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Why the Government Sells Us Out When It Negotiates Tariffs

Written by Gary North on March 11, 2017

A common cliché of protectionism is this one: the United States government needs to negotiate better deals for American companies.

It is time to call a spade a spade. This is fascism. Fascism is the economics of a government-business alliance. There should be no government-business alliance. The government should not be involved in business. Whenever government gets involved in business, it is always done to favor certain businesses at the expense of all the rest of them. It always involves a repression of decision-making on the part of individual buyers and sellers. There are no exceptions. There are always going to be a few winners and a lot of losers. But we do not see the losers. This is what Frederic Bastiat in 1850 called “the fallacy of the things not seen.”

If I say this to the standard conservative, he nods his head in agreement. He is convinced that the government is up to no good when it intervenes into the free market. Then, a few minutes later, he tells me that the government should actively negotiate better trade deals for American businesses. In other words, his default setting on trade is fascism. He does not understand this. He does not understand economic logic, and he does not understand the meaning of the so-called business-government alliance.

There is only one legitimate justification for tariffs: as sources of revenue. In the United States Constitution, originally, the United States government was not allowed to tax individuals directly. This was done in order to restrict the power of the federal government. The federal government was allowed to tax liquor, which it did. The other main source of income was from tariffs. A tariff is a discriminatory tax placed on imports, but the Constitutional justification for it in 1787 was to restrict the power of the federal government to tax people directly through income tax assessments.

Once the 16th amendment was announced as having been passed, the justification for tariffs disappeared. From that point on, the tariff was just another discriminatory tax against imports and exports.

Yes, it is a discriminatory tax on exports. Because foreigners cannot sell all that they could otherwise sell to Americans, they cannot get their hands on United States dollars. When they cannot get their hands on United States dollars, they do not order American goods or invest in American companies. So, import restrictions are always export restrictions, and vice versa. I realize that almost no Americans or any other nationality understand this, because it involves economic reasoning, and people are not adept at economic reasoning.


This brings me to the idea that governments should negotiate tariffs and other quotas with foreign nations.

Why should any government agency negotiate in favor of any American business? What is the economic logic of this? This is one more example of government interference into the operations of the free market. Yet Americans who claim that they do not want government intervention in the marketplace loudly insist that some American trade negotiator has an obligation to get a better deal for America.

(For the rest of my article, click the link.)

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