Free trade has been stigmatized. It has been pilloried, vilified even, by populist voices on both the left and right. From NAFTA to the proposed Trans-Pacific Partnership, trade deals rooted in economic liberalization have become America’s scapegoat for a mediocre economy at home. From the perspective of political expediency, it makes sense. Holding a campaign rally in front of an abandoned manufacturing facility is far more straightforward than attempting to explain the virtues of competitive advantage. It’s the easy thing to do. But is that what we truly want to look for in our leaders? Individuals who will forgo hard truths in place of facile soundbites?
This country is a shining example of the existential benefits that free trade cultivates. Think about it. You can buy maple syrup from Vermont, a car assembled outside Dallas, oranges from the Florida coast, timber from the Pacific Northwest and countless other items without even thinking twice about interstate tariffs, excise fees, or other restrictions. The core principle at play here is a simple one: When government chooses to “protect” an economy, what it’s actually doing is violating the right of the individual to engage in trade with whom they see fit. As Americans, we’d be horrified if a measure were proposed to tax Maryland crabs being imported into Virginia in an effort to safeguard our freshwater fish farming industry. But yet this is the very logic used to justify protectionist economic policies when it comes to international trade.
Over the last few decades, median household income and U.S. international competitiveness has sunk while government regulation has continued to grow. In a 22-industry study conducted by George Mason University’s Mercatus Center, researchers documented how much of an economic damper regulation can be – going as far to contend that it inflicts an annual reduction in GDP growth of 0.8%. Had government regulation been frozen at 1980 levels, Mercatus researchers estimated that the U.S.’s annual GDP could easily have been 25% larger by 2012. This amounts to $4 trillion dollars total in lost economic activity, or roughly $13,000 per capita.
To counteract these negative effects, politicians in both Washington and state capitals across the country offer tax incentives, subsidies, and other assistance to select companies in an effort to “promote business” – instead of simply promoting a free and open market. This may be how you orchestrate a short-term media win, but it’s not how you foster the healthy, lasting expansion of an economy.
As recently as last week, President-elect Trump reasserted the protectionist attitudes his campaign was so fond of during the 2016 campaign, tweeting that American businesses will be heavily taxed should they wish to relocate outside the United States. If this sounds familiar to you, it’s because we had a similar national conversation back in 2014.
Two years ago, Burger King announced their intentions to merge with Canadian coffee shop chain Tim Horton’s, and establish a combined headquarters in Ontario. By doing so, Burger King would avoid the U.S.’s outrageous corporate tax rate, which is the highest in the entire world. Burger King was vilified by the Left, even though they were simply making an economical business decision for their investors. When President Obama considered taking action against companies attempting to relocate internationally for tax purposes, conservatives railed against the idea – and rightly so. They cited similar statistics to the ones included in this article, and contended that sweeping tax reform – not government force – was the solution.
Where are those conservatives now?
In order to get America back on the path to prosperity, we must empower all businesses to take risk, invest, and bolster the entrepreneurial spirit that our country was founded upon. To do that, renewing our commitment to the ultimate level playing field, the free market, should be our top priority.
Anthony DeFazio is the President of American Individualists, and serves on the Communications team of the Loudoun County Republican Committee. Follow him on Twitter: @anthonyjdefazio, and on Facebook: @anthonyjohndefazio.
