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Richmans' Trade and Taxes Blog
Clyde Prestowitz: "We live in a world that is ... half free trade and half mercantilist"
Writing in Foreign Policy magazine on September 15, Clyde Prestowitz (The Protectionist Humbug) calls for an end to the nonsense that opposing mercantilism is protectionist. He begins eloquently:
He characterizes the world as half free trade and half mercantilist:
There are five overall trade policies:
In a world in which only Free Trade and Protectionism exist, countries that practice Free Trade are better off. Those that practice Protectionism sacrifice their other industries in order to favor the politically connected ones. But in a world in which Mercantilism is rampant, Free Trade is equivalent to unilateral economic disarmament. Those that practice Free Trade get gains in current consumption at the expense of declines in power, economic growth and future consumption.
Unfortunately, Prestowitz doesn't appear to have thought through the consequences of his position. He does not advocate Balanced Trade in this commentary. Nor does he call for a WTO-legal scaled tariff to balance trade. A scaled tariff is applied to countries in proportion to our trade deficit with that country. Those countries that buy as much from us as we buy from them, such as Brazil, would be rewarded with no tariffs. While those countries that keep out our products, such as China, would be forced to change, or they would lose market share in our markets. Instead our practice of Free Trade in the face of rampant Mercantilism rewards China and forces Brazil to copy China.
Journal of Economic Literature:
Atlantic Economic Journal: