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The politics of "economic isolationism"

By Christopher Coyle
web posted June 21, 2004

On March 31, delivering a speech in the state of Wisconsin during the controversy over the outsourcing of American jobs, President Bush gave an eloquent defense of free trade, railing against attempts to turn the United States into "economic isolationists." He succinctly and wisely stated that protectionism "would endanger our economic recovery, cost U.S. workers jobs, lead to higher prices for American consumers, and put U.S. companies at a competitive disadvantage." This is why it is all the more disappointing that Mr. Bush has not heeded his own rhetoric, allowing the politics of re-election trump the principles he supposedly stands for.

Obviously, one of the most egregious examples of this dichotomy is the protective steel tariffs, enacted to protect the inefficient steel industry from cheap foreign imports and save American jobs (and, of course, pander for votes in battleground, steel-producing states like Pennsylvania, Ohio, and West Virginia). However, it only contributed to increasing costs for businesses, leading to higher prices for consumers and unemployment in steel-consuming industries. Particularly hard hit were areas such as Michigan's automobile industry and enterprises like the Port of New Orleans. Bush did repeal these tariffs before their three-year expiration date, but did so due to political, rather than principled, motives; the European Union and other nations were set to implement retaliatory tariffs, adroitly targeting goods such as citrus fruits that are important to states, like Florida, that Mr. Bush needs to win for re-election in November.

Yet steel tariffs only scratch the surface of Mr. Bush's aberrations from free trade policies. Mr. Bush has also instituted a tariff of 29 percent on Canadian softwood lumber, ostensibly for the same purposes as the steel tariffs - to protect domestic jobs - but have only succeeded in increasing the price of housing construction and other lumber products. Vietnam has also become a victim to America's trade policies with large tariffs imposed on imported catfish. China has particularly been hard hit by the administration's deviations from free trade. The influence of the Carolina textile industry contributed to quotas on certain textile apparel including, among other things, Chinese-made bras. As retaliation for the measure, the Chinese cancelled a trade mission that planned on buying a large amount of farm commodities. The United States has also placed tariffs on televisions made by four Chinese firms since they were being made at less than "fair value." Next on the list is wooden bedroom furniture, which America is accusing the Chinese of dumping into our market, as tariffs of up to 200 percent were implemented just last week, making this the largest case of protectionism against the Chinese to date.

Another blatant instance of protectionism is the 2002 U.S. Farm Bill, a 10 year, $180 billion monstrosity which destroyed in 1996 Freedom to Farm Act, which was an attempt to eventually end agricultural subsidies. The measure, supported as an obvious gift to the farm lobby, has artificially increased prices for agricultural products, tying up scarce resources by keeping sub marginal producers in business and harming American consumers. The subsidies have made it harder for farmers living in third-world countries to compete, preventing them from raising their living standards. In fact, it was American and European insistence on keeping lavish subsidies for their farmers, despite the insistence by a group of developing nations that these unfair subsidies be eliminated, that helped to collapse the Doha round of global trade talks.

In addition to the farm bill, farmers have had influence on other free-trade policies. The Bush administration has been actively perusing bilateral trade agreements with many countries. While these agreements have been beneficial to free trade in many ways, they have also contained needless protectionist elements to appease the farm lobby. For example, the recently-signed free trade agreement with Australia will eliminate virtually all tariffs of manufactured goods between the two countries, yet the powerful sugar lobby was able to exempt itself from the agreement, while beef and dairy product protection will only be phased out over the next two decades.

Of course, some of these measures will only effect the American economy to a limited extent, given the narrow markets on which some of these tariffs have been placed. And, as mentioned above, the president has also worked hard to promote free trade by creating agreements with other nations, such as Singapore and Chile (where agreements have already been passed by Congress) and in spearheading broader initiatives, including he Free Trade Area of the America and a Central American version of NAFTA. Yet, their significance can not be diminished. It shows Mr. Bush's willingness to ignore the principles he ran for, such as free-markets and smaller government, in order to win the support of a small group of politically important constituencies. Indeed, this development has extended beyond the realm of free trade policies, such as with the prescription drug benefit added on to Medicare.

In these protectionist policies, the only constituency that Mr. Bush seems to forget is the one that he should be unwaveringly defending: the consumers, upon whom he disperses the costs of these various tariffs and quotas. It is they whom Mr. Bush should be courting, standing up for his principles by supporting economic freedom, not the narrow special interests who wish to rob his fellow man through higher prices. Needless to say that Mr. Bush is not the only one at fault here; Congress has also been complicit in many of these anti-free trade policies, yet one can only hope Mr. Bush will reign in this creeping protectionism, before vast damage can be done. For if we wish to maintain our economic prosperity, the last thing we want to do is become "economic isolationists."

Christopher Coyle is the President of The Liberty Coalition at the University of Virginia.

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  • Steel tariffs were bad economics and bad politics by W. James Antle III (September 22, 2003)
    George W. Bush thought a lot of good would come from the increase in steel tariffs he ordered in early 2002. W. James Antle III says the move turned out to be anything but beneficial for the economy or Bush
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