Wealth & Poverty Review A Lively Discussion on Trade and Protectionism

This will go down in history as the episode of “The Bill Walton Show” where economist John Tamny referred to views I presented as utter nonsense and I called his naïve.

No, we haven’t descended into a late-night cable TV news catfight. Anyone who has watched this program for any time knows I could not have more respect for Tamny, a senior fellow in economics at Reason Foundation,  and his unique insights into economics, trade, and policy—and that he’s one of my favorite people.

But the language we both chose in what was an entirely pleasant conversation perhaps reflects the sharp differences that are emerging even on the pro-market side about the trade practices of President Donald Trump.

I had made the point that China operates from a different playbook than us. Our economy is set up to satisfy consumer demand—China is focused on industrial policy, real estate development, mercantilism, and currency manipulation.

As such, fair trade, prudent trade, might not look as much like free trade as the right is used to.

This was “utter nonsense,” Tamny said, because China, of course, wants to satisfy consumer demand, pegs its currency to the dollar, and has a “desire to import every bit as much as ours.” Who cares if the Chinese “cheat,” if it means lower-cost consumer goods in the U.S.?

I barely had time to tell Tamny his views were naïve before Terry Miller, another economist, jumped in.

“There’s cheating and there’s cheating,” said Miller, director of the Center for International Trade and Economics at The Heritage Foundation, adding: “China doesn’t have anything resembling a free market economic system like that in the United States. They have a state-controlled system. It’s grown out of a totalitarian communist regime, so they have some very different ideas about how the state should intervene and control economic activity that would be completely unacceptable to us in the United States.”

Miller then talked about “another kind of cheating when China intervenes to, for example, steal intellectual property from American firms, or operate in a way that coerces them.”

We used the example of airplane manufacturers. If they want to sell in China, they have to give the Chinese access to their technology. Then, China restricts its market to planes made in China with technology it forced American companies to give up.

“There is an element of coercion in Chinese economic activity, and I think you can’t let them get away with things like the theft of intellectual property,” Miller said. “That’s just wrong.”

There was a lot we did agree on. The free market knows best when it comes to trade policy. We’d probably be better off if countries got rid of their trade agencies. And trade agreements are becoming increasingly irrelevant and, given that most restrict trade rather than expand it, counterproductive.

The recently announced tariffs on washing machines and solar panels were oddly acceptable to all three of us free traders.

“Every president has imposed some sort of ridiculous, economy-sapping or people-sapping tariff,” Tamny said. “So find some of the lamest industries you can find, that are least relevant, that are already heavily subsidized … throw a few bones to this ridiculous wing of the party that wants to put up barriers to trade, and quiet the protectionist wing down, and then secretly say, ‘We are not suicidal. We are not in the business of cutting off the left hands of our people, which is basically what tariffs are. We are open for business.’”

Tamny suggested we pursue a “Lamaze policy” when it comes to trade and “stay out of what is natural and beautiful. We have evolved with traders. What is the car, the internet, the airplane, the Erie Canal? Everything we have done as evolving people is to make it easier for people to trade with one another.”

One would be naïve to think that is utter nonsense.

Listen to the full episode here.

Bill Walton

Senior Fellow, Center for Wealth and Poverty
Bill Walton is a Senior Fellow of the Center on Wealth and Poverty, and Vice President of the Council for National Policy. He is the chairman of Rappahannock Ventures, LLC (private equity) and Rush River Entertainment (feature film production), which he founded in 2010.