I like to think that my four-part video series on trade (here, here, here, and here) has a lot of useful facts and analysis.
But I overlooked a very persuasive argument.
Here are the world’s more protectionist and most pro-trade jurisdictions, according to the latest data from Economic Freedom of the World.
Why are these two lists persuasive?
Because IMF data shows that the average per-capita GDP of the protectionist nations is $3,212 while the per-capita GDP of the free-trade nations is $46,550.
More than 14 times higher!
At the risk of understatement, there are plenty of reasons why there is a big income gap between those two lists. The protectionist countries tend to have lots of other bad policies (weak rule of law, monetary instability, excessive red tape, etc), while the free-trade nations are likely to have good policies in those areas.
So the most accurate thing to say is that protectionism contributes to the poor performance of countries on the left list while trade freedom contributes to the prosperity of the nations on the right list.
Unfortunately, the leading presidential candidates in the United States want to be on the wrong side.
That’s a mistake. Andy Kessler of the Wall Street Journal explains that the Biden-Trump approach makes no sense.
…tariffs impose costs on all Americans to subsidize a few jobs. …You’re going to hear a lot about tariffs this election cycle. …Mr. Trump has proposed 10% tariffs on all imports. That sounds strong but it’s actually a weakling move, especially with U.S. industrial capacity already near an all-time high. …Should we put tariffs on search engines and social networks? Of course not. China blocks ours to force its citizens to use inferior products. Tariffs denote weakness, not strength. With tariffs, you get false price signals and less innovation. They misallocate capital and human resources by having entrepreneurs chase fake opportunities. Domestic manufacturers love tariffs, which allow them to raise prices, but the rest of us have to overpay for goods while manufacturers become lazy. …Tariffs steal the opportunity cost of doing something better. …The government is awful at picking winners and losers. …We have the world’s strongest economy. Tariffs are a sign of weakness. Let markets, not vote-buying politicians, decide which industries will bloom from the ground up. Tariffs and industrial policy are for losers.
Amen.
I would also add that protectionism is a playground for corruption.
I’ll close by asking anti-trade readers if they can identify a successful protectionist nation. Anywhere in the world. Just as is the case with my never-answered question, I won’t be holding my breath waiting for responses.
P.S. The United States in the 1800s is not a correct answer.
