No, Biden’s Protectionism Isn’t “All About National Defense”

By Donald J. Boudreaux.

"Noah Smith recently found fault with several British writers who are ‘scolding’ the Biden administration for its embrace of protectionism. (Because American dissenters from current US trade policy offer arguments quite similar to those of the British writers targeted by Smith, it isn’t clear why Smith confined his fire to the latter group. But so be it.)

Here’s Smith (original emphasis):

I definitely acknowledge the costs and risks of tariffs. And yet I feel that in their rush to condemn Biden’s new policy, the British writers have made an incomplete and weak case. In particular, they have failed to grapple with the main reason that tariffs — not to mention other new policies like export controls, industrial policy, and sanctions — are being deployed.

The primary reason for all of these policies is national defense. Yes, political considerations like protecting the auto industry and catering to populist sentiment certainly play a role. But the most important motivation for the tariffs and other interventionist policies – the reason that so many US elites embraced the new policies with so little pushback – was the military threat that China represents.

A few paragraphs later, Smith abandons equivocation (and I quote again with original emphasis): “It’s all about national defense.” He then repeats the point by saying – and once more with Smith’s own emphasis — “every single one of the Biden administration policies… the tariffs, the subsidies, the export controls, and so on — is aimed at making sure the US does not lose critical manufacturing industries that it would need in order to mount a defense against China and Russia.”

Nonsense.

Smith, of course, is correct to observe that “without manufacturing industries, it is very hard to fight an industrial war.” To succeed militarily requires access to tangible, hard stuff. Bombs, bullets, and bayonets made of metal are more effective than are ones made of marshmallows. Winning wars also requires ready access to energy, and to advanced technologies. All true. And so we must acknowledge that the more likely it is that free trade would drain America of one or more of these things, the stronger is the case for protectionism on grounds of national defense.

Let’s also acknowledge this possibility: A policy of free trade could leave the US devoid of enough industrial capacity to produce militarily adequate amounts of tangible, hard stuff, and also of energy and advanced technologies. This acknowledgement, note, is only of a possibility. Because almost everything that is possible will never occur, the relevant question is “How probable is it that a policy of free trade would deny the Pentagon access to the materials, energy sources, and advanced technologies that it needs to carry out warfare effectively?

Has Freer Trade So Far Diminished America’s Industrial Might?

The future can’t be known for certain. But to get some sense of this probability, Smith might have looked at what happened to America’s industrial capacity as trade during the post-war decades became freer, including during the era of China’s membership in the World Trade Organization. But this he didn’t do. Had he done so, he would have found little support for his argument.

No one doubts that America’s integration into the global economy has deepened over the past nearly 60 years. From 1967 (the earliest date for these data) through 1993, industrial capacity in the US grew steadily. In 1993 the US had 48 percent more industrial capacity than it had in 1975 (the last year America ran a trade surplus) and 100 percent more capacity than in 1967, just 26 years earlier. Then in 1994 (the year NAFTA took effect) the rate of growth of America’s industrial capacity increased. This rate of growth then slowed in 2001 (the year China joined the WTO), but this growth did not stop for long, and it certainly didn’t shrink to any significant degree. Today (June 2024), the size of America’s industrial capacity is virtually identical to the all-time high that it hit in December 2016, which is ten percent more capacity than existed in the US when China joined the WTO.

During this time, US manufacturing output also grew steadily. It hit its all-time peak in December 2007, being then 21 percent higher than it was a mere six years earlier when China joined the WTO. Today, although a bit less than it was in 2007, American manufacturing output is still 13 percent higher than when China joined the WTO. And because there’s been no notable increase in trade freedom since the Great Recession — quite the opposite — the relative stagnation since then in the growth of industrial capacity and manufacturing output is unlikely to have been caused by increased trade.

Does the History of Free-Trading Britain Hold Lessons for America?

