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Christian Economics in One Lesson, Chapter 11

Written by Gary North on June 13, 2015

Who’s “Protected” by Tariffs?

And the LORD spake unto me, saying, Ye have compassed this mountain long enough: turn you northward. And command thou the people, saying, Ye are to pass through the coast of your brethren the children of Esau, which dwell in Seir; and they shall be afraid of you: take ye good heed unto yourselves therefore: Meddle not with them; for I will not give you of their land, no, not so much as a foot breadth; because I have given mount Seir unto Esau for a possession. Ye shall buy meat of them for money, that ye may eat; and ye shall also buy water of them for money, that ye may drink (Deuteronomy 2:25)

God made it clear to Moses, who in turn made it clear to the Israelites, that there was to be free trade between the people of Israel and the people of Esau. There was to be no coercion. The people of Esau had goods that the Israelites wanted: meat and water. The people of Israel had what the people of Esau wanted: money. There were possibilities for voluntary exchange. The people of Israel were not in need of “protection” against the meat and water of Esau, meaning tariffs.

There is no mention of any tariff in the history of Israel in the Old Testament. There is none in the New Testament, either. The Roman Empire was a huge free trade zone. Its wealth rested on this fact. The Mediterranean had been cleared of pirates in 66 B.C. by Pompey. This increased trade. All roads led to Rome. This also increased trade.

1. Owners
In this incident, the owners were on both sides of the national border of Esau. There were the people of Esau, who possessed water and meat. There were the people of Israel, who possessed money. Because they had legal title to their property, they could pursue their best options available to them because of their property.

Because they owned their property, they possessed the legal right to disown it. Every piece of property was accompanied by a bundle of rights. This is the meaning of ownership: the right to use property in particular ways. One of these ways is exchange. The owners of these bundle of rights sought ways to increase their possession of more desirable goods through exchange. Who decided which goods were more desirable? Their owners.

Today, as in the days of Moses, there are owners who are affected by tariffs. Buyers (customers) on both sides of a national border are owners of money. Sellers (producers) on both sides are owners of goods. They are beneficiaries of a moral and legal order that allows them to do what they want with whatever they own, including surrender ownership.

There are also producers of goods on both sides of the border who face competition from sellers on the other side. They own resources. They seek to maximize their income from these resources. They have an incentive to restrict competition.

2. Window
The window was the legal system governing each of these nations. In the area of exchange, each civil order allowed the exchange of goods across the national border. Neither system of laws imposed restrictions of exchange. This is what free trade means.

“Free trade” usually has a more narrow focus than “free market.” But they are the same. The free market is a product of a legal system that allows free trade: across the street, across the county line, across the state line, and across the national line. The institutional arrangement places owners as judicially sovereign over whatever they own. The invisible judicial lines known as borders have no economic impact on the legal rights of people on opposite sides of these borders to exchange goods.

The bundle of rights associated with the ownership of specific pieces of property are conveyed across all borders: street, county, state, and national. There are no discriminatory taxes placed on the person who is selling one form of property across a border: goods. There is equality under the law. This conforms to the most fundamental civil law of Moses: equality before the law: “One law shall be to him that is homeborn, and unto the stranger that sojourneth among you” (Exodus 12:49).

On both sides of the border, free men possess the legal right to make bids to sell goods (producers), as well as the legal right to buy goods (customers). This legal order enables them to exercise the rights of ownership. Because they possess the right to trade, they can specialize in whatever activities they do best in the marketplace — “best” being determined by paying customers.

3. Stone
Tariffs are sales taxes on imported goods. These sales taxes are collected by the national civil government. They are, in the language of the criminal syndicates, protection money. But instead of protecting customers from imported goods, tariffs are imposed on importers. This reduces demand for imported goods, according to this fundamental economic: “When prices rise, less is demanded.” So, the “protection money” is collected from importers. Then who is bring protected? Domestic producers of the taxed items. They can more readily undercut the prices of the imported goods, plus tariffs.

The politicians of the national state come before the voters and propose sales taxes on goods that cross into the nation from abroad. The politicians are careful not to describe these sales taxes as sales taxes. Too many voters are tired of paying the existing level of taxes, let alone a new tax. So, the politicians call these sales taxes by a new name: tariffs.

(For the rest of the chapter, click the link.)

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