This longwinded-but-necessary introduction leads me to my blog post from Friday, in which I opined on the possible political motivations behind new protectionist legislation from Congressman Gene Taylor (D-MS) that would force the United States to withdraw from NAFTA. One of my main conclusions was that Taylor's legislation, which (i) was based on a classic protectionist myth about free trade and US manufacturing job losses and (ii) would never, ever become law, was probably little more than a cynical way for the Congressman to grub some free campaign advertising, even though the protectionist myths propagated by the legislation could, if followed, actually end up harming many of his trade-dependent constituents (Taylor represents a district in Mississippi with three international ports).
On Sunday, I received a rather detailed and disgruntled comment from the anonymously-named "Researcher" that appeared to meet both "reject criteria" (b) and (c) mentioned above. On the former criterion, the comment itself was a longwinded defense of Congressman Taylor's protectionism that relied on several of the myths that I've repeatedly debunked on this site. (And yes, I was just heartbroken that Researcher wasn't familiar with my work!) On the latter criterion, a quick glance at my visitor log indicated that "Researcher" lived in Washington, DC and was Googling "'gene-taylor' NAFTA" on a Sunday afternoon - thus setting off my spidey-senses that perhaps "Researcher" had a personal stake in this debate (or was just really, really bored). For these reasons, I chose not to publish Researcher's comment, and figured that was the end of the story.
I was incorrect.
Yesterday, the same "Dummies" blog post received another, more confrontational comment from Researcher that said, in what I imagined to be his/her best Jack Nicholson voice, "Why did you delete my comment? Can't handle the truth?" The gauntlet, as they say, had been thrown. Normally, I'd still ignore such puerile taunting, but because there are a few things in Researcher's original comment that I really haven't covered before, and because the comment itself provides some very valuable and relevant insights, I think that a response would actually provide everyone with a great "teachable moment," as the kids like to say. So I've decided to take Researcher's bait and to respond in full to his/her original comment... in (what I hope to be) excruciatingly embarrassing detail.
I've now posted each of the comments at issue in the comments section of the original blog post, but for ease of reference, here's the first comment in full:
Taylor is senior Member of the House Armed Services Committee and has seen all the evidence that you deny of the economic inefficiency and the threat to national security from the rapid decline of our manufacturing workforce and industrial base. It took years to build MRAPs to save the lives of soldiers and Marines from roadside bombs in Iraq because we no longer have the industrial capacity to respond quickly to a surge in demand. The cost to taxpayers was very high because we did not have the domestic capacity for the parts and supplies for efficient manufacture of thousands of new vehicles. The United States is losing the ability to be self sufficient when necessary and that is a significant loss.So there you go. Readers of this blog will immediately recognize that Researcher's comments rely on several classic "protectionist myths." I'll dismantle each of these one-by-one (not in order), and then I'll hit on a few specific points that are unique to the comment above. Finally, I'll discuss some very interesting and ironic things I've discovered about Researcher and his/her comment.
The jobs data is very clear. Since we went all-in for free trade, whenever we have a recession (2000-01, 2008-09) we lose millions of jobs in the U.S. and most of the manufacturing jobs do not come back after the economy improves. Companies do not invest in new plants or substantial expansion of existing plants except in industries where buy-American policies require it, such as defense production, or where we have informal protectionist agreements, such as the voluntary deal with Japan automakers that encourages them to make their cheaper cars in the U.S.
Myth #1: The US manufacturing sector ("our industrial base") is "rapidly declining." As I've noted many, many times, tall tales about the demise of US manufacturing are probably the most prevalent, and misguided protectionist myth out there. First, until the onset of the latest recession, the US manufacturing sector was setting all kinds of performance records. As noted in my Cato Institute paper last year: "According to nearly every financial statistic that is relevant to evaluating the health of the manufacturing sector, it was unequivocally thriving until the onset of the recent US financial crisis and recession. In 2006, US manufacturing achieved record highs for output, revenues, profits, investment returns, exports, and imports.... [I]n 2007 new records were set for output, revenues, value added, and exports in the manufacturing sector." (See paper for footnotes, but don't bother: it's all government data.) During this same period ('06-'07), do you know what else was setting records? Yep: imports. Of course, the strong, positive relationship between imports and US manufacturing success makes total sense when you consider that almost 60% of all imports into the United States are capital goods and equipment - things that American manufacturers rely on to produce their globally competitive products (in record amounts).
Oh, and just so we're totally clear, the US manufacturing sector was, and remains, the world's largest: according to the United Nations Industrial Development Organization, US factories are the world’s most productive, accounting for 25 percent of global manufacturing value-added. By comparison, Chinese factories account for only 10.6 percent. (But don't just take my, or the UN's, word for it: the White House's 2009 "Manufacturing Framework" also made America's manufacturing dominance crystal clear.)
