By Jacob Laufgraben
Problem – America’s Protectionism Does More Harm Than Good
In recent history, the United States has adopted protectionist trade and immigration policies with the goal of safeguarding the jobs and wages of native-born Americans. However, these policies, and the reasoning behind them are founded on distortions of sound economic thinking, peddled by special interest groups who fear competition. Furthermore, protectionism has done little for this country but holding back its economic growth, and contributing to the decline of American hegemony on the world stage.
One of the most detrimental protectionist policies is heavy restrictions on immigration. Such a limiting immigration system has been instituted despite the fact that immigrants are a net positive to the United States. Not only do they enrich the cultural fabric of American society, but they are a boon to the economy. Contrary to the common populist talking point that immigrants take jobs from native-born Americans and lower the wages for American workers, immigrants create jobs and do not have a substantial impact on wages. How can this be though? The populist argument seems convincing. It claims that there are only so many jobs available, and if immigrants are getting any of them, native-born Americans are missing out. And furthermore that an increase in the supply of labor will cause companies to decrease how much workers are paid.
In reality though, wages and jobs are not finite and constant resources that are used up as more people enter the country. The market is a complex organism that responds to social and economic changes. When immigrants come to this country and get jobs, they bolster the bottom line of whatever company they work for. This allows the company to expand, which means they need more workers to support their business. Many of the workers they hire to supply this labor demand are native-born Americans. And this isn’t just a theory, the data supports it. According to John McLaren, an economist from the University of Virginia, an immigrant creates, on average, 1.2 jobs for every job they take (Newman 2015). Furthermore, because of the company’s growth and increased profits, it can take on additional employees without lowering the wages of the current workers.
Trade protectionism is a policy that is equally harmful to not just the American economy, but to the livelihood of the people living here. Free trade is an economic system that allows goods and resources to pass between countries unencumbered by transactional barriers like tariffs and quotas. Like immigration controls, many populists often oppose free trade because it gives people access to cheaper foreign goods. Tariffs meanwhile, increase the prices of said goods and encourage consumers to buy American-made products. Supporters of protectionism argue that this bolsters American industry and keeps jobs here at home. But these notions are unfounded. According to Donald J. Boudreaux, a senior fellow with the F. A. Hayek Program for Advanced Study in Philosophy, Politics, and Economics, “free trade does not create more jobs, but neither does protectionism. Free trade may reduce jobs in inefficient industries, but it frees up resources to create jobs in efficient industries, boosting overall wages and improving living standards.” (Boudreaux 2018)
A good example of this principle is former President Donald Trump’s trade war with China. Tariffs levied against Chinese steel may support the American steel industry, but it impairs the American electronics industry, which depends on cheap Chinese steel to make computers and other similar products. Additionally, free trade gives Americans access to less expensive foreign goods, increasing their purchasing power. When tariffs are in places, Americans have to spend more of their hard-earned pay check on groceries, clothes, furniture, automobiles, and practically everything else in their lives.
But opposing protectionism isn’t just a matter of economic prosperity, but of national security as well. Since the end of the Second World War, the United States has been the dominant power in the world, especially in economic terms. For much of the Cold War, the second largest economy was the Soviet Union, and it wasn’t even close. Since the fall of communism in Europe though, the United States has stood as the world’s lone superpower. But that is changing. China’s post-Mao economic liberalization, which transitioned the country from a command economy to a more market oriented one, has been paying steep dividends. And in fact, 2021, this year, is when the People’s Republic of China is expected to overtake the United States as the world’s biggest economy. Unlike America, China is an autocratic, one party state that oppresses its own people, and is currently committing genocide against its Uyghur population. Furthermore any power that China gains comes at the expense of the global struggle for democracy and human rights.
But how does free trade and free movement help the United States retain power over China? For one, free trade agreements are an effective tool of power politics. Take the Trans-Pacific Partnership for example. The proposed agreement was between the United States, Japan, Vietnam, Mexico, Peru, and a number of other nations which flank the Pacific Rim. It was intended to decrease trade barriers between the signatories, which would be economically beneficial. A World Bank study predicted it would result in a 1.1% increase in GDP for member states by 2030. (Global Economic Prospects 2016) But from a geopolitical standpoint, it would also decrease many of the member states’ economic dependence on China by making trade with the United States more favorable. This is important because many countries in the agreement, like Japan, Vietnam, and Malaysia are reliant on China for trade and are therefore less able and willing to use their political and economic clout to counter China’s influence. By bringing these states into the American sphere, the United States can ensure the proliferation of democracy and freedom.
But free movement will be an equally effective tool in deterring China. By bringing more workers into the country, the United States will see substantial economic growth. In fact, migration was the key to China’s own economic boom. Over the past decades, in the greatest migration in human history, hundreds of millions of Chinese people moved from the rural countryside into China’s fast growing cities, where they would find jobs in factories. This increased supply of labor fueled the Chinese economy. According to the American Enterprise Institute (AEI), over forty years it would propel China from not even breaking the top ten largest economies in 1980, behind Canada, Brazil, and Spain to being on the precipice of being the world’s largest economy today. (Perry 2018) Unlike China, the United States does not have hundreds of millions of people waiting in the American countryside. But it does have hundreds of millions of people living south of the US-Mexico border, many of whom if given the opportunity, would come to America seeking a better life.
The Solution and its Benefits
For these reasons, the best solution to ensure the economic benefits of free trade and movement, as well as the continuation and expansion of a free and democratic world with the United States at its helm, is to create an economic community with the nations of the American continents, in the style of the European Union’s predecessors.
Before the European Union (EU) came to be as we know it as today, it had several earlier stages. It began as the European Coal and Steel Community (ECSC), under which a continent haunted by the specters of the Second World War sought to “make war not only unthinkable, but materially impossible.” (Joannin 2011) They accomplished this by removing trade barriers on coal and steel between the founding member states, in hopes that this would neutralize competition over the natural resources necessary for warfare. Over time the fight for economic integration and supranationalism would progress, and with the signing of the Treaty of Rome in 1957, the European Economic Community (EEC) was born. The EEC created a customs union, which would “remove trade barriers… abolish customs duties, and eliminate quotas” (Corporate Finance institute 2015) between member states. It also forged a common market, which authorized the community to “adopt a common external tariff… [and] allow free trade and free movement of labor and capital among the members of the group.” (Corporate Finance institute 2015) This organization and its successor, the EU, had tremendous benefits for the continent, and American Economic Community would be similarly beneficial to the Western Hemisphere.
As previously discussed, such a community, and the freedom of trade and movement it entails, would benefit the United States. But the proposed union would also include many smaller, poorer countries. Some may argue that this is a recipe for domination, whereby rich, majority white countries like the United States and Canada would reign over dozens of less-developed nations populated by mostly people of color. But in fact, this community, by the sheer force of the market, as well as with the proper institutions, would benefit all member states, no matter how poor or small. One of the reasons for this is specialization. Essentially, when a country has free trade with another, “international competition [will drive] less productive firms out of the market (and with them their products) and only those firms that are productive enough to compete” (Bahar 2016) i.e., those that the country has a comparative advantage, will survive. This specialization benefits a country not only because they have access to cheap foreign goods, but also because their domestic economy becomes more developed because of the value it has to other countries as an exporter of goods or services that they specialized in. An economic community in the Americas would, by ensuring free trade, facilitate this specialization amongst its member states and result in economic development for poorer nations.
In terms of free movement, the ability for people in impoverished nations to move to wealthier ones like the United States has been a godsend for the nations they emigrated from. When someone moves to a wealthier country, a good portion of the wages they earn there, which typically far exceed those they earned in their country of origin, are usually sent to their family in their homeland. This may not seem significant, but it is quite consequential. Take the island nation of Haiti for example, which based on GDP per capita, is the poorest country in the Americas. “Haiti got a lot of aid after the catastrophic earthquake of 2010, but they get much more in money from relatives abroad than they get in foreign aid. It’s a very important part of economic development at home.” (Young 2018) So by allowing people from the proposed community’s impoverished member states to move to wealthier ones, both rich and poor countries can reap the benefits of free movement.
