When politicians call for fair trade with foreigners, they almost always hypocritically use a concept of fairness that makes a mockery of the word’s normal usage. In exchanges between individuals-and in contract law-the test of fairness is the voluntary consent of each party to the bargain: “the free will which constitutes fair exchanges,” as Sen. John Taylor wrote in 1822. When politicians speak of unfair trade, they do not mean that buyers and sellers did not voluntarily agree, but that federal officials disapprove of the bargains American citizens chose to make. “Fair trade,” as the term is now used, usually means government intervention to direct, control or restrict trade. Fair trade means government officials deciding what Americans should be allowed to buy and what prices they should be forced to pay.
Fair trade often consists of some politician or bureaucrat picking a number out of thin air and imposing it on foreign businesses and American consumers. Fair trade means that Jamaica is allowed to sell the United States only 950 gallons of ice cream a year, that Mexico may sell Americans only 35,292 bras a year, that Poland may ship us only 350 tons of alloy tool steel a year and that Haiti is allowed to sell the United States only 7,730 tons of sugar. Fair trade means permitting each American citizen to consume the equivalent of only one teaspoon of foreign ice cream per year, two foreign peanuts per year and one pound of imported cheese per year. Fair trade means that the U.S. Congress can dictate more than 8,000 different taxes on imports, with tariffs as high as 458 percent.
Webster’s New World Dictionary defines “fair” as “just and honest; impartial; unprejudiced.” Yet, most of the foreign trade practices deemed unfair are not considered unfair if done by the U.S. government or by an American company. The United States levied an import surtax on Thai rice in 1986 because of a small Thai government rice subsidy-though the U.S. government simultaneously provided a subsidy more than a hundred times larger to American rice growers. American trade law requires foreign companies to earn a significantly higher profit than American companies–or else be penalized as if they are selling at a loss. In federal unfair-trade investigations, foreign companies are assumed to be lying and American companies are assumed to be telling the truth.
The official U.S. definitions of unfair trade are proliferating almost as fast as the number of trade lawyers in Washington, D.C. In recent years the U.S. government has penalized foreign farmers for not paying wages to their wives and children, foreign governments for not coercing foreign companies to buy more American products and foreign companies for relying on part-time labor, making charitable donations, not having computerized sales records and failing to charge their American customers the highest prices in the world. Federal law currently assumes that foreign competition that prevents American companies from raising their prices unfairly injures them.
Federal trade policy intentionally sacrifices some industries to other industries. American manufacturers have been forced to grovel before Commerce Department officials for each ton of specialty steel they are allowed to import. Restrictions on steel-crankshaft imports in 1987 hurt dieseltruck engine manufacturers, restrictions on ball-bearing imports in 1989 hurt scores of American industries and restrictions on flat-panel computer displays hurt computer makers in 1991. Fair trade is profoundly anticompetitive: trade restrictions have given American firms monopolies or duopolies on the sale of steel rails, bicycle tires, tungsten ore, textile fabrics and numerous chemicals. Thanks to economically perverse U.S. trade laws, the more inefficient and backward an American industry is, the more likely the U.S. government will blame foreign companies for its problems.
American politicians are profiteering on allegations of foreign unfairness. For American trade policy, need is the basis of right, and political-campaign contributions are the measure of need. The more foreign unfair practices American politicians claim to discover, the more power they seize over what Americans are allowed to eat, drink, drive and wear. Each new definition of unfair trade becomes a pretext to further restrict the freedom of American citizens. In practice, fair trade means “From each according to what politicians demand, to each according to what politicians choose to give.”
Every trade barrier undermines the productivity of capital and labor throughout the economy. A 1984 Federal Trade Commission study estimated that tariffs cost the American economy $81 for every $1 of adjustment costs saved. Restrictions on clothing and textile imports cost consumers $1 for each cent of increased earnings of American textile and clothing workers, according to the London-based Trade Policy Research Centre. According to the Institute for International Economics, trade barriers are costing American consumers $80 billion a year-that’s equal to more than $1,200 per family.
Government cannot make trade more fair by making it less free. The time has come to deregulate our national borders-to end the medieval pursuit of a “just price” for imports-and to cease allowing government officials to have economic life-and-death power over American businesses. It should not be a federal crime to charge low prices to American consumers.
