Protective Tariffs: Who Places Them on Whom?

I am against protective tariffs. They weaken economic efficiency, give out special benefits to industry, hurt consumers, and reduce freedom. Nevertheless, they have been used by any countries, both large (U.S., Brazil) and small (Mauritius, Tunisia) in the furtherance of industrialization. Why is this so?

According to this article, the key factor is lack of urbanization. Singapore and Hong Kong were both solidly free-trade from the beginning because they had no substantial rural population. Mauritius, Brazil, Taiwan, the People’s Republic of China, and Tunisia, meanwhile, all had large rural populations.

This makes some sense.

What is the effect of a protective tariff? It is to shift domestic consumption from the products of foreign exporters to those of domestic producers. Who’s hurt by the protective tariff? Consumers, especially who don’t work in protected factories or benefit from their business. Who benefits? Domestic producers.

Hurting the farmer to benefit domestic manufactures is easy.  But what if there is no farmer to encourage to move to the factory, but only a city-dweller? What if there’s no one for uncompetitive domestic manufacturers to sell to but urban dwellers? Then protective tariffs just redirect resources which could be used for the advancement of cutting-edge modern urban services to manufacturing for no good reason. It’s redistributing resources from most city-dwellers to a few city-dwellers. This is the opposite of the case in which there are numerous farmers to buy protected goods, as cities as a whole can benefit from farmers as a whole via the protected urban manufacturing sector. Thus, Chicago supported the Republicans, who were the champions of protective tariffs, before the Great Depression.

Protection in partly rural societies.
Protection in partly rural societies.
Protection in fully urban societies. Notice the net benefit to the cities is much lower.
Protection in fully urban societies. Notice the net benefit to the city is much lower.

It’s notable U.S. protective tariffs began in 1816, when the U.S. was just beginning to industrialize and still very much an agricultural nation, with its infant industries threatened by foreign, especially British, competition. And it’s notable they mostly ended in the 1930s, when the U.S. had mostly urbanized, the manufacturing sector had fully bloomed, and foreign trade had collapsed to a trickle.

When domestic firms can benefit from the profits of foreign manufacturing and get greater political power than those protected domestic manufacturing firms that can’t do so, that’s when protective tariffs come to a permanent end as a significant means of stimulating domestic industry, and outsourcing begins. This is especially true if domestic firms can own factories overseas. Thus the National Association of Manufacturers’ condemnation of the Republican presidential nominee’s domestic industrial protection plan to benefit grandparent industries for the benefit of domestic industrial workers in, say Ohio and Pennsylvania, at the expense of most Americans, as in, say, California and Washington.


Thursday Assorted Links

1. Turkiye delenda est. I wouldn’t be surprised if the terror attack was done by the CIA or Turkish intelligence, though the purpose would be unclear.

2. What’s wrong with the 2016 Reason Rally as compared with the 2012 one. Brilliant piece.

3. Murphy’s Assorted Links

4. Karl Sharro defends the abolition of democracy in the UK (very good satire)

5. Gun ownership becoming more concentrated in fewer hands

6. Russia’s agreement to stop bombing rebels was stupid

7. Hillary proposes eliminating student debt for people who can most easily eliminate it themselves

8. #1. Downfall of USSR #2. Brexit (Gary North on Brexit)

Wednesday Assorted Links

1. Tweet #1:

2. Tweet #2:

3. Tweet #3:

4. They do not make ads like they used to

5. Will Hurd

6. Lessons for Brexiters

7. Good piece on Libya

8. Scott Adams writes brilliant post on why Trump is losing

Tuesday Assorted Links

1. How the CIA supposedly saved the U.S. bank tower

2. Why the Supreme Court’s former Virginia Governor decision matters to Hillary

3. Hillary’s hawkishness was already in existence as First Lady

4. DNC’s platform committee opposes Zogby’s anti-anti-Assad regime plank

5. This is why you’ve gotta have HSTS

6. How Brexit is a win for Putin. Remember, a win for Putin is generally a win for all of us.

7. Extreme versions of own-side political perspectives lead to shift to other side

8. A very useful tweet, both for Kasparov and Cowen:

9. National Organization for Women is now the National Organization for Rape-Fabricating Slut Pornographers

10. Man with interracial family featured in Warren’s anti-Trump ad Massachusetts Trump voter.

11. More Clinton emails released, including some she deleted

12. AEI gets it right on Israel and Turkey

Monday Assorted Links

1. Trump most respected among moderately religious Republicans, but not non-religious Republicans

2. Tweet of the Day

3. Only the conservative U.S. media likes Brexit

4. Bad comedian: Daniel Lin

Good comedian:

5. Why big money (=big media) opposes Brexit

6. Hispanic anti-Rubio pro-Trump millionaire campaigns in Florida

7. The Independent Institute’s review of Polarized America

8. John William McCormack

Sunday Assorted Links

1. The “what is the eu” spike was under 1000 people

2. Violent confrontations between idiots in California

3. The lying press. Maybe I should start reacting to it like Sailer does. Might increase my popularity. Maybe I’m taking this with too little aloofness.

4. The city is not the state

5. Chief Idaho Prosecutor a public danger

6. Bill Maher becoming more based

7. The New China: observations by Ken White

8. Freddie DeBoer on his side’s innumeracy

Saturday Assorted Links

1. Help Bob Murphy critique an idiot WaPo left-wing elitist Brexit article!

2. Thiel funding Hogan+WeSearchr=? (great ideas that might be implemented)

3. 70% of those demanding another referendum don’t live in the UK

4. Nobody’s too interested in punishing (((White))) guy White collar crime (Steve). I wonder why?

5. Ron Paul on Brexit

6. Britain chooses Freedom over Fear (must-watch)

7. Ross Douthat: the only man in the media supporting Brexit. So based. So cucked. So purple-pilled.

8. “The optimal trade deal for country A – according to mercantilist dogma – is one that commits the people of A to work for foreigners without compensation. This optimal trade deal, in effect, turns the workers of country A into slaves for foreigners.“. Good stuff for a Trump-hater. I am a free-trader, not a fan of Trumpian trade policy.