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OpEdNews Op Eds    H2'ed 8/22/15

Picking Apart One of the Biggest Lies in American Politics: "Free Trade"

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It has become unfashionable in the post-Reagan era to talk about tariffs.

An easy way of explaining tariffs is to say, "If there's a dollar's worth of labor in a pair of shoes manufactured in the United States, and you can make the same pair of shoes with 20 cents worth of labor in China, then we're going to charge you an 80-cent tariff when those shoes are imported into the United States. If you can make them with 50 cents of labor in Mexico, then our import tariff from Mexico is 50 cents."

In short, import duties are used to equalize manufacturing costs and protect domestic industries.

And the tariffs' equalizing effects shouldn't just be limited to labor. Products from other countries where toxic chemicals can just be poured into rivers (eventually ending up in the oceans we all share) instead of being more expensively disposed of or recycled, should be assessed a tariff to reflect that environmental cost. The same should apply to the way they generate their electricity (for example, using old coal-fired power plants that belch toxins into our air) to manufacture parts for the products.

Second, pull us out of the WTO, NAFTA, CAFTA, and the rest, and mandate that all purchases made with US taxpayers' dollars be spent on goods and services provided by American workers employed by US-domiciled and incorporated businesses on American soil. No exceptions. (No more hiring Dubai-based Halliburton, for example.)

Third, have the government support new and emerging industries through tax policy, direct grants, and funding things like the National Institutes of Health, which funds most university research that leads to profitable new drugs for our pharmaceutical companies.

In Japan, it's the Ministry of Industry and Trade (MITI) which helped develop the Lexus so beloved by Thomas Friedman. There is no shame in subsidizing our own companies -- as long as they show their loyalty to the U.S. by employing American workers, investing in American enterprises, and not engaging in international business ventures that hurt America.

Then there are other tax incentives and domestic policies to pursue that will benefit the creation of jobs at home. Encourage Americans to save, so there's a strong pool of investment capital for businesses to borrow against and grow -- the best way to do this is to offer people an above-the-inflation-rate interest rate on savings.

This could easily be accomplished by offering US government savings bonds with a guaranteed rate of return (for example, inflation plus 3 points) and limiting their purchase to people who have a net worth of less than $5 million and selling no more than $1 million per person. This would establish a benchmark against which banks would have to compete, stimulating private banks and credit unions to offer higher returns on savings.

These are bold moves, no doubt, for any president or party to make, but they do have the advantage of pleasing the Tea Party populists as well as the Coffee Party progressive populists.

Of course, such protectionist policies would not sit well with some of the multinational conglomerates, whose loyalty is not to America, but only to their investors and shareholders. A lot of them manufacture products in China or Vietnam and sell them here at a huge profit without giving a damn about the consequences of these actions to American workers.

But if we want to "bring our jobs back home to America," as politicians keep saying, all we need do is repudiate Reaganism and so-called "free trade" and go back to what George Washington and Alexander Hamilton worked out in 1791 that served our country so well until Reagan and Clinton dismantled them in the 1980s and 1990s.

Footnote: Here is part of Alexander Hamilton's "Report on Manufactures" 11-point plan to build America, submitted to Congress in 1791 and largely instituted in a variety of ways by Congress and the George Washington administration by 1793. It stood in large part and built American industry from 1793 until the Reagan Revolution, and is now (in more modern forms, including using VAT taxes as functional tariffs, and "national security" as a form of "prohibition") the principle trade policy for countries like China, Germany, Taiwan, South Korea, and Japan:

A full view having now been taken of the inducements to the promotion of manufactures in the United States, accompanied with an examination of the principal objections which are commonly urged in opposition, it is proper, in the next place, to consider the means by which it may be effected. In order to a better judgment of the means proper to be resorted to by the United States, it will be of use to advert to those which have been employed with success in other countries. The principal of these are:

1. Protecting duties or duties on those foreign articles which are the rivals of the domestic ones intended to be encouraged.
Duties of this nature evidently amount to a virtual bounty on the domestic fabrics; since, by enhancing the charges on foreign articles, they enable the, national manufacturers to undersell ;all their foreign competitors. It has the additional recommendation of being a resource of revenue. Indeed, all tile duties imposed on imported articles, though with an exclusive view to revenue, have the effect, in contemplation, and, except where they fill on raw materials, wear a beneficent aspect towards the manufacturers of the country.

2. Prohibitions of rival articles, or duties equivalent to prohibitions.
This is another and an efficacious means of encouraging national manufactures; Of duties equivalent to prohibitions, there are examples in the laws of the United States, but they are not numerous. It might almost be said, by the principles of distributive justice; certainly, by the duty of endeavoring to secure to their own citizens a reciprocity of advantages.

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Thom Hartmann is a Project Censored Award-winning New York Times best-selling author, and host of a nationally syndicated daily progressive talk program on the Air America Radio Network, live noon-3 PM ET. His most recent books are "The Last Hours of Ancient Sunlight," "Unequal Protection: The Rise of Corporate Dominance and the Theft of Human Rights," "We The People," "What Would Jefferson Do?," "Screwed: The Undeclared War Against the Middle (more...)

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