No Fixed Abode: The Perks (And Perils) Of Protectionist Policies

Jack Baruth
by Jack Baruth

“Like any good capitalist, I firmly believe that automakers need competition to produce their best and most innovative work.” That’s what my colleague and occasional pal Stef Schrader on Jalopnik wrote yesterday, in a column titled Protectionism Is Only Good If You Love Really Terrible Cars. I doubt neither Stef’s sincerity nor her diligence; she hits all the traditional marks in her piece, from Allegro to Trabant, and she does it with style.

I am not a good capitalist. Not any longer.

For most of my life, I was; I’ve been mostly self-employed since I was 19, and I’ve never asked for help from anybody save for three weeks’ worth of unemployment payments in 1995. I always looked at life as a battle that went to the strongest, and I never felt inadequate in the face of the challenge.

Once I became a father, however, I started wondering about my son’s prospects, and the prospects of his contemporaries. What if they didn’t have the strength, or the luck, that I’ve had? Should they be just tossed aside by the global economy, discarded forever just because they couldn’t win a race to the bottom with seven billion other desperate souls?

If the former president of the Miami University Entrepreneurial Society (yes, guilty as charged) can read Adbusters and start worrying about factory conditions around the globe, perhaps that means everything out there is up for grabs. And it’s worth asking the question: Could a new round of protectionist policies, intelligently conceived and applied, change our lives as drivers, consumers, and workers — for the better?

I want to start the discussion by dispensing with the phrase protectionist and replacing it with the word fair, because the truth is the United States has rarely had a fair trade relationship with other countries; either it’s been predatory, as was often the case with Latin American nation-states, or it’s been willfully ignorant of reality.

Let’s start with one of Stef’s prime arguments: the idea the Japanese conquered the American market by building better cars. While I won’t bother to argue the 1978 Malibu was a better car than the Accord, it’s fair to say Honda had several nontrivial competitive advantages besides product superiority. Japan had steel that was better and cheaper, courtesy of the MacArthur Restoration (yes, I’m making that pun). It had a young workforce willing to accept lower wages because the country was still in a hole, economically speaking. And, of course, it had the advantage of building the cars in yen and selling them in dollars.

Finally, consider history worked to Japan’s advantage in a way virtually nobody could have predicted or planned for. Without the OPEC crisis, the Accord would have been the same kind of small-batch curiosity the Toyopet was two decades prior. It’s easy to say you should always plan for high fuel prices, but that was precisely the strategy that destroyed General Motors’ market position in full-sized vehicles during the ’80s.

In short, while it’s tempting to see the ’70s auto market as a battle between hard-working, humble, engineering-focused Japanese automatons and spoiled-brat Grosse Pointe dipshits whose sole goals in life revolved around retiring early and owning a boat, the facts of the situation don’t support that narrative.

Many Americans apply the same willful blindness to China today that they did to Japan 40 years ago. We don’t have anything like a level playing field with China. American manufacturers have to contend with everything from OSHA to the unions to the habitat of the speckled owl-bird-fish, but the Chinese are free to do what they like to their people and their environment before sending us products priced in a centrally controlled currency.

Time and again we’re fed that same stupid canard that it’s manufacturing efficiency, not foreign competition, taking our jobs — but if that’s really the case, why doesn’t everything in Wal-Mart have a label that says “Made in the USA by a supremely efficient machine”?

We’re also told those jobs, and those industries, can “never come back” — as if the disappearance of our manufacturing base to China was an act of God and not the clearly predictable outcome of a series of policies designed to ensure a particular outcome, which can be easily reversed.

When the above fictions don’t satisfy the true progressives and the populists, we’re then told the outright racist fiction that American workers can’t compete with the Chinese or the Germans or the Japanese. To which I can only say: level the playing field and let’s see. What if our laws required imported goods to meet the same environmental, material, and human-rights standards that American manufacturers have to meet?

