Trump, Libertarians, and Trade

Introduction

From my post on the positive aspects of Trump for those who favor libertarianism and decentralization – certainly when compared with the alternatives – I offer one of the several positive items:

He questions trade deals.  I understand the dilemma that this presents for libertarians and free market types, but we can’t have it both ways: we know that the so-called “free trade” foisted on us isn’t free trade, it is government management crony trade.

The Challenge

Matt Welch at Reason has since come out with a post precisely on this dilemma:

Libertarians have long been sensitive to the paradox near the heart of international tariff-reduction projects of the past seven decades. On one hand, increasingly free global trade flows have irrefutably played an outsized role in lifting a billion people out of poverty in the last quarter-century alone. On the other, multilateral trade agreements by definition create institutions, such as the World Trade Organization (WTO), beyond the direct reach of sovereign democratic polities.

A reasonably good statement; unfortunately, not leaving well enough alone….

Those of us who have accepted that trade-off have found ourselves for decades having to both defend and try to improve from within the "Washington consensus" on liberalizing tariffs. But now that that consensus has been repudiated at the polls all over the Western world, it's time for the other side of that intra-libertarian argument to make its free trade case within an imperfect vessel.

Why must those on “the other side of that intra-libertarian argument…make its free trade case within an imperfect vessel”?  Commonly referred to as the Hegelian dialectic, why must libertarians (or anyone else) limit their arguments to a pre-determined set of boundaries?

So the ball's in your court, Thomas Massie, Daniel Hannan, Ron Paul, and all the other libertarians who have argued for years that free trade agreements aren't the same thing as free trade.

Welch is asking the impossible: play within these non-libertarian boundaries and come up with a libertarian solution.  There is no libertarian solution within those boundaries: free trade agreements are not only not the same thing as free trade; they are not even free trade agreements.

The Rebuttal

Why didn’t Welch ask for Murray Rothbard to offer his arguments as to why (managed, but most certainly not) free trade agreements are not free trade?  I will ask Murray:

I’m puzzled. I’d like to know why so many free-marketeers, so many free-market think-tanks and pundits, are not simply pro-Nafta, but are fervently, frantically, almost hysterically pro-Nafta.

To quote the king: is a puzzlement.

Look, I can understand, though not agree with, mild approval. An old libertarian friend of mine, for example, told me that he was mildly pro-Nafta but not really interested in the entire topic. That seems sensible.

I can understand mild approval as well; I also do not agree.

There is no libertarian answer within these pre-established boundaries.  The only libertarian answer is to get government out of the trade business; this option isn’t offered.  So on what libertarian basis would I disagree?

World Government…

…as offered by Welch (cited above but also here for reference):

On the other [hand], multilateral trade agreements by definition create institutions, such as the World Trade Organization (WTO), beyond the direct reach of sovereign democratic polities.

Multi-lateral trade agreements inherently require greater and greater centralization of government.  Bi-lateral trade agreements (which, I believe, are somewhat more consistent with Trump’s view) do not.  National solutions or international solutions: which one, in this world, is more libertarian?

Rothbard said this better 24 years ago:

The “free traders” for Nafta confront their biggest problem when we point out that, under Nafta, super-governmental commissions, unaccountable to any taxpayers, will be able to enforce and “upwardly harmonize” ever greater environmental and labor regulation standards against the wishes of the citizens of each country.

Rothbard offers that such warnings were labeled scare tactics by the Cato crowd at the time; yet, can anyone argue that this prediction did not, in fact, come true?

There is only one sensible interpretation of these “free marketeers”: that they are serving as a rather feeble figleaf for the naked seizure of power by international statism.

Rothbard is quite right, and when given the choice only of national statism vs. international statism, I will take the national version every time.  Decentralize, decentralize, decentralize – it is the application of libertarian theory in the real world.

The Motive?

Rothbard offers a glimpse into why such “free marketeers” were (and perhaps still are) in such support of multi-lateral treaties like Nafta, pointing to the oil and gas billionaire Koch brothers:

Here is a possible clue to this puzzle. Take this seeming anomaly. On the one hand, in Annex 602.3 to Nafta, the allegedly “free-market” Salinas government of Mexico “reserves to itself,” in no uncertain terms, all possible provision of and investment in every aspect of the exploration, production, or refining of crude oil and natural gas.

Query: Does Koch Industries – which in November 1992 purchased 9,271 miles of natural gas pipelines to Mexico for $1.1 billion – expect to benefit heavily from Nafta?

Mmmmm….

The Libertarian Answer

There is only one libertarian answer to trade: it should be left to market participants.  What does this mean in this world?  Reduce import tariffs to zero.  Nothing more is necessary.  For those who fear that the US will be flooded with imported product and will therefore lose jobs, rest assured – those dastardly Chinese and Germans will have to spend those dollars somewhere – and that somewhere is in the good old USA.

Conclusion

Returning to Welch:

The postwar liberal trade order certainly has had its defects. Here's hoping the additional sovereignty won't come with an untenably protectionist price tag.

I hope so as well.  However, arguing for crony trade deals that require ever-greater levels of centralization is not the solution.  Instead of spending time arguing for ever-greater centralization, Matt Welch and Reason (and those who back Reason) can instead argue for the only free-market and decentralizing position – one that can be implemented unilaterally, and with no further role for state-intervention and no role at all for supra-national agencies.

Remove all import tariffs.  The market will take care of the rest.