Matt Hittle, everyone's favorite libertarian, is up to his usual antics
with an editorial this week in the Volante professing the greatness of
free trade. The main point of his editorial is that free
(international) trade benefits all except for a small minority of
"protectionists" who would rather see the majority harmed in order to
maintain their own stake in the economy. And Matt is right... well,
sort of at least. I agree with Matt's overall argument but believe he
is exaggerating the righteousness of free trade. It comes with its own
demons that must be addressed.

Protectionism is inherently wrong. The principle of protectionism boils down to "virtue in selfishness." Why? Because protectionists, by the very definition of the word, are out to protect their interests in spite of reasons, such as efficiency, to back down and adjust to a new economy. By conceding this point, however, I do not mean to imply that there are no legitimate ways to oppose free trade on other grounds.

The strongest argument Hittle makes to support free trade is efficiency. To dramatize this point, let us suppose that Canadian farmers want to grow bananas in Canada rather than importing them from Costa Rica. In order to grow bananas in Canada, the agricultural industry builds massive indoor facilities that are artificially heated in order to keep the banana trees alive and fruitful in Canada during the harsh winter. This is good for the Canadian banana industry, which would otherwise be completely broke, but bad for the Canadian consumers who, loving bananas as all good people do, are paying three times as much for a banana as they would if they had just imported them from Costa Rica. This example illustrates (1) the potential benefit of free trade to consumers, (2) the strong motive for protectionism, and (3) how different countries can produce different goods with greater or lesser efficiency. It is this third point that I want to elaborate on for now.

What Matt conveniently omits from his article are the "dark efficiencies" that account for discrepancies between two countries. What do I mean by "dark efficiencies"? Well, in the above example, Costa Rica's climate made it more efficient at growing bananas; similarly a country might have more fertile soil for crops, more wind for wind energy, or more easily accessible steel for manufacturing. However, poor labor standards and poor environmental regulations oftentimes create an artificially efficient economy.

Imagine waking up every morning to a thick cloud of smog shrouding Beede Hall. Imagine going to the river and seeing industrial waste sludge past Cotton Park. Imagine chemical runoff seeping into Vermillion's ground water supply and going straight into our bodies. Imagine working at McDonald's for $3 an hour because there is no minimum wage. Imagine losing a limb at Polaris and not receiving workman's compensation. Imagine that your parents withdrew you from school and sent you to work at Gurney Seeds in Yankton as a child for 50 cents an hour to generate income for your family. These are examples of the "dark efficiences" that explain increased efficiencies in other countries (and thus lower costs for we consumers). If Wal Mart can manufacture toys by expelling as much pollution as they want without safety standards to ensure there is no lead in their toys with a workforce that gets paid relatively little money without hardly any safety regulations in China then why in the hell would they manufacture toys in America where they have to follow environmental and labor standards? The short answer is: they wouldn't. And if they DID manufacture in America, then some other company using the "China" manufacturing model would rise up and take advantage of the situation, putting the American manufacturers out of business. All too often, these "dark efficiencies" account for differences in prices; not legitimate factors like climate or natural resources.

In order to confront this reality we have two choices: force higher standards from overseas manufacturers or decrease regulation in America. The latter choice has been coined by economists as a "race to the bottom" in which nations uniformly ease regulations in order to compete with countries like China that have little regulations. Let me ask you this: do you want to live in a smog-filled, sludge-watered, minimum-wage-less America? If the answer is "NO!" then you are in good company with the Democratic Party and the resounding majority of Americans. Libertarians, the idealists that they are, just don't understand that people don't want to live in a world without these regulations. It's not because we are "inefficient" it is because we value clean air, worker safety, and minimum wages. While we concede that there is a premium on having a regulated environment and workforce, that premium is less than the "monetary value" we give to having a clean environment and protective workplace.

If we don't want a "race to the bottom" then we have another choice: enforce higher standards from international products. Rather than advocating "protectionism" to "keep jobs in America," which as I argued earlier is a selfish principle, we should advocate tough rules and regulations to ensure that products in America are truly more competitive. Let's ban products made from children. If a company pays less than a reasonable "minimum wage" standard for the country it is produced in then let's calculate what the company should've paid and make the company pay the difference as an import tax. Let's calculate how much money it would've cost for the company to be "environmentally clean" and make that an import tax as well. The end result would be a LEVEL playing field-- and one that protects the important interests of the environment and fair labor standards. The price of an American versus a Chinese product would then be fair; any discrepancy in price would be due to an abundance of Chinese steel rather than an abundance of tyrannized Chinese workers.