Obviously, we can’t force China to clean up their wastewater disposal or protect their wildlife or even keep children out of their factories. And that is why we need tariffs — to level the playing field between American firms who have to obey our laws and overseas firms that do not. It’s not “protectionism.” I assure you that America was just as capable of making cheap stuff back in 1890 as China is now. But we decided the environmental and workplace safety conditions of that time — to say nothing of the way food was prepared — weren’t acceptable. So what kind of racist scumbag do you have to be to say Chinese workers and children and animals don’t deserve the same protection?

So this is my suggestion for President Trump: Level the playing field. If GM wants to build Buicks in China, let ’em. But if they want to sell those Buicks here, then the burden of proof should be on GM to show they were built to equal standards of environmental protection and workplace safety. If not, then there has to be a tariff.

The same thing should be true for Mexico and any other nation where it applies. You can build your cheap cars in Mexico, but you should be prepared for a tariff to reflect the fact that you engage in labor arbitrage.

To Mr. Trump’s credit, he already realizes the purpose of tariffs is not to protect American companies; what does “American” mean in that context anyway? Ford is global, Chrysler is owned by the Europeans, and General Motors has demonstrated a despicable willingness to send its losses to the American taxpayer while sending its profits, and its investments, to China.

Will the prices of cars rise? It’s likely. But the social good of increased manufacturing employment greatly outweighs the inconvenience of paying 10-percent more for your Malibu because it’s chock-full of imported Chinese electronics. If you’re willing to pay 20-percent more to have a “DENALI” or “XLE” badge on the outside of your car, then you’re capable of paying that same tariff to ensure fairness for the American worker.

Furthermore, it’s already been shown multinational corporations can relocate production to the United States just as easily as they sent it to Mexico or China. It’s already happening. Billions of dollars’ worth of facilities and job opportunities are coming back home, simply because our government has finally demonstrated you have to play by some sort of rules if you want to sell to the American market.

But what about corporate profits? Who gives a shit? As one anonymous but perceptive writer pointed out a few months ago,

Who cares if productivity numbers tick down, or if our already somnambulant GDP sinks a bit further into its pillow? Nearly all the gains of the last 20 years have accrued to the junta anyway. It would, at this point, be better for the nation to divide up more equitably a slightly smaller pie than to add one extra slice—only to ensure that it and eight of the other nine go first to the government and its rentiers, and the rest to the same four industries and 200 families.

That’s fairness at its most basic, understandable, and reasonable.

Finally, I’ll address Stef’s primary issue with tariffs: that they result in crappy cars. It’s debatable as to how true that is; the perceptive student of history will recall that Japan was, and continues to be, a protected market for a variety of reasons, including both economic incentives and openly racist consumer behavior. (Our former E-I-C will no doubt disagree, of course; he always said that Japan was a totally free market and it was just random chance that no American manufacturer ever managed to get a foothold there.)

But even if you stipulate it was protectionism that resulted in the Allegro, the Granada, and the Trabant, that is an old lesson. China has taught us a newer lesson that supersedes it: where production goes, everything else will follow. Assembly labor is not some fungible process to be sent anywhere in the world while the “real work” stays firmly in the host country. To the contrary, it is the magnet that pulls an economy along, and that is why China can now design everything from its own laptops to its own fighter jets.

Let’s put that magnet back in the United States. Let’s bring the jobs and the opportunities back home. Let’s strike a blow for the environment, for human rights, for the dignity of your neighbors both next door and across the train tracks. Let’s do the right thing. Let’s forego being good capitalists and try being good people instead.

Thank you for reading.

