WEBVTT

NOTE Who's Protected By Tariffs?

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I'm Geoffrey Tucker of the Mises Institute. I have with me Mark Thornton, also of the

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Mises Institute, and we're plowing through economics in one lesson to see what kind of

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lessons he offers and how they apply today. And today we're going to talk about trade.

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And in the headlines this morning is the news presented as a tremendous calamity to the world

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that the latest trade negotiations have broken down and everyone's in a panic. So maybe you

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could put this in some context.

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Big surprise, right?

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You mean politicians are getting together, can't get along?

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Yes, exactly. Or that these trade talks would break down. I mean, all of these international

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agreements and trade talks have always broken down at certain points and they take forever.

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forever to get to their supposed goals and so a trade talk round can take years and years

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and years and they periodically break down when the various interest groups are at loggerheads

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with one another.

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It's not the politicians so much but the interest groups that they're representing that break

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down.

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For example, in the third world, or the developing world, we have a very strong desire for exporting

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our products.

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And a lot of these products are being protected by tariffs in the developed world.

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So it's a matter of negotiating between those concerns.

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Absolutely.

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So it is really the interest groups behind them.

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It's the interests of the exporters versus the domestic producers.

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It's the whole story that Hazlitt tells and tells so well about what's really going on.

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It's, you know, the protectionism is supposed to protect particular jobs, and that's obvious

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in that scene, but what is not seen behind the scenes, so to speak, is that so many people

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People are being hurt. The consumer is being hurt. Domestic industries are being hurt.

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And the whole protectionist scheme is a net loser for the economy.

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Now, you say domestic industries. You mean final producers of goods, right? Because there's

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many intermediate producers. Well, the final producers are the ones that are benefiting

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from these restrictions on imports, but there are many in between producers, wholesale manufacturers

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and things that are very much hurt by the tariffs on the goods that they use.

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I'm thinking, for example, of sugar, which is, am I right, it's still heavily protected?

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It is very heavily protected.

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The U.S. sugar producers have been protected since the very beginning of the country.

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I think that was to bring Louisiana into the Union or something.

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And so they've always had protection.

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It's really economically irrational for much of the U.S. sugar production to take place.

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It has very destructive effects on the Florida ecology.

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And it makes sugar prices for all Americans so much more expensive.

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How much more?

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Do you know?

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Several times.

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Really?

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Do you pay a third as much for sugar?

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We pay, let's say, three times the world price of sugar.

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Right.

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So we pay that much less.

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If we could get rid of those restrictions and import sugar from Cuba, for example, the

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price of sugar for Americans would go down and many Americans say, well, I don't really

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buy that much sugar.

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But in reality, you do.

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You buy sugar in so many products that you consume all of the bakery goods and all of

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the candies and ice cream and soda pop and you know right on down the list.

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Now of course the price is so high that they've come up with the high fructose corn syrup

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as a...

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Right.

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And that's been around for some years.

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Yes, since I think after World War II they started working on that as a way of helping

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the Corn Producers, who seem to always need help as well.

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And so most of our products have been altered with taking the sugar out and putting the

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high fructose corn syrup in them, and so Coca-Cola in the United States doesn't taste like real

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Coca-Cola as it's produced elsewhere around the world.

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I have to go and buy this Mexican Coke, which is in the import section of the grocery stores,

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to get anything that tastes decent. I read a story the other day, I don't know if you

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bumped into this either, also, that said that this corn syrup is actually much more fattening

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than sugar. Did you see that? And the story actually speculated that this has substantial

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impact on the average weight of the average person in the American population.

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It's supposed to have an impact on obesity and insulin problems and now that is still

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being debated scientifically amongst that community and of course the corn producers

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are saying no, it doesn't have any effect, it's the same thing and other people are saying

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no, it's correlated with obesity and it's correlated with diabetes and all of those

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sorts of things.

