David: Thank you very much for responding. I have read arguments regarding tariffs and tariff-wars from a number of Libertarian economists and I certainly do agree with the theory set forth; which is to say that imposition of such an import tariff only serves to hurt consumers in the importing economy or country. The austrian school theory is both easy to understand and, for my money, entirely logical. You made mention of the fact that the austrian position on this question is not generally well received by others. It has seemed to me that the solution to the situation (U.S. manufacturers being “hurt” by foreign imports not subjected to any such competitive tariff protection) must embrace those issues that you have mentioned; issues that are involved in making the cost of U.S. goods higher. Costs attributed to minimum wage laws, all manner of different (high) taxes, the cost of inflationary monetary policy, as well as other costs that are attendant with the costs of having and maintaining a work force, are examples of home-grown costs that have to be recaptured as an incremental portion of the final price that must be obtained in order to make such manufactures economically worthwhile, without regard to whether or not they are made for export to foreign shores.
I think that my question or difficulty arises from primarily political considerations having to do with the changes that have taken place in the U.S. economy during the past several years and the perceptions, fears and frustrations that I encounter when I speak with friends and business associates. Here is one example:
I have a friend who makes T-Shirts for different companies, primarily for trade shows, sales events, marketing purposes and the like. Up until about 10 years ago, he had 10 employees working for him. None of the employees were paid very much more than minimum wage. His little company was enrolled in a health insurance program which, while not overly generous, did cover major medical and most traditional medical conditions. He picked up the lion’s share of the insurance costs as part of his employee’s compensation. He finally was forced, by the economics of his situation, to get rid of most of his employees, except for his wife. Now it’s just the two of them and their function is primarily sales. The actual manufacture of his custom T-Shirts is done by an operation in China and at a cost far less than what he had been paying. In order to stay competitive and still make a profit, according to his own explanation, he had no other choice. His customers continue to receive a product of equal, or at least comparable, quality and he’s able to sell his product at a price that remains competitive. When listening to him, it was obvious that he believed that he had lost some measure of control over his business because, clearly, he felt badly that he had to layoff so many employees who had worked for him for such a long time and had helped him become successful. I’ve known him for about 25 years and he is, by no means, some stereotypical “greedy corporate monster” of the type which the mass media find so irresistable for their news stories. While we can’t allow emotions to enter into a sound business or economic decision, his example has been repeated many many times, in different businesses, throughout the U.S.
Do you think it is the case that, in a very general sense, the people of the U.S. are going to be forced to learn, and eventually accept, that their labors are going to have to be re-evaluated and re-priced, based upon the labor costs of foreign economies, if U.S. manufacturing is to remain (or become) competitive enough to keep domestic manufacturing labor employed? That strikes me a a very tough “sell” in the political world. In the rather murky and emotional world of politics, it seems to me that such an inevitable body of change has been used as a strong club with which the austrian school tariff attitude has taken an undeserved beating and it has served as an effective whipping boy for politicians who are inclined to avoid the truth and to shift the blame onto a foreign country or elsewhere.
BTW, thanks also to Anonymous Coward for the post, especially the point regarding Smoot-Hawley. That is an excellent point that is not discussed nearly enough in public debates and I would venture a guess that no more than a relative handful of people are even aware of the terrible effects of Smoot-Hawley. Best regards.