Who decides what’s “fair?”

We’re from the government, we know everything, and we’re here to make international trade “fair.”

From Cafe Hayek:

First, there’s no reason to suppose that even saintly government officials possess, or could possibly obtain, the knowledge necessary to obstruct in welfare-enhancing ways their fellow-citizens’ trade with foreigners.

Second, there’s no reason to suppose that even stupendously well-informed government officials would, when obstructing their fellow-citizens’ trade, act to promote the general welfare rather than to promote the welfare of special-interest groups.

Third, there’s no reason, if government officials are to be trusted with such extensive powers as you desire, to limit the exercise of those powers only to economic change sparked by trade that crosses political borders.


See also: A Failure to Adjust, a long, well documented, explanation of the results of assuming complete knowledge, while complaining that “better complete knowledge” would prevent the problems.

Good, fast, cheap

The followup to that is usually, “Pick two.” In this case, pick none.

General Motors, the President, and the Trade War

GM announced that it will soon close five plants: four in the U.S. and one in Canada. There are many reasons behind the move, including lower sales of some of GM’s models and the additional cost of $1 billion imposed by the metal tariffs.

The announcement led to another round of complaints and bluster from President Trump who seems to believe it is appropriate for him to tell American companies what they can and cannot do to make sure they’re able to survive in business.

Well, why not? He’s certainly willing to use tariffs to tell consumers what they can and cannot buy.

Reminds me of the Obamacare mandate. Republicans were comparing that to forcing people to buy broccoli. How about forcing people to buy Volts? Apparently not: Even if you subsidize the Volts, batteries, windmills, and solar panels.

Saving jobs where wages make producing cost competitive products problematic (though an argument can be made that most of those products weren’t actually market-competitive anyway, as the plant closings indicate) was, at best, a long shot. Add to that a billion dollar increase in material cost…

Well, at least there are a few more US steelworkers employed than there would have been. For now.

Presiding over spilled milk

The United States has applied its central planning acumen to the dairy industry for many decades. It has worked as you might expect.

Not only does America have milk – it’s got a surplus of over 8 million metric tons, forcing dairy farms to shutter and farmers to simply start dumping millions of gallons of milk that far exceeds domestic and foreign demand

The State of Wisconsin has seen a net loss of more than 400 dairy farms this year alone, and in December last year, the state’s farmers dumped a record 160 million pounds of skim milk they couldn’t sell. That’s three times the amount they were forced to dump in 2012, according to CSMonitor.

By July, farmers in the Northeast had dumped 145 million pounds of milk, and 23.6 million pounds of that was dumped in July alone, according to Bloomberg.

Predictably, we have a bureaucrat to step in for comic relief:

“Dairy farmers are free-market guys – they don’t want to be told how much to produce,” Richard A. Ball, commissioner of New York’s Department of Agriculture and Markets, told Bloomberg.

Ahem. The free market is what would be telling dairy framers how much to produce; if there was one. Since there isn’t, maybe they do have to be told. Which, to be fair, is what they asked for.

With just the right combination of lobbyists, legislators, and bureaucrats I’m sure we could convert this glut into a shortage, or maybe a bigger glut, in short order. At least we could ensure a glut of lobbyists and bureaucrats as a source of campaign contributions to legislators.

As to signs of dairy farmers being “free market guys,” I don’t think lobbying for protective tariffs, USDA price regulation, demanding trade war, or rent-seeking after subsidies actually qualify.

U.S. dairy imports are restricted through quotas, tariffs and licensing requirements. Prices are regulated through a complex system managed by the USDA, which sets minimum prices. When prices fall below regulated minimums, farmers can apply for federal assistance.

US dairy farmers didn’t manage to get into this situation all on their own, they have had a lot of government “help.” They did, however, ask for it – including their share of $20 billion a year in subsidies from the farm bill, a hodge-podge of other price support programs, and the building of America’s strategic cheese reserve.

