Here is a farmer who proposes to exchange with his neighbor a horse he does not want for a couple of cows he does want. Would it benefit these farmers to prevent this trade on the ground that one might breed his own horses and the other raise his own cows? Yet if one farmer lived on the American and the other lived on the Canadian side of the line this is just what both the American and Canadian governments would do. And this is called “protection.”
Protection or Free Trade, Henry George (c. 1886)
Review: This is the fourth column related to international trade. Thus far, the columns have established: A: U.S. beef producers are winning in the global marketplace (see column one) and, B: Despite rhetoric to the contrary, neither beef (column two) nor live cattle imports (column three) have proven to be detrimental to U.S. producers over time.
As alluded above, the protectionists avoid that reality and remain entrenched in their anti-trade, imports-bad rhetoric regarding international trade. Let’s ponder some of the broader principles (and practicality) surrounding that protectionist position.
Reprisal: Most people would agree, given the principles of economic liberty, anyone who owns an enterprise (e.g. farm or ranch) should have every right to invest his/her capital, skills, ideas and resources as they see fit. And therefore also possess the right to market his/her products to whomever he/she desires (assuming the product is safe and legal).
Meanwhile, most people also understand that protectionist measures often set into motion retaliatory measures by affected countries – and furthermore, such reprisal can be unpredictable. Accordingly, protectionism forces the business owner to always be looking over his/her shoulder; it portends potential retaliation and jeopardizes the full potential of the enterprise owner’s economic freedom.
As such, protectionism (if successful) potentially exposes neutral third parties to the counter-punch. That is, the protectionist (looking out for his/her own special interest) makes another individual subject to the protectionist reprisal - not to mention the secondary consequences discussed below.
Real World: One reader (an independent producer) recently shared his real-world perspective on the importance of trade (responding to this column):
…the producers from the [southeastern U.S.] are feeling the positive effects of free trade. There is a hell of a lot of southeast feeder calves being fed in Canadian feedlots. So, saying exports in a crowded sale barn in Virginia gets everyone excited because there’s another bidder for those calves we didn’t have six years ago.
He then made it personal: “Seventy five percent of all the calves I background are sold to Canadian [feeders], that’s why I feel so strongly about it…4 loads a month going north really helps the cash flow.”
We don’t hear those stories from the protectionists.
Montana: Given that premise, let’s broaden the view to a state-wide level; we’ll use Montana as a trade test-case. The state’s ag sector generated $1.5B of export revenue in 2022 (see graph below; USDA has yet to detail state-level data for 2023). That number has tripled in 22 years – growing at average rate of 5% annually!
Conservatively assigning an economic multiplier of 2X to that number makes trade equal to about $3B in economic impact. That represents ~4.5% of the state’s GDP ($67 B).
Now ponder what happens if those exports are curtailed because of retaliatory measures. One, the state’s rural economy takes a direct hit. Two, and perhaps even more important, are the secondary consequences. The fallout being felt by all sorts of independent businesses and their employees in rural America (truckers, waitresses, clerks, mechanics, welders, etc…). Trade derives value that extends far beyond just producers.
And none of that accounts for the state’s services exports. Montana welcomes roughly 1.25M international visitors to the state, annually – that represents about 10% of a $5B industry.
Can’t Eat AND Have Cake, Too: In the end, protectionists are rent seekers – trying to leverage governmental favor to serve their own special interest. Meanwhile, they want to maintain all the other benefits of a global economy (e.g. purchasing Super Duty pickups with Power Stroke engines). They want to eat their cake and have it, too.
Protectionists are inherently conflicted. No one describes that reality better than Dr. Donald Boudreaux (George Mason Univ). Several years ago, in a Mercatus Center podcast, he summarized it like this: “…what [protectionists] want is to have all the riches of being part of the dynamic competitive market order but they individually would like to be excused from it.”
Nevil Speer is an independent consultant based in Bowling Green, KY. The views and opinions expressed herein do not reflect, nor are associated with in any manner, any client or business relationship. He can be reached at nevil.speer@turkeytrack.biz.
