A friend and I recently got into an argument about whether or not we should reduce tariffs, as happened a few months back with South Korea. My logic was, “Sure, free trade benefits everybody, and the more investments and markets a foreign nation has over here, the less likely they are to encourage people to bombs us.” His logic was, “No. Because America is better than other countries.”
This exchange, plus the realization that I haven’t drawn robots in nearly a month, prompts a quick lesson on free trade vs. protectionism.
The argument for free trade is that with fewer barriers and tariffs between two or more nations, each will focus its resources on what it’s best at making. This is an efficient system because the law of supply and demand ensures that if the supply goes up, the product will cost less to produce and buy. Prices will go down for consumers.
Meanwhile the countries involved in trade grow warm and cuddly because their businessmen are flying back and forth having affairs and such. Savvy businessmen rarely bomb countries where their mistresses live. Noting that businessmen are also twice as likely to drop $10,000 into a Super PAC than the other people at the grocery store, it’s a safe bet that countries which trade a lot will feel less inclined to bomb the hell out of each other.
So, hypothetically, let’s say America is really good at building scud missiles and terrible at building robots, but Japan excels at robot construction and is awful at making decent scud missiles. Without tariffs, America might construct 100 scud missiles for every robot it hobbles together, while Japan cranks out 40 robots for every scud missile. That’s a whole lot of scud missiles and robots!
But what if our domestic manufacturers realize they cannot hope to compete with flashy Japanese robot companies? What if Japan makes their robots cheaper because they contract out the easy stuff (like metallic claws and eye lasers) to China, which effectively employs slave labor? We can’t do that with Mexico because half of Mexico is a narco-state right now, and drug traffickers are surprisingly bad at supervising sweat shops.
Our domestic robot producers will then approach the government and ask for a “tariff,” which will impose a tax on all imported robots. A 30% robot tariff would suddenly make the $100 Japanese model cost $130, and so the hitherto expensive $120 American robot would become comparatively cheaper through market manipulation.
If our robot factory owners are successful in implementing a tariff, four things will result:
1. The American robot manufacturers will make a lot more money.
2. Japan will sell fewer robots, which will piss off the Japanese, particularly their robot manufacturers. Because their country is not that much smarter than ours is, they will probably respond by raising a scud missile tariff to protect their own domestic industries and to punish us.
3. With less scud missile demand from abroad, some of our own manufacturers will fold up, while several Japanese robot manufacturers will lose profits and kill themselves. The result will be inefficiency in both countries: now America will make 80 scud missiles for every robot, while Japan will slap together only 30 robots for every scud missile it makes.
4. Because of the way supply and demand works, prices for both robots and scud missiles will rise. Consumers in both nations will make up the difference. If you were saving up the change in your jam jar to buy a decent scud missile for your boyfriend– too bad! You’ll have to wait at least another year or so before you hoard enough quarters.
So consumers do not win from this process. Some parties in industry will come out better (American Mom-and-Pop robot factories and Japanese wholesale scud missile makers will become competitive again) while others will suffer (decent American scud missile suppliers and honest, down-to-earth Japanese robot assemblers). Consumers in both countries lose, because prices for both products will rise.
The only consistent winner here is military suppliers, whose handsome