Apr 2, 2025

Max Rangeley and Daniel Hannan on the post-WWII trade order

In closing, we know what happened when the world moved away from Cobdenite [free trade] principles.  It happened at the beginning of the 20th century with cataclysmic consequences.  Indeed it was precisely as a reaction to the horrors of the two wars, the Holocaust and the Holodomor that delegations from the free nations met in Bretton Woods in 1944 and agreed to a progressive reduction in trade barriers, a policy which led to the creation of what is now the World Trade Organization and to seven decades of unprecedented democracy as well as unprecedented prosperity.  

That process is now going in reverse.  Trade is falling as a proportion of global GDP and we are seeing a revival of the doom loop between political instability and autarkic tendencies.  "The owl of Minerva," wrote Hegel, "spreads its wings only with the gathering of the dusk."  If ever there was a time to remind ourselves how fortunate we have been in the economic order we have enjoyed, that time is upon us.

~ Max Rangeley and Daniel Hannan, Free Trade in the Twenty-First Century," Preface

2025


Mark Thornton on protectionism

It's important that Austrians and friends of the Austrian School realize that protectionism is just a step forward to war.  It's a step forward to human impoverishment and it's a step towards human division, hate and devolution.  Protectionism is the health of the state.

~ Mark Thornton, "Free Trade in the Twenty-First Century," Minor Issues, 3:40 mark, March 29, 2025



Mar 31, 2025

Donald Trump on the impact of tariffs on foreign car prices

I couldn’t care less, because if the prices on foreign cars go up, they’re going to buy American cars.  I hope they raise their prices, because if they do, people are gonna buy American-made cars.  We have plenty.

~ President Donald Trump, interview, NBC News, March 30, 2025

(The new 25% tariffs on foreign-made cars and auto parts are set to take effect on April 3, a day after Trump is scheduled to announce reciprocal tariffs on imports from more of America’s trading partners.  While there were reports last week that the reciprocal tariffs would be targeted and less ornery, the Wall Street Journal reported Sunday that the Trump administration is considering stiff tariffs of up to 20% against almost all U.S. trading partners.)



Mar 30, 2025

Kishore Mahbubani on how China learned from the collapse of the Soviet Union

I think out of necessity they [the Chinese] have to have a strategy.  And they do have one.  So for example, they ask themselves the obvious question: "Why did the United States successfully defeat the Soviet Union?  Why?"  And I must say, the one country that has studied the collapse of the Soviet Union more carefully than any country in the world is China because China knows that the dream of the United States is to make China the second Soviet Union that collapses.

So how does China prevent a collapse?  First point, the Soviet Union didn't collapse because of external pressures; it collapsed because of internal weaknesses.  And so China realizes, "To make sure I survive, I must have a very strong dynamic economy and strong dynamic society."  [...]

So the Chinese know that the first priority is to make sure your economy is strong and your society is strong, which is why they're massively educating their people and growing their economy, so that they don't become a second Soviet Union.  

The second thing that the Chinese learned from the collapse of the Soviet Union was that the United States succeeded because it managed to get a lot of the neighbors of the Soviet Union to join the containment policy everywhere: Western Europe, Japan, South Korea, both ends of the Soviet Union.  So what did the Chinese do?  The Chinese launched a preemptive strike against a containment policy by making sure that its neighbors depended on the Chinese economy.

I'll give you a simple example.  Singapore is part of Southeast Asia and we are part of an organization called ASEAN and ASEAN started as a pro-American organization.  In fact, when ASEAN was created on August 8th, 1967, both the Soviet Union and China denounced the creation of ASEAN as a pro-American organization.  It's true, ASEAN was pro-American, pro-Western.  And what was stunning was that even though ASEAN was pro-American, pro-Western and we had longer dialogues with the United States, European Union, Australia, Japan, everybody, none of our Western friends proposed a free trade agreement to ASEAN.  The first country to propose a free trade agreement to ASEAN was China in 2001.