Still some nationalists and protectionists in the United States will rail against opening the borders, claiming that if they are opened, migrants will flood in, not seek work, and take advantage of our generous welfare state. The only problem with such a claim is that the evidence does not support it. Immigrants do not come to this country to reap public benefits, but to labor and provide better lives for their families. Recent years have proven this to be true. “Immigration from Mexico collapsed right after 2006, coinciding exactly with the collapse of housing starts in the U.S., because so many of them [Mexican immigrants] were working in construction. Nothing changed about welfare benefits right after 2006. What’s changed was jobs.” (Young 2018) If it were true that immigrants were only coming to the United States for our social programs, then there would not have been such a precipitous decline in immigration following 2006. If anything there might have been an increase due to the economic despair and recession felt throughout the world, which followed the bursting of the housing bubble. But clearly, this was not the case.
Data has also suggested another fascinating notion about the relationship between immigration and the welfare budget. “Cross-sectional estimates based on 2013 CPS data suggest that immigrants represent a net fiscal drain on average. However, so does everyone else, including native-born Americans. When immigrants are assigned the marginal cost of public goods, their fiscal impact is actually significantly less negative than that of native-born Americans. Immigrants’ tax contributions cover 93 percent of their publicly provided benefits while natives’ contributions cover only 77 percent of theirs.” (Orrenius 2017) Even with this in mind, some may insist that if we opened the borders, many more low-skilled immigrants would enter the country, who naturally might be more dependent on government welfare programs. This, they say, would increase the immigrant population’s fiscal drain. But such a worldview ignores the lessons of history and economics, which shows that immigration ebbs and flows as a result of changes in the American economy. As discussed, the 2006 collapse of Mexican immigration was largely the result of fewer low-skilled construction jobs being available in the United States due to the bursting of the housing bubble. But it wasn’t just legal immigration that declined, but illegal border crossings too, as is evidenced by the sharp decrease in border apprehensions following 2006. (Bolter 2018) This proves immigrants largely aren’t entering the United States if they can’t find work here. And that would not change if we engaged in a more vigorous policy of free movement.
The Political Structure of the Community
Now that the detriments of the current system have been addressed, the benefits of this proposed community dealt with, and the protectionist and nationalist talking points refuted, it must be established how such a union as described herein would operate as a political body. All intergovernmental organizations, like the United Nations, European Unions, and North Atlantic Treaty Organization, have intricate structures, rules, and norms that govern their proceedings and guide their success as institutions. The American Economic Community should be no different. Fundamentally, its supreme law would be a constitution, which exists as a treaty joining the member states into a union, while enumerating the economic liberties of those who live in its borders. Such liberties would include those relating to property as well as rights that exist in the workplace. The constitution would also give the community’s central authority the right to regulate economic and commercial issues.
Furthermore, the most important structure of this community should be its legislative branch. A Congress of the Americas will be established, and based on the political philosophy of the great South American liberator Simon Bolivar, it should be tricameral in nature. In the Constitution of Bolivia, which he drafted, he proclaimed that the “The Legislative Power emanates directly from the electoral bodies appointed by the people; its exercise is vested in three chambers: first, the Tribunes; second, the Senators; third, the Censors.” (Bolivar 2003) While this tricameral foundation should serve as the bedrock for the community’s legislature, there must of course be alterations made to Bolivar’s original vision regarding the nature and authority of each body. Bolivar himself believed that the Senate should be a hereditary chamber, like the British House of Lords. This would obviously be inconsistent with American ideals of democracy.
