If the report is true, which would not be surprising, there is a certain irony—a very certain irony—in the US government’s intent to handicap the Russian government by preventing imports into that country from producers of G7 countries (“Allies Resist US Plan to Ban All G7 Exports to Russia?” Financial Times, April 25, 2023). Aren’t imports bad and dangerous for national security, as both Donald Trump and Joe Biden agree? Shouldn’t our statocrats encourage Russians to import and producers from G7 countries to export there? Shouldn’t the US government be bold and subsidize exports to Russia? Wouldn’t that weaken their domestic manufacturing industry and thus handicap their economy and their government’s war machine?
Memorandum: Trump imposed tariffs on steel and aluminum from friendly countries under the excuse of national security; he toyed with the idea of doing the same for foreign cars. Biden kept many of Trump’s tariffs, and the subsidies of his CHIPS Act are supposed to protect Americans from dangerous imports of foreign technology. The American political class now seems unanimous in supporting the emotions underlying this approach.
Coincidentally, a story in the Wall Street Journal documents the fact that despite, or because of, playing commissar, the Pentagon has run out of domestic suppliers for a special sort of gunpowder. Fortunately, they could buy some from Germany, Poland, Switzerland and, if Trump returns to power, even from Brazil (“The U.S. Military Relies on One Louisiana Factory. It Blew Up,” April 26, 2023). I suspect that many suppliers in the wide more-or-less free world would happily fill the void.
(Incidentally, and pardon my pedantry, the author of this interesting story or his editor seems to think that gunpowder “is used … in bullets.” Should an employment condition for journalists be that they own at least one gun and one cartridge?)
We can imagine one response to my ridiculing the US government for wanting to make Russia great again by encouraging its autarky. The response would be that, given Putin’s savage invasion of Ukraine and its bellicose nuclear threats, it is justifiable to handicap his government even by strangling the economy of its subjects. Although my former self would not agree, I would now tend to grant that embargoes and sanctions, although they also hit the very subjects of the government imposing them, may help prevent the worse alternative of open war and general conscription. But such a response, at least a prudent one, would still suggest that imports are unequivocally beneficial in peacetime.
The reported American crusade to prevent imports into Russia is not the only incoherence of protectionism, a sentimental and authoritarian doctrine. As the saying goes (somewhat reformulated to make it less collectivist), protectionism is what nationalist states do against their subjects in times of peace that would be imposed to their same subjects by foreign enemies in times of war.
READER COMMENTS
William Connolley
Apr 28 2023 at 6:41am
> Aren’t imports bad and dangerous for national security
Well, only in that they can be cut off. Which is what is happening. So no the argument isn’t self-contradictory.
Jon Murphy
Apr 28 2023 at 7:16am
Although that’s not the argument Trump, Biden, and others use. They talk about jobs. They talk about manufacturing capacity. They talk about carbon footprints. Indeed, one Trump supporter even liked imports as akin to bombing one’s country saying “imports destroy factories better than any missile.”
Their arguments are contradictory.
Pierre Lemieux
Apr 28 2023 at 10:02am
Wiliam: The fact that any individual (the logical and moral basis of any admissible political argument) endangers his own security by relying on suppliers is not an argument against commerce, although it may be an argument against single-supplier dependence if the benefit of such dependence is not higher for the individual than its cost. Special collective cases are (summarily, I confess) dealt with in my penultimate paragraph, and are not resolved by protectionist “logic.”
Thomas L Hutcheson
Apr 30 2023 at 11:07am
But it is only “external” effects, that the sum of the individual risks from a supply interruption as know by the individuals are less than the total effects, that justifies the national security argument for protection. And always has; it’s not a new argument. To the partial credit of today’s proponents, they HAVE taken on board the standard economics conclusion that production subsidies are better than protection for incentivizing “national” production of sensitive goods. If the subsidies were paid for with new revenues instead of increasing growth-thwarting deficits, I’d be less concerned.
Pierre Lemieux
May 1 2023 at 9:37am
Thomas: You need a philosopher-king with guns to compute and enforce “the sum of the individual[s].” Otherwise, how to you add them up? The welfare economists who followed Pigou tried, for half a century, to find a scientific formula and finally gave up. Only naked power remains. The only way-outs are Buchanan-Tullock’s unanimity or a Hayekian evolved system of rules.
Thomas L Hutcheson
May 1 2023 at 12:51pm
Yes, Pigou taxes, indeed any measure to deal with externalities, can only be employed by a state with powers of coercion. What else is new?
