As Democrats and Republicans both express support for tariffs, the economic implications of protectionist policies are once again at the forefront of public debate. Both parties differ on the size of their proposed tariffs, but the New York Times reports that “both Democrats and Republicans are expressing support for tariffs to protect American industry, reversing decades of trade thinking in Washington.” Proposals to impose tariffs on imports from China seem to be particularly attractive to both red and blue voters:
The tariffs have proved popular with industries that have faced stiff competition from Chinese firms, like makers of kitchen cabinets…the industry realized that Chinese companies had taken over about 40 percent of the market and that their share was continuing to grow.
In “Protectionism and the Destruction of Prosperity,” Rothbard explains why tariffs and protectionism are incompatible with economic prosperity:
As we unravel the tangled web of protectionist argument, we should keep our eye on two essential points: (1) protectionism means force in restraint of trade; and (2) the key is what happens to the consumer. Invariably, we will find that the protectionists are out to cripple, exploit and impose severe losses not only on foreign consumers but especially on Americans.
Rothbard’s point is that free trade is essential to the prosperity of ordinary consumers. Protectionism ultimately hurts domestic consumers when import tariffs cause prices of domestic goods to rise: “And since each and every one of us is a consumer, this means that protectionism is out to mulct all of us for the benefit of a specially privileged, subsidized few.” Moreover, tariffs do not create “fair” trade any more than price controls create “fair” prices. As Rothbard warns,
Whenever someone starts talking about “fair competition” or indeed, about “fairness” in general, it is time to keep a sharp eye on your wallet, for it is about to be picked. For the genuinely “fair” is simply the voluntary terms of exchange, mutually agreed upon by the buyer and seller. As most of the medieval scholastics were able to figure out, there is no “just” (or “fair”) price outside of the market price.
It is clear that no economy can prosper in the long run while the government attempts to fix prices or to control the terms of trade. Supporters of free trade, therefore, oppose all forms of protectionism. However, that is not the end of the story as far as concerns the industries which have lost their market share to China, and in “Nations by Consent: Decomposing the Nation State” Rothbard turns his attention to the deeper underlying concerns of the protectionists.
Open borders and cultural identity
For opponents of protectionism, it seems to be logical that promoting free trade requires support for open borders, on the assumption that borders inherently impede free trade through border controls and tariffs.
While that may seem logical, it is a grave misstep to leap from free trade to open borders. That unfortunate leap arises from a failure to understand the importance of nations and national borders, and the importance of political boundaries in defending national identity and culture. In “Nations by Consent,” Rothbard observes that, “The genuine nation, or nationality, has made a dramatic reappearance on the world stage.” He addresses the tension between open borders and the risk of eroding a nation’s cultural boundaries, arguing that this is a problem that needs to be borne in mind by classical liberals who support free trade:
The question of open borders, or free immigration, has become an accelerating problem for classical liberals. This is first, because the welfare state increasingly subsidizes immigrants to enter and receive permanent assistance, and second, because cultural boundaries have become increasingly swamped.
The growing pressure on national and cultural boundaries prompted Rothbard to change his views on immigration, as he recognized that the disintegration of national and cultural identity could no longer simply be swept aside as inconsequential by those who, as he did, support free trade:
Previously, it had been easy to dismiss as unrealistic Jean Raspail’s anti-immigration novel The Camp of the Saints, in which virtually the entire population of India decides to move, in small boats, into France, and the French, infected by liberal ideology, cannot summon the will to prevent economic and cultural national destruction. As cultural and welfare-state problems have intensified, it became impossible to dismiss Raspail’s concerns any longer.
Some commentators have assumed that Rothbard simply abandoned his principled support for free trade, so it is important to clarify that maintaining the integrity of national borders does not entail abandoning free trade. On the contrary, Rothbard recognizes that human beings lie at the heart of all human action, including market exchange, and nations are not simply economic zones whose sole purpose is to provide a platform for global trade. Rothbard explains:
Contemporary libertarians often assume, mistakenly, that individuals are bound to each other only by the nexus of market exchange. They forget that everyone is necessarily born into a family, a language, and a culture. Every person is born into one or several overlapping communities, usually including an ethnic group, with specific values, cultures, religious beliefs, and traditions. He is generally born into a “country.” He is always born into a specific historical context of time and place, meaning neighborhood and land area.
Therefore, Rothbard saw no contradiction between the principle of nations by consent—including the right to secede—and his support for free trade. He distinguished between political boundaries and economic boundaries, arguing that political boundaries do not imply the need for economic boundaries represented by destructive customs barriers and protectionist tariffs. He explains:
One goal for libertarians should be to transform existing nation-states into national entities whose boundaries could be called just, in the same sense that private property boundaries are just; that is, to decompose existing coercive nation-states into genuine nations, or nations by consent…even under a minimal state, national boundaries would still make a difference, often a big one to the inhabitants of the area.
Rothbard also recognizes that politicians are often tempted to follow political boundaries with protectionist policies, making overblown promises to put their own citizens in a stronger economic position by protecting them from free trade. The political desire to protect domestic producers who are outcompeted by foreign producers explains why many supporters of free trade are hostile to nationalism—they fear that a devotion to one’s nation will only encourage further protectionist measures of the type now being proposed by both parties. But Rothbard insists that, far from fueling protectionism by erecting more borders and more tariffs, the principle of nations by consent is more conducive to free trade:
A common response to a world of proliferating nations is to worry about the multitude of trade barriers that might be erected. But, other things being equal, the greater the number of new nations, and the smaller the size of each, the better. For it would be far more difficult to sow the illusion of self-sufficiency if the slogan were “Buy North Dakotan” or even “Buy 56th Street” than it now is to convince the public to “Buy American.” Similarly, “Down with South Dakota,” or a fortiori, “Down with 55th Street,” would be a more difficult sell than spreading fear or hatred of the Japanese. Similarly, the absurdities and the unfortunate consequences of fiat paper money would be far more evident if each province or each neighborhood or street block were to print its own currency. A more decentralized world would be far more likely to turn to sound market commodities, such as gold or silver, for its money.
Rothbard’s insights highlight the political interdependence between the open borders debate and the debate about tariffs. In these debates, it is important to reiterate that free trade does not require nations to abolish their borders, nor does it require supporting open immigration. National sentiment is a reality of human nature, and the reality is, therefore, that many people would not sacrifice their national identity for the rather abstract notion of the economic prosperity which comes with free trade. They might well decide there is a tradeoff to be made between economic prosperity and their national or cultural integrity.
It must be emphasized that national borders do not impede free trade for the simple reason that free trade is voluntary. Safeguarding a country’s borders would no more impede voluntary free trade than walls and a locked door would prevent the homeowner from participating in voluntary exchange with others.