Second, while the current recession certainly put a damper on the US manufacturing sector (and every other sector), our "rapidly declining industrial base" is actually leading the economy into recovery: just yesterday the Institute for Supply Management released its monthly "factory index," a widely accepted metric of manufacturing health, which showed that US manufacturers had increased production and employment in February - the seventh straight month of expansion - thus "signaling [that] factories are leading the nation out of recession as the new year begins." So not only are Researcher's claims about the demise of the US manufacturing sector without merit, but so are his/her additional claims that recessions somehow accelerate American deindustrialization and discourage manufacturing investment.
And one final point here, I find it hilarious that someone would cite "Buy American" provisions as the gold standard of manufacturing efficiency and productivity. As I've already noted, the Stimulus* Bill's Buy American provisions have been an abject disaster - harming many US companies and literally causing the destruction of perfectly good raw materials out of fears that they didn't comply with a unnavigable labyrinth of bureaucratic regulations. And the GAO recently found that these same Buy American rules were creating massive inefficiencies in construction and manufacturing projects across the country. Awful.
Myth #2: Imports destroy US manufacturing jobs. Researcher is undoubtedly correct about one thing: the number of manufacturing jobs is decreasing in the United States. However, this has absolutely nothing to do with imports or free trade (or, as shown above, the state of the US manufacturing sector). Indeed, as noted in the aforementioned Cato Institute paper, total US manufacturing jobs peaked in 1979 "and started to decline well before trade accounted for even a fraction of GDP." And NAFTA certainly had nothing to do with it: "Between 1979 and 2007 the number of US manufacturing jobs declined from 19.4 million to 13.9 million, or by 196,429 per year. In the 14 years between 1979 and the launch of NAFTA, the U.S. manufacturing sector shed 2.7 million jobs. In the 14 years between the launch of NAFTA and 2007, the sector shed an almost identical 2.8 million jobs." So much for that nefarious job-destroyer that is NAFTA, huh?
The truth is that developed countries around the world have been steadily losing manufacturing jobs since the 1950s, and this trend is due to rapidly increasing productivity, technology gains and changing consumer tastes, not free trade. According to the CIA's World Factbook, Germany, the United States, Japan, Italy, France, the Netherlands and the UK are all among the world's top ten merchandise exporters; according to the OECD, some are net importers, and others are net exporters. Yet the long-term industrial employment trend for each country is decidedly downward (but for a few random upticks). So neither a country's total exports output nor its trade balance is a magical recipe for retaining manufacturing jobs.
Heck, even those awful, currency-manipulating Chinese (/sarcasm) are losing manufacturing jobs: According to a recent op-ed by GMU's Walter Williams, China has lost over 4.5 million manufacturing jobs since 2000 - a lot more, by the way, than the United States (about 3.3 million, according to the BLS). Williams helpfully adds, "In fact, nine of the top 10 manufacturing countries, which produce 75 percent of the world's manufacturing output (the U.S., Japan, Germany, China, Britain, France, Italy, Korea, Canada, and Mexico), have lost manufacturing jobs but their manufacturing output has risen."
So, Researcher, if you just have to blame something for American manufacturing job losses, blame the robots, not NAFTA or free trade. (Cafe Hayek's Don Boudreaux has even more on NAFTA, trade and job losses here, if you're interested.)
One final note for anyone still not convinced: recent government statistics show that 2009 witnessed a very significant contraction in US imports, total US trade (exports and imports), and the US trade deficit. And do you know what else characterized 2009? Cripplingly high unemployment! Enough said.
Myth #3: Imports and "free trade" threaten national security. Protectionists love to scare the bejeebus out of people by claiming that without widespread protectionism, America's manufacturing sector - and thus its national security - is gravely at risk. I've already detailed above how manufacturing fearmongering is routinely, ahem, manufactured, but national security fearmongering, while despicable, is also par for the protectionists' course. Here's Cato's Dan Ikenson refuting (unsurprisingly) the United Steelworkers union back in 2001:
U.S. military accounted for less than 0.1 percent of industry deliveries in 2000. During the Vietnam War, steel deliveries to the military accounted for 1.9 percent of the total market. This confirms that U.S. steel capacity and production so exceed military demand that even massive production cutbacks have no security implications. There are no legitimate shortage concerns--only hypocrisy. The industry warns of shortages while seeking to curtail supply.Sounds familiar, does it not? And, let's keep in mind that the stats above are from 2000 - back when the now-vibrant US Steel Industry was a complete mess.
