TARIFFS AT BORDER COULD HELP U.S.
LOWER TAXES, PAY NATIONAL DEBTS
By Mark Anderson
“Before the income tax was
invented, the duty levied on imported goods financed almost the entire cost of
America’s federal government—and as much as 80 percent of that duty came
through the Port of New York, making the New York Custom House a major national
financial power.”
That is how the sign reads
outside the Alexander Hamilton U.S. Custom House in lower Manhattan, which stands as a stately symbol
of what used to be the main tax for federal revenue: the tariff. For the first
125 years of these United
States, there was no federal income tax but
tariffs were levied on imports as a commonsense source of revenue.
Ian Fletcher, an author and
economist on the other side of the nation at the San Francisco office of the U.S. Business and
Industry Council, talked with AFP about the hard realities of modern
trade. He used to live where he had a good view of the Golden Gate Bridge.
“You could see the container
ships coming in—riding very low in the water—because the containers were full;
the containers obviously have to go back where they came from, so the same
number of boats go back,” he said. “You see them going out of the Golden Gate Bridge
riding very high in the water; the reason for that, obviously, is the United States
is not exporting nearly as much as it’s importing. So these ships are going
back to China
and places like that half empty, sometimes entirely empty.”
Fletcher, a former Wall
Street economist who served hedge funds, private equity firms “and pirates like
that,” as he put it, said that he wrote his new book, Free Trade Doesn’t Work:
Why America Needs a Tariff, because “I wanted to give something back to this
country.” Interestingly, he said, “At long last, academic economists in the
universities were finally putting together the math that would enable you to
prove on a very high intellectual level that free trade is the mistake that
most commonsense people think it is.”
He added, “So I thought it
was time that this be put before the public, because it’s something they really
need to know. . . . Everyone who has looked at [the book] has liked it.”
However, many diehard free-trade intellectuals are the exception.
“Those guys just don’t
understand that ideology and economics are not the same thing,” Fletcher said
of today’s free traders, including Ludwig von Mises disciples and others cut
from a similar cloth. “You can believe in any political ideology you want . . .
but economics is supposed to be a discipline of facts.”
When asked how much longer “average
Americans” must suffer under NAFTA—a demonstrated failure first instituted in
1994—Fletcher gave a startling response: “Well, I think the good news there is
that the free-trade era of the United States is coming to an end”—based in part
on the academic world’s newfound realizations about free trade’s
fallacies, which may spell the beginning of the end for America’s
modern trade regime.
He added: “Free trade,
although it’s a mistake, is something that can look like a good policy for
nations under certain circumstances. The British thought it was really good
policy around the middle of the 19th century. They adopted it, and it
knocked them off their economic perch. And I think the United States
is being forced to wake up. And it will be dragged, kicking and screaming, back
to America’s
traditional economic policy, which is protectionist, though a lot people don’t
know that.”
Britain began to flirt with free trade around 1860 and eventually
saw it fail. Ironically, exactly 100 years later, in 1960, America
embarked down the same road, Fletcher noted.
Fletcher agrees with Gus
Stelzer, the late General Motors executive and trade writer, that the U.S.
Constitution is a protectionist document—that it does not provide for
neo-liberal trade policies. Fletcher said: “The U.S. Constitution explicitly
grants Congress the right ‘to regulate commerce with foreign nations. . . .”
Thus, the constitutional
framework is “black and white,” Fletcher told AFP, regarding the unmistakably
clear protectionist provisions installed for the purpose of “ordered liberty”
so Congress can set the ground rules for imposing tariffs not simply to raise
revenue, but mainly to protect domestic industry. That, he said, is the
ultimate goal of tariffs. The revenue is secondary.
Another black-and-white
item—Chinese tires—was addressed by Fletcher. The Obama administration’s
support of tariffs on Chinese tires and pipes is, in Fletcher’s assessment,
more of a disappointment than many people may realize.
“The Chinese tire situation
is pretty indicative of what he is really doing. He is making small, little
adjustments here and there, like his predecessors have, to prevent anything
little from blowing up into a big flashpoint. He is clearly not a
protectionist. The U.S. International Trade Commission recommended a 55 percent
tariff on Chinese tires; he only imposed 36 percent.”
Fletcher sees this as a
signal to keep the protectionists pacified but also for Obama to indicate, “Fundamentally,
I am a free trader.” He said Obama went on to propose the Trans-Pacific
Partnership, which is “a whole new free-trade area for the Pacific. So there is
no doubt that Obama is a free trader.”
Fletcher said The Wall
Street Journal “will scream its head off every time somebody imposes a 2
percent tariff on toothpicks,” yet that is mainly theatrics for the masses,
since long-existing rules provide for tariffs to be imposed now and then on
narrow segments of incoming goods—if pushed hard enough by domestic interests.
But many observers read too much into these occasional tariffs, he said.
So, as AFP asked Fletcher,
are these “token tariffs” on Chinese tires and pipes a sign of even a
small shift away from a free-trade regime?
“Not even remotely,”
Fletcher answered, adding that yet another turnaround on campaign promises for
Obama is that, as a candidate, he said he would renegotiate NAFTA. “He has
since announced that he will not renegotiate NAFTA at all.”
Mark Anderson is
a longtime newsman now working as the deputy editor for AMERICAN FREE
PRESS. Together he and his wife Angie provide many photographs of the
events they cover for AFP. Mark welcomes your comments and inputs as
well as story leads. Email him at at [email protected].Subscribe to American Free Press. Online subscriptions: One year of weekly editions—$15 plus you get a BONUS ELECTRONIC BOOK - HIGH PRIESTS OF WAR - By Michael Piper.
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(Issue # 5, February 1, 2010)
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