Craig
Apr 28 2023 at 12:55pm
“Fortunately, they could buy some from Germany, Poland, Switzerland and, if Trump returns to power, even from Brazil”
I’m not following that thought actually. Well, I do, but read literally that suggests Brazil won’t export this special gunpowder to the US unless Trump is in power?
Pierre Lemieux
Apr 28 2023 at 2:35pm
Craig: You are right that there was too much concatenation in the last part of this sentence of mine. (And perhaps I should have left Trump alone!) My idea was that the Pentagon might not trust Brazilian producers of black powder because the political situation there (as in much of South America) is much less stable stable than in Germany, Switzerland, or Poland. It is not that “Brazil” would not export black powder, but that the Brazilian government could at any moment forbid them to do so. Except, of course, if the two buddies Bolsenaro and Trump were both president again and they could practice the “art of the deal,” whatever the risk involved for the future. Diversification of sources should be the goal at the Pentagon: munition plants can blow off even in Louisiana. (It just occured to me that exports of military materials might be tightly controlled in Switzerland or could become so if open war broke out.)
Thomas Hutcheson
Apr 28 2023 at 5:36pm
No irony. Trade is beneficial to both parties. If one party wishes to punish another and is willing to forgo the the benefits that it receives, it can cut of trade to prevent the other party from benefitting. Of course this works best if total not just the marginal benefit of trade to the two parties is different. [Cites the diamonds’ water paradox.]
Jon Murphy
Apr 29 2023 at 10:48am
If one believes that trade benefits both parties, you are right. But these people do not. Recall Trump’s statements about “losing” at trade.
Thomas L Hutcheson
Apr 30 2023 at 11:14am
I try to address the best argument for what I disagree with, not the most popular argument. But I probably do not because it is so much more fun to whack at strawmen than steel men. By addressing the best argument, one is probably closer to making the best counter-argument: for the best policy not just against a bad policy.
Pierre Lemieux
Apr 29 2023 at 11:01am
Thomas: I don’t follow you there. What are the “parties” you are referring to? National governments? Do you mean that politicians and bureaucrats, or official majorities, are the “parties” in international trade? But then, what if some of their subjects want to trade and others don’t? Are the “parties” you are speaking about those individuals or groups who have the guns to prohibit others from trading? What would it mean to say that “Berkeley” does not want to trade with “Nashville” and wants to punish it (or him, or him or her, or him and her?)? I think one can find a Hayekian or Buchananian solution to the problem you are raising, but the problem of aggregation is much more complex that what you seem to suggest. Or perhaps I don’t understand what you mean.
Thomas L Hutcheson
Apr 30 2023 at 11:26am
I was thinking in normal (to me) national government terms. The relevant decisionmakers see a cost in a potential supply interruption that they see as greater than perceived and acted on by the users of x and want to do something to align private incentives with the cost as they see it. It’s sort of like a Pigou tax/subsidy argument. If the decisionmakers’ estimates of the costs are correct, a subsidy (financed with the least dead weight cost tax possible) to production in uninterruptible venues would be the best policy leaving investors to find the least cost venue.
Pierre Lemieux
May 1 2023 at 9:25am
Thomas: Thanks for restating your Pivovian-Musgravian view so neatly. One way address it is to ask: Any “relevant decisionmaker”? Any philosopher-king? Or Mr. X’s preferred ones? What if Mrs. Y prefers another one? What if she “perceives” the costs and benefits differently? What about those individuals who wanted to be parties to the trades they themselves choose? This leads us directly to Anthony de Jasay’s observation:
Thomas L Hutcheson
May 1 2023 at 1:06pm
Whoever we are trying to persuade. At this point in time the US government has a policy of e=using subsidies to encourage more manufacture of computer chips in the US, presumably a away of avoiding the risk of supply disruptions bases on war/disputes with China. I think that the same objective could be better achieved if the subsidies could be used in other places that are at little risk of disruption. And of course I want the resources diverted into these new faculties to have as low a marginal cost as possible, meaning that they should be financed with low dead-weight loss taxes.
It would be interesting to know how de Jasay would analyze this problem.
BC
Apr 30 2023 at 5:16am
The protectionist claim is that cutting off imports protects high-wage manufacturing jobs and, more recently, improves national security. If true, then banning exports to Russia should increase Russian high-wage manufacturing jobs, giving Russia more wealth and manufacturing capability to wage war.
Pierre’s last sentence is spot on. Protectionist policies are the same ones that adversaries try to impose on a country. Would spying on one’s own country and giving secret information to adversaries be considered “nationalist”? How about bombing one’s own country? Those are also things that adversaries do.