And the impact of that China-ASEAN agreement was phenomenal.  Because in the year 2000..., ASEAN's trade with the United States was $135 billion and our trade with China was only $40 billion.  So U.S. trade was more than 3 1/2 times what China's trade with ASEAN was.  But as a result of the free trade agreement, by 2022, even though ASEAN's trade with the United States has gone from $135 billion to $450-500 billion, an increase of over three times, China's trade with ASEAN went from $40 billion to $975 billion dollars, almost $1 trillion dollars, the world's largest trading relationship in 2022!  So there's no way ASEAN can join a containment policy against its largest trading partner, right?  It's crazy.

~ Professor Kishore Mahbubani, "Kishore Mahbubani REVEALS China's Strategy to Counter USA," Rise of China, 6:35 mark, March 25, 2025

(The Association of Southeast Asian Nations was established in 1967 by Singapore, Thailand, Malaysia, Indonesia and the Philippines.  It has since been joined by Brunei, Vietnam, Laos, Myanmar and Cambodia.)



Mar 27, 2025

WSJ on the 1963 chicken tax

Nothing is more American than the pickup truck. One big reason why: the “chicken tax.”

The U.S. has imposed a 25% tariff on imported trucks ever since President Lyndon Johnson hit back at European levies on American poultry in 1963, less than two weeks after the assassination of President John F. Kennedy.

As the Trump administration pursues a barrage of new tariffs, the longstanding tax on pickup trucks bears witness to the power of high duties to reshape global trade, competition and industry over decades, with effects far exceeding their original purpose.

Like today’s tensions, the dispute that became known as the “chicken war” was punctuated by worries about the trade deficit, accusations of protectionism and threats to cut Europe loose from America’s defense umbrella. 


In the 1980s, Subaru imported a small pickup that circumvented a 25% tariff on trucks because it had two backward-facing seats bolted to the open bed.


Stephen Miran: "I think that a lot of folks have got the effects of tariffs wrong"

I think that a lot of folks have got the effects of tariffs wrong...  The number one point is a general point about economics, which is that when you think about any economic policy, a tariff, a tax, anything else, the economists believe that the party that bears the burden or the benefit of that policy is the party that's more inflexible, because if you're flexible, you can change your behavior to avoid the costs...  

U.S. consumers are flexible.  We have options.  We can produce stuff at home, we have a variety of countries we can import stuff, we can substitute into home production, whereas countries that sell to the United States are inflexible.  They've only got the United States to sell to.  There's no alternative.  So they're the ones who will bear the burden of these tariffs, which means that there's going to be very limited pass through into downside economic risk or into higher prices.

~ Stephen Miran, "Trump's Economic Adviser Rejects Short-Term Pain From Tariffs," Bloomberg Podcasts, 0:30 mark, March 24, 2025



Mar 26, 2025

Our World in Data on comparative advantage

To see the difference between comparative and absolute advantage, consider a commercial aviation pilot and a baker.  Suppose the pilot is an excellent chef, and she can bake just as well, or even better than the baker.  In this case, the pilot has an absolute advantage in both tasks.  Yet the baker probably has a comparative advantage in baking, because the opportunity cost of baking is much higher for the pilot.

At the individual level, comparative advantage explains why you might want to delegate tasks to someone else, even if you can do those tasks better and faster than them.  This may sound counterintuitive, but it is not: If you are good at many things, it means that investing time in one task has a high opportunity cost, because you are not doing the other amazing things you could be doing with your time and resources.  So, at least from an efficiency point of view, you should specialize on what you are best at, and delegate the rest. 

The same logic applies to countries.  Broadly speaking, the principle of comparative advantage postulates that all nations can gain from trade if each specializes in producing what they are relatively more efficient at producing, and imports the rest: “do what you do best, import the rest.” 

~ "Trade and Globalization," Our World in Data, 2014

(Look under subtitle, "Theory: What is 'comparative advantage' and why does it matter to understand trade?.")