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So scientifically we haven't heard the final word on that, I think there's a lot to the

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The story though, and certainly the basic correlation is there, the more corn syrup we've been consuming,

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the heavier we've gotten as a nation in general. And I think the science of it is that the

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high fructose corn syrup doesn't satisfy you as quickly as sugar and that the corn syrup

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is supposed to be more stored in your body rather than used directly. So that's the theory

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The Terrors are ultimately behind this. That's what's remarkable about it.

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The unintended consequences. Economists can't necessarily spell all of these unintended

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consequences out at the very beginning, but we should all be aware that we can't imagine

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all these problems. We don't know everything that's going to happen behind the scenes,

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but it's something to consider any time something like a tariff or a regulation is brought up

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is, wait a second, you've got these direct effects that's going to hurt consumers, that's

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going to make it more difficult for unprotected industries to get land, labor and capital,

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and then you're going to have all these diversions and unintended consequences. So watch out.

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And that's what Hazlett is telling us. Look at the unseen problems that have emerged in

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and things like sugar and the softwood lumber tariffs and the steel tariffs of 2002. These

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all have, you know, wide-ranging effects on the economy and they're all negative.

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Okay, now explain this. Every president that I can remember in my lifetime has said that

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Free Trade is a wonderful thing. I'm talking about U.S. President, right? Free Trade is

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a wonderful thing. We have to back this wonderful trade agreement. You know, we must just get

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behind it. And anybody who says otherwise is just backwards and uninformed. So, there

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seems to be a big gap between the practice and what the politicians are preaching.

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Oh, absolutely. I mean, no U.S. president that I could think of was actually for free

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trade, that they would actually say unilaterally disarm our weapons of economic protectionism,

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which is what free trade is. That's what Richard Cobden advocated. That's what Frederic Bastiat

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advocated. That's what Henry Hazlitt advocated is unilateral economic disarmament.

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Non-negotiated international agreements. There's severe problems with international

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negotiated agreements. There's no problems with free trade. You just unilaterally lower

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your barriers, lower your restrictions and trade emerges on its own. International agreements

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break down and when they do, they can lead to things like war. Okay, so Europe went through

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through this in the 19th century where through bilateral agreements and then multilateral

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agreements they all reduced their tariffs in the 19th century, but that led to internal

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contradictions within that system that ultimately broke out in hostility and was one of the

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ingredients leading up to World War I. So, you know, the idea that we can negotiate our

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Our way to free trade is ridiculous. We can get some freer trade through those things,

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but the long-run consequences are very dangerous.

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Right. Then you have these boards that are set up to arbitrate disputes. Now, why wouldn't

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those lead to more peaceful... So you don't have to turn to war. You have to turn to these

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arbitration panels, no?

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Well, that's where the conflict arises, is with these panels and these organizations.

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That's where the infighting comes to impasses and things break down just as this trade talks

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have broken down.

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Hopefully this breakdown will not result in any kind of war, but you can imagine economic

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circumstances 10, 15 years from now where trading negotiations between the United States

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and China and other parts of the world, the Middle East, that could come to great impasses

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that results in actual armed conflict as well.

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So when you talk about free trade, you're really not talking about the World Trade Organization?

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No, absolutely not. There are aspects of freer trade within these organizations such as the

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right of developing countries to import textiles and garments and clothing into the United

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States without any barriers. So there are some freer trade, you know, and of course

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The lowering of those barriers helped American consumers. They had a very negative effect

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here in Alabama. We lost all of our textile mills here in the state of Alabama. But look

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what happened. We lost our steel mills and our textile mills. And what were they replaced

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with? They were replaced with automobiles, finance, high tech, healthcare. And so when

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I ask some of my fellow citizens here in Alabama, would you rather that the population be working

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in Textile Mills or Automobile Plants. Would you rather have them working in iron mills

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or in finance and things of that nature or healthcare? And of course they always say,

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well, you know, of course we'd rather have these higher paying, more sophisticated jobs

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for our population. So they can see the benefits after the fact, but up front they were, everybody

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was totally against all this relaxation of protectionism.