[Image: By Deluxe602 at de.wikipedia(Original text : S.M.) [ GFDL or CC-BY-SA-3.0], from Wikimedia Commons]

Jack Baruth
Jack Baruth

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  • Turf3 Turf3 on Jan 25, 2017

    For the first time I have seen someone challenge in print the spurious argument that all the manufacturing jobs have left because of automation. 1) If that were true, the middle of the US would be filled with active, working, highly automated factories. Instead it is filled with closed, inactive factories. 2) If that were true, then there would be no reason to move factories to China or Mexico, because the difference in direct labor costs wouldn't matter. 3) Job losses from automation occur slowly and a few at a time, so the people affected and the surrounding areas can adapt. No one suddenly automates a factory and fires a couple thousand people all at once due to the automation. However, for the past 30 years companies have been closing factories and firing everyone to move the work to China or Mexico. Compare the difficulty of a laid-off worker, displaced by automation, finding a new job when 50 people that year were laid off due to automation - versus when 1500 suddenly unemployed people were thrown into a local labor market. 4) Even a highly automated factory still requires tools, dies, fixtures, all of which are provided by local tool and die shops; requires maintenance men, quality control people, etc. The total follow-on effect from gradual automation in a factory is far less severe than that from closing the factory outright. 5) It is well known that the Chinese contract manufacturers are not automating their processes. No reason to, they just throw more cheap labor at it. Would you rather have a nation of well paid people buying more expensive goods, or a nation of poorly paid people buying cheap goods? Which is more sustainable in the long term? Which looks more like Tijuana and which looks more like Switzerland? Where would you rather live?

    • See 1 previous
    • Ect Ect on Jan 25, 2017

      turf3, BLS data (as previously noted) shows that US manufacturing out, in constant dollars, has virtually doubled since NAFTA was signed, and has maintained its share of total US GDP. In the same period, direct manufacturing employment has declined by about 1/3 but the number of jobs in the economy has risen significant;y. Other developed countries have seen a similar trend - this is not a situation unique to the US. Developing/developed countries typically shed unskilled and low-skill jobs while adding higher-skilled jobs. This is economic evolution, based on technology, and its how developed countries maintain their competitive edge. BTW, US trade in manufactured goods within NAFTA is roughly balanced - a small surplus in 2014, a small deficit in 2015. In both years, in surplus with Canada, deficit with Mexico. US imports of manufactured goods from Mexico are about 20% higher than exports, so it's hardly a huge gap.

  • Turf3 Turf3 on Jan 25, 2017

    Oh, one other point - how do we expect to build important military equipment when we have no rolling element bearing industry, no video display industry, and only a minimal steel industry and only a minimal integrated circuit industry? I would hate to see what happens if we ever get into a shooting war with China. Where will we get our bearings from?

    • BiturboS4 BiturboS4 on Jan 25, 2017

      On exactly this point, check out the book "Ghost Fleet" (https://www.amazon.com/Ghost-Fleet-Novel-Next-World/dp/054470505X) by P. W. Singer and August Cole. It's a fictionalized account along the lines of "Red Storm Rising" of how a hypothetical near-future war with China might play out. It is based upon extensive research and actual technology, and the authors have a deep background in the technical and military issues at stake.

  • Wjtinfwb I'd like to see a Ford/Mazda relationship restarted. Both companies have some car guys keeping the flame alive and could develop a sports car slightly bigger than a Miata and pick and choose from each other's parts bin to put together some attractive powertrain combo's. Even a Mazda 3 AWD with the 300HP EcoBoost 2.3L, manual and AWD from the Focus RS would be welcome. Even better, a factory Miata V8 with the 480 HP Coyote (i know it wont fit...) and a manual gearbox. And how about a CX-5 with a 2.7L EcoBoost V6 with AWD and an chassis tuned for sport. Lots of possibilities.
  • Blueice Patient 28, sorry, but it is Oktoberfest. Bring a kegof Kraut beer and we will 50% you.
  • Bd2 Probably Toyota, Hyundai is killing them these days.
  • Bd2 Japan is evil, stop buying their vehicles. I hope TTAC has a holiday for PEARL HARBOR.
  • Wolfwagen If Isuzu could update this truck and keep the cost between $25K - $30K they would sell like ice pops on dollar day in a heat wave.
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