Evidence from America’s past on the connection between increased international trade and the size of America’s industrial base and her ability to manufacture lends no support to those who insist that, absent higher tariffs and subsidies, America will probably be unable to maintain the industrial might she needs to defend herself militarily. On this front, Smith offers only evidence that’s indirect. Specifically, he points to the British experience of the late 19^th and early 20^th century — a period during which, it is alleged, British industry lost the ability to maintain Britain’s economic and military might. (My knowledge of British history is too scanty to allow me to comment on this allegation. So I treat it here as true.)

The British during most of that era were indeed free-traders. But they were also major imperialists in a way that America never was and is not now. Was Britain’s relative economic weakness during this time due to her freedom of trade or to her stubborn insistence on defending and ruling a vast empire (or, perhaps to some other cause or causes)? Smith wants us to conclude that a major culprit in the economic decline that compromised Britain’s military was her commitment to free trade. Maybe he’s correct, but he offers no evidence for this thesis beyond post hoc argumentation. Is it not perhaps more likely that whatever economic troubles Britain suffered during that era were due much less to the freedom of residents of the British Isles to trade with foreigners, and much more to the waste of resources and energy involved in ministering such an empire?

Noah Smith, of course, is aware that Britain had an extensive empire. But about this empire he startlingly claims that, far from weakening Britain economically, it was a significant source of net wealth for the British. “Trade with its far-flung colonies,” writes Smith, “enriched Britain.” Adam Smith knew better, and said so. And I suspect that, had Adam lived another hundred years to observe Victoria’s forever-sunlit empire, he would not have changed his conclusion that empire drains imperial countries of wealth. At any rate, as shown by Kristian Niemietz, the claim that Britain’s empire was a significant economic boon to that country is false.

Where’s the Evidence that the Main Driver of Biden’s Protectionism Is Concern for National Defense?

Perhaps the most glaring flaw in Noah Smith’s essay is that nowhere in it does he give as much as a shred of evidence in support of his principal claim, which is that the chief (or, perhaps, only) purpose of Biden’s protectionism and industrial policy is national defense. Smith says that the overriding objective is to better ensure national defense, but his assertion rests on nothing more solid than an assumption – an assumption made in apparent ignorance of the White House’s own claim that at least one key purpose of its tariffs is to “protect American workers.”

Perhaps Smith takes this assumption about the primacy of national defense as valid because, as nearly always happens, when some protectionist scheme is proposed, its supporters declare that among this scheme’s many benefits is that it will enhance the country’s national security. Biden & Co. are not above pulling this move. And it’s true that, if Biden’s protectionism is going to be justified, success at such justification is more likely if it rests on national-security grounds than on purely economic grounds, as the economic case for protectionism enjoys no credibility among serious economists. But there’s no reason to conclude that, therefore, Team Biden’s trade policy is chiefly about national defense.

Can anyone who is familiar with Joe Biden’s history believe that the man is interested in anything much beyond maximizing Joe Biden’s electoral prospects? He’s an ambitious lifelong — and obviously ethically hollow and intellectually shallow — politician. This reality alone should cause any realistic person to suspect, strongly, that Biden’s protectionism is overwhelmingly and above all about expanding and cementing his political support by creating rents for special-interest groups.

In his assessment of Biden’s protectionism, Noah Smith doesn’t first consider, and then reject in light of evidence, the well-known possibility that this protectionism might be driven chiefly by interest-group politics. No. Smith simply assumes this possibility away by never considering it.

One need not be the most careful student of trade policy to know that tariffs and subsidies are frequently justified in the name of national security. But mentioned no less frequently by defenders of protectionism is the allegedly wondrous ability of tariffs and subsidies to make Americans economically richer and to “protect jobs.” Such discussions typically are as instructive about economic reality as Road Runner cartoons are about physical reality. Why should people, many of whom are in the Biden administration, who talk and write so ignorantly about trade — who prattle stupidly about ‘leveling the playing field’ — be trusted to diagnose the consequences of trade for national security or to prescribe courses of action on this front? That is, even if the Biden administration’s only goal in proposing tariffs and subsidies truly is a sincere desire to strengthen America’s national defense, Biden’s and his team’s manifest ignorance of economics should give us every reason to distrust them with the power to obstruct the commerce of ordinary Americans."