For the American Economic Community, the first of these three bodies will be, as Bolivar suggested, the Chamber of Tribunes. Members of this assembly, which shall be known as tribunes, will be apportioned to each country in varying numbers based on their population. The tribunes will not represent their country as a whole, but smaller constituencies that make up their nation, who directly elect them. It would be similar to how members of the United States House of Representatives do not serve Wisconsin or New Jersey or Oregon, but their individual congressional districts. This chamber has jurisdiction over all affairs regarding the relations between member states, and the community’s relations with the outside world. Such matters under their authority would include joint-military operations involving different signatories and immigration and trade between the community and non-signatory nations. One important task residing with this chamber would be deciding what the community’s common external tariff would be. Legislation passed in this chamber would not require the approval of either of the other chambers. It would be sent directly to the desk of the consul of the community (whose role will be established briefly).
The tribunes also have the important responsibility of appointing the consul and vice consul of the community, who are nominated the heads of state or government of the different member countries. These national leaders form a council known as the American Diet (whose role shall be defined). Additionally, the tribunes must elect a speaker amongst themselves who will preside over the chamber and is formally the highest ranking officer in the Congress. This speaker, along with the current president of the Diet (whose role will be specified), and the consul of the community are the highest ranking politicians in the union. They are constitutionally required to meet on a regular basis to discuss matters of state, and together form a triumvirate.
The Senate, on the other hand, apportions two senators per member state, who represents their country as a whole and elects them directly. They have jurisdiction over issues that pertain more to the domestic issues of individual nations, like environmental and labor regulations. By assigning issues of domestic importance to a body with equal representation, it can be ensured that less populous countries are not dominated by more populous ones on the issues that affect their homelands most intimately. Like the chamber of tribunes, bills passed in the senate go directly to the consul’s desk. The senators also have the responsibility of appointing the consul’s cabinet and his ambassadors (who are nominated by the consul himself). In the case of a tie in this chamber, the vice consul casts the deciding vote.
The Chamber of Censors are the only body not elected by their constituents, but appointed by the national legislatures of signatory states. Their job is to settle disputes of jurisdiction between the Senate and Chamber of Tribunes by a vote. There will be one censor from each member country and in the case of a tie, the current president of the American Diet will cast a deciding vote. It also holds the exclusive authority to censure and try to remove from office any member of the legislature, the executive, or judicial branch. They are also responsible for appointing members of the community’s judiciary. Furthermore, the censors are the main inquisitive body of the government, which subpoenas state and non-state actors to hold hearings. They must then report on the hearing’s findings to the other chambers.
The other important deliberative body of the community is the American Diet, which shall consist of a college of all the heads of states or governments of the respective signatory nations, with the president of the diet rotating periodically between all members. This is quite similar to the European Council, which under the Treaty of Lisbon, claims that “member states are represented in the European Council by their Heads of State or Government and in the Council by their governments, themselves democratically accountable either to their national Parliaments, or to their citizens.” (Treaty of Lisbon 2007) As stated, the president can cast a tie-breaking vote in the Chamber of Censors. It is this body that will nominate the consul and vice consul to be confirmed by the Chamber of Tribunes. The Diet’s additional power is much more informal than the legislature, but being a conglomeration of the leaders of the community’s members, it can serve as an impetus for international discourse and the legislative process as well as crisis management.
The consul, as the chief executive of the community, is responsible for ensuring the enforcement of all laws passed by Congress and enacted by his or her signature. It is an office to which the holder is appointed to a single five year term. They also have the power to veto any piece of legislation passed by Congress, but such a veto can be overturned by two thirds majority in the chamber that the legislation originated in. The consul also represents the whole community on the world stage and is the community’s preeminent diplomat. The vice consul is the consul’s deputy, who will serve out the rest of the consul’s term if they are incapable of doing so. The vice consul, unlike the consul’s cabinet and his ambassadors, does not serve at the pleasure of the consul and cannot be dismissed.
Conclusion
In a world that is changing faster than it has at any point in human history, it is clear that we need bold and ambitious ideas to guide us into a better future. The merits of this community would be profound. By engaging in this multinational and globalist order, the Western Hemisphere can integrate its economies and form institutions that usher in a new age of prosperity and freedom. Additionally, by joining this union, the United States would strengthen its economic and political position, so that it can continue to defend democracy against the autocrats and tyrants of the world. Americans must take these necessary steps towards a more united hemisphere, and by doing so, create a world freer from want and oppression.
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