Clearly, the broader protectionist claims about free trade undermining national security by accelerating American deindustrialization are completely false, but what about the discrete claims - about procurement problems during the US military's production of MRAPs (Mine Resistant Ambush Protected vehicles) - that Researcher brings up? Well, they also appear to be flimsy. According to 2009 Testimony by the GAO on Rapid Acquisition of MRAP Vehicles, "DOD use of a tailored acquisition approach to rapidly acquire and field MRAP vehicles was successful" (emphasis mine). GAO also found that one of the reasons that the MRAP "rapid acquisition" program was so successful was because of expanded trade: "The Secretary of the Army waived a restriction on armor plate steel, which expanded the countries from which DOD could procure steel." In other words, eliminating restrictive procurement rules allowed the government to produce MRAPs even more quickly. Shocking, I know.
But let's ignore all of these facts and assume arguendo (lawyer word!) that the MRAP program demonstrates a weakness in the US industrial base which requires some form of discrete protectionism (admittedly, there is some vague reference to this issue on page 4 of the GAO Report). Although my earlier points make clear that "free trade" didn't possibly cause US manufacturing weakness, such "national security protectionism" is perfectly in line with current free trade theory and practice. Indeed, even Milton Friedman himself once wrote that "it cannot be denied that on occasion [national security] might justify the maintenance of otherwise uneconomical productive facilities." Moreover, all US free trade agreements contain express exceptions for military procurement (e.g., NAFTA Article 1018) and for trade restrictions based on national security concerns (e.g., GATT Article XXI and NAFTA Article 2102). So to claim that NAFTA or "free trade" theoretically or legally undermines US national security is just plain wrong.
More importantly, Researcher's (and Rep. Taylor's) grand solution - completely dissolving NAFTA to justify some form of extremely limited national security protectionism - is a classic case of "throwing the baby out with the bath water." While the United States government might possibly have a direct and identifiable national security interest in protecting certain domestic MRAP suppliers, it has no such interests in also protecting domestic producers of tomatoes or t-shirts or footwear or lumber or televisions or automobiles (and so on). Yet Taylor's anti-NAFTA legislation (and other broad protectionist strokes like it) would do just that - and thus destroy all of the awesome benefits (totally unrelated to MRAPs or any other discrete military procurement) that free trade provides American businesses and families (especially those with lower incomes), while also unnecessarily and unfairly restricting every American citizen's right to engage in voluntary, mutually beneficial transactions with whomever he or she so chooses. As such, Researcher's and Taylor's protectionist dreams, if enacted, would impose an immoral, unnecessary and regressive tax on basic necessities, industrial inputs, consumer products and luxury items.
In short: such proposals are as immoral as they are absurd.
With that, I think I've
And speaking of irony...
You might recall that I said at the beginning of this novella that it wasn't just the factual misrepresentations in Researcher's original comment (or his/her subsequent taunt) that warranted this blog entry, but also that the comment itself was actually quite noteworthy. Well, that's because it turns out that "Researcher" appears to work in the U.S. House of Representatives and has a history of commenting on blog entries about Congressman Taylor or Mississippi politics more generally. According to my visitor log (and yes, I have PDFs of all of these log entries), Researcher filed his/her Monday "taunt" from a computer with the IP Address 126.96.36.199 ("U.S. House of Representatives," Washington, D.C.) around 2:00p after (again) using Google to search the blogs for "'Gene Taylor NAFTA." I think this makes it pretty clear where Researcher works and what Researcher was doing last Sunday, and therein lies the very thick irony. As I mentioned above, the main point of my original post was that elected officials often use anti-trade legislation to do little more than get free press during an election cycle and further reinforce the widespread myths that justify their protectionist politics. And here, in the case of "Researcher," we very likely have a congressional employee checking the internet for news and blog reports on a Congressman's new anti-trade legislation, and then taking to the web to further propagate the protectionist myths that justify the aforementioned Congressman's protectionist positions. In other words, by trying to debunk my original blog post, Researcher pretty much proved it all to be true.
You cannot make this stuff up.
One final closing note: I must admit that I'm dismayed, although probably not surprised, to learn that federal employees appear to be surfing the web and anonymously commenting on blog entries in which they have a personal or professional interest - sometimes on the taxpayer's dime. While I seriously doubt that such behavior is illegal or anything, I find it rather troubling that someone employed by the United States Congress is using anonymity and the internet to mask obvious and important biases and thus unduly influence public policy debates. Such actions hardly seem to be a model for good government, and they certainly make me wonder just how prevalent anonymous government commenting practices are.
Indeed, just how many "Researchers" are out there?