Winston Churchill was so committed to the principle of free trade that in 1904 he chose to abandon his party rather than abandon the principle. In crossing the floor of the House of Commons to join the Liberal Party, he said: "We say that every (citizen) shall have the right to buy whatever he wants, wherever he chooses, at his own good pleasure, without restriction or discouragement from the state. There came last year into (our country) from every land and people under the sun millions worth of merchandise. ... Why did it come? Was it to crush us, or to conquer us, or to starve us, or was it to nourish and enrich our country? All that vast catalogue of commodities came to our shores because some (citizen) desired it, paid for it and meant to turn it to his comfort or profit."
Now, I'm not urging Republicans to jump ship - there is no free-trade Democratic ship on which to jump - but to emphasize that all trade in free enterprise is for the benefit of consumers and individual choice.
There is no doubt that President Bush's pro-growth tax rate reductions significantly reduced the cost of capital and labor last spring and are now pushing hard on the economic accelerator.
As a result, imports are increasing and the trade deficit is rising, which is natural when the economy is growing and producers need capital goods and industrial supplies. That's why I'm baffled that the White House insists on keeping the dead weight of protectionist trade policies hard on the economic brake in the name of reducing our trade deficit.
Protectionist policies are frequently justified with "fair trade" rhetoric, especially regarding our relations with China. For example, Commerce Secretary Don Evans stated recently that, "If you believe in free trade, you must also believe in a fair playing field." That sounds good, but it is a euphemism for tariffs and quotas, and as economist Alan Reynolds pointed out in a recent column, "Tariffs and quotas restrict competition, restrict supply and raise prices."
In recent days, U.S. trade policy has gone from poor (agricultural subsidies, tariffs on steel and Canadian soft lumber) to poorer with last week's implementation of tariffs on China's textile products. Fed Chairman Alan Greenspan, who consistently refuses to opine on economic policy beyond monetary and fiscal policy, was moved to warn of "clouds of emerging protectionism."
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