and reduced economic growth far beyond Short-term revenue generation. It was one of the three main Problems which the Centralists were determined to change at the Constitutional Convention.

The complexity of Trade between the United States and the rest of the World extends far beyond the American problem cited. The American States of the 1780s held a general level of Educational and Economic development, and could universally benefit from free trade practice between themselves, though they had great need to restrict European incursions into their markets, which were destabilizing developing native industries with undercutting Price schedules of developed industries with established markets; which could maintain a reduced Cost-per-Item Production schedule. Native Capital formation insisted on the need for Tariff fees against European Goods in American markets.

The Poorer nations of the World could accomplish quite stable economies with high economic growth, if they did not have to compete with the established industries of Europe and America. The current system, though, destroys native industries, distorts their economic development into provision of Trade products and resources to Developed nations, and reduces their domestic native capitalization. Offshoring and Outsourcing to poorer nations in pursuit of lower Labor Costs, on the other hand, destroys developed industries in the Developed nations; leading to lowered Employment rates, rising Income Inequality, increased Class distortions based upon wealth, and development of dependence on cheap Goods; something which will not last, as foreign Capital inflates the Labor Wage rates of Poorer nations. This corrupted Trade practice between Rich and Poor nations has little Solution, except for the imposition of intelligent Tariff charges. lgl

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