David Seltzer
Apr 29 2023 at 12:25pm
Pierre: “I would now tend to grant that embargoes and sanctions, although they also hit the very subjects of the government imposing them, may help prevent the worse alternative of open war and general conscription.” I understand your position but I’m concerned as to its effectiveness in the extreme. Japan’s military attacked Pearl Harbor because of an oil embargo implemented by the the US government. It’s estimated 80% of Japan’s oil was imported from the US. The most tragic outcome was the death of hundreds of thousands of Japanese citizens. Currently, the most dangerous and chilling concerns are the bellicose threats of nuclear holocaust from despots.
Pierre Lemieux
Apr 29 2023 at 3:29pm
David: I know very little about the causes of Pearl Harbor. Britannica writes:
But you are right that embargoes are a very dangerous tool. Specific sanctions against specific individuals or companies and limited export restrictions are much more acceptable. My use of “embargoes” was imprudent if not incorrect.
Richard W Fulmer
Apr 29 2023 at 4:10pm
Doubling down on the pedantry, the author of the WSJ piece claims that black powder is used in M16 rifle cartridges: “a small amount of black powder is used to detonate a more powerful explosive packed in the same bullet [sic].” However, I can find no support for this claim. The sources that I’ve found state that, while “black powder is still used to ignite the main propellant charge in large-bore artillery pieces,” M16 cartridges use only smokeless powder.
Who is correct?
Pierre Lemieux
Apr 29 2023 at 10:29pm
Richard: A priori, like you, I would not give much credence to the WSJ reporter on this matter!
Pierre Lemieux
Apr 29 2023 at 10:54pm
Richard: Post Scriptum: I had also noticed the bullets made with power, and reflected that if I am ever shot, that’s the sort of soft bullet I want to be hit by.
David Seltzer
Apr 30 2023 at 2:07pm
Me as well. Center mass double tap.
Anthony DeRobertis
Apr 29 2023 at 5:33pm
If you steelman the argument, it’d be something like “in the long term, restricting Russia’s imports will cause their manufacturing base to grow (etc.), making them better off, but that takes time. In the short term, they will have supply disruptions impeding their prosperity and war effort.”
While I don’t think that long term is correct, it’s at least not self-contradictory.
Pierre Lemieux
May 1 2023 at 9:49am
Anthony: Interesting argument. I am not sure it works, though. A coherent protectionist would still have to believe that the discounted long-term gains must be higher than the short-term pains (and aggregate all these). Or else, he would have to argue that free trade is only good in times of war under certain conditions and for the importing “country” only.
Jim Glass
Apr 30 2023 at 11:11pm
“Unequivocally” is a strong word. Europe was at peace in 1938, but things were pretty bad in Germany and thereabouts, and clearly on course to getting worse. In March, the German army invaded Austria and annexed it. Do we all know what happened to the Jews in Austria *immediately* upon the annexation?
In response, Sir Frederick Marquis, managing director of Lewis’s department store, had the store cease doing business with Germany and announced it would boycott German goods. In response to that, he was summoned to Downing Street and chastised by the government for contradicting national policy.
“You know your political state is a complete joke when its first line of defense against external enemies is a managing director of a department store.” – Who Saved Hitler?
So here’s a question I’ve asked here before (particularly in regard to IBM’s large scale dealings with Germany and its government not only before the war but right through it) without seeing any answer….
You are the owner of an American business. The time period is 1933 through December 6, 1941. The USA is at peace with Germany. You, like Sir Frederick, have ample contacts in Germany, know full well what the Nazis are doing and intend to do, you’ve read Mein Kampf, you know what’s happening to the Jews, what more the Nazis intend to do to them and to everyone else.
At what point during that period do you stop doing business in Germany? Or do you not stop until Germany declares war on the US? (Or, like IBM, do you not stop even then?)
Why?
Pierre Lemieux
May 1 2023 at 10:07am
Jim: Good questions. I would argue that “at what point during that period do you stop doing business in Germany” is a decision to be made by each exporter or importer. There is a risk: Western companies who continued doing business in Russia as the invasion of Ukraine was rather imminent took a big risk, and lost. My penultimate paragraph opens a way for exceptional sanctions or selective export bans at a certain point, where the situation changes. Obviously, one’s political theory must be able to approximately determine where this particular point is reached. (David pointed out above that embargoes–a global ban on trade with importers of a given country–is a different thing. Indeed, on this, see my previous post “The Free Trader as a Traitor.”)
Craig
May 1 2023 at 11:41am
To expound on Mr. Glass’ point a bit, he notes IBM but perhaps even more notable is the Ford Werke which utilized slave labor after the start of WW2 but still prior to US entry into the war.
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