This is new

But it still shows President Trump’s confusion on trade and tariffs. From whitehouse.gov:
Press Conference by President Trump After G7 Summit

Emphasis mine.



Q How did it go down?


We have to — ultimately, that’s what you want. You want a tariff-free [sic], you want no barriers, and you want no subsidies, because you have some cases where countries are subsidizing industries, and that’s not fair. So you go tariff-free, you go barrier-free, you go subsidy-free. That’s the way you learned at the Wharton School of Finance. I mean, that would be the ultimate thing. Now, whether or not that works — but I did suggest it, and people were — I guess, they got to go back to the drawing and check it out, right?

So, they did teach him that tariffs are a bad thing in his Econ 101 course. One would think this attitude would have made NAFTA easy to re-negotiate.

Since this is the first time I can recall any mention of it in the President’s otherwise protectionist, multitudinous rants; maybe he’s just now remembered it. Better late than never, but his recall is incomplete and confused.

Canada does, indeed, levy a 270 percent tariff on milk imported from the US. However, it is not the US that pays that tariff, it is Canadian consumers. Just like it’s American consumers and businesses who pay US tariffs on softwood lumber, steel, aluminum, washing machines, cars, etc., etc..

As to no subsidies: If Canada wants to subsidize US purchases of steel, aluminum, softwood lumber, or cars: I say let them. Those are subsidies given to US consumers by Canadian taxpayers. It’s stupid for Canada to do it, but it isn’t our problem.

President Trump is confused about who pays tariffs, and he appears to view trade as a zero sum game. If one side wins the other side must lose. Nothing could be further from the truth. By definition, in any freely conducted trade all the traders win.

If he could just remember that lesson from Wharton, he’d be a much better CEO. Maybe he missed class that day.

Mercantilist revivalism

Used to be when you said “conservative” people had a clear idea of what you meant philosophically. Adam Smith, W. F. Buckley, Goldwater, Reagan, or Cruz might come to mind. Maybe it would invoke the tea party, free trade, Constitutional originalism, free markets, and opposition to deficit spending. Now, it’s all a mess thanks to a long run of “conservatives” like John McCain, George Bush, and Donald Trump

There’s “conservative,” “neo-conservative,” “cuckservative,” “Trump conservative,” “Alt-right,” etc.. TOC has worried in the past about this philosophical dilution – defining freedom down. The current round of internecine attacks, including selective rejection of long standing principles, have been more damaging than anything the Progressives have accomplished.

Cronyism and protectionism are seen as fine if the correct people do it. Now protectionism is “conservative,” along with corporate bailouts.

We all need to reread Friedrich Hayek’s Why I am Not a Conservative: “The tug of war between conservatives and progressives can only affect the speed, not the direction, of contemporary developments.” Hayek was a classical liberal, a qualifier required since the collectivists stole the original word. Now we’re witnessing the further muddling of what has been meant in the United States by “conservative,” i.e., “classical liberal.”

The latest example; “Conservatives” who defend Trump’s populist trade shenanigans as ‘bargaining positions’ are expediently abandoning moral leadership.

Why Trump’s Higher Tariffs Now are Unlikely to Result in Lower Tariffs Later

I think it is absurd to assume that Trump’s real intention is to get us to a new equilibrium with lower tariffs all around the world. He does not understand the value of free trade and his closest adviser on this issue is an ardent protectionist. Trump’s negotiation experience is all in zero-sum games where he is trying to extract the most of a fixed pie for himself, not in trying to craft win-win solutions across multiple parties.

But here is the real reason this won’t work: The current relatively-free trade regime that exists today was built almost totally on America’s moral leadership on the issue…

[M]many of the most powerful political actors in our trading partners actually represent large corporations (some state owned and some just highly-aligned with the state) and powerful labor unions who would be perfectly happy to pursue additional crony protectionism of their industry even at the expense of the majority of their country’s consumers and businesses. All these forces for protectionism have always been kept at bay in large part by America’s leadership on the issue.

Not any more.