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Another thing about these negotiations, it's very interesting because what is the U.S.

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position on these, within these negotiations usually has something to do with if we're

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going to lower our tariffs, then you've got to accept what our policies that we're going

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to Impose on You, such as IP, intellectual property recognition, so that American music

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manufacturers or something can crack down on pirated DVDs or whatever.

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Another one, these labor regulations and environmental restrictions that the US is advocating that

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these other countries pick up, they can hardly afford them, right?

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Right, they absolutely can't afford them, they can't stop the IP problem.

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And so, you know, those are going to be part of the impasse that has been developing, is

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developing, and probably can only get worse, really.

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There's nothing to suggest that these countries can comply with our labor regulations or our

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minimum wage law or anything like that.

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Although American labor unions would love that, right?

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Absolutely.

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And why?

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Because they believe in the rights of workers all over the world?

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I'm afraid not, Mr. Tucker. And that's why the unions are supposed to be, you know, supposedly

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financing some of these anti-globalism groups around, you know, that protest globalism because

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they want the left, sort of left-wing agenda of labor regulations and so forth to be more

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be more prominent and be a definitive part of the global project, so to speak.

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Raise the cost of competition. That's the game, right?

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That is the game. Or take a cut, in the case of intellectual property, take a cut of the revenue of foreign producers

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who are otherwise able to sell, produce and sell their products at a much lower price.

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Well, this is a huge racket. Now, this topic is frustrating for you as an economist, isn't it?

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I'm an economist, isn't it? Because it's been explained now for centuries and yet we still somehow don't get it, right?

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Oh yeah, well if you read Hazlitt's chapter on who gets protected, he starts off with a very frustrating discussion about, you know, we've known all this.

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We don't need to be talking about the finer points of economic theory.

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We know the basics about tariffs and protectionism since at least the time of Adam Smith, and

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that this is the biggest step forward that we could take.

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We could just decide to become free trade, and it would be the biggest benefit to the

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economy that we could possibly do.

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And so there's a tremendous amount of frustration on the part of Hazlitt and myself and all

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and all the other Austrian economists about, you know, the, just the common sense of free

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trade.

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Yeah.

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So, what do you suppose is the missing ingredient?

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What do we, what's missing?

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Why can't we get from here to there, from our current protectionist environment to a

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world of free trade?

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Well, of course, the special interest groups that benefit from these individual free trades

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have advocates who are paid large amounts of money to lobby Congress and other groups,

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and what we need to oppose that is the wide-ranging recognition of the benefits of free trade,

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and that people understand what free trade is, unilateral, and what it is not, which

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is these groups and these organizations and these agreements, and to proceed along those

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Those lines, which is far more efficient, which is far faster, and it's less likely

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to result in any kind of conflict between nations, and then eventually, once you go

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through a very short period of adjustment like we did here in Alabama through the late

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1980s and early 1990s, and all of a sudden, you know, we're at a much better economic

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position and you know people are happy with the outcome that they feared to begin with.

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Wouldn't it set a wonderful example for the world too?

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Absolutely, absolutely. There's no question. You think about Cuba and Florida where Florida

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is destroying the Everglades and its ecology in order to produce sugar. In Cuba people

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are, you know, starving and they have no access to any kind of economy at all and if we could

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just open up the free trade there, open up the door between Cuba and Florida, it would

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solve Florida's problem, its ecological problem, its water problem and so on and so forth.

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Cuba would be a much more prosperous country and all that takes is the will to do it.

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And we would consume less corn syrup and more sugar and we'd all be thin. Right? Or something

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like that.

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Well, it just, all the benefits start rolling out, all the unintended consequences start

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being rolled back. It's a wonderful process and I hope we start it real soon.

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Well, thanks so much for explaining this to us, Dr. Bernton.

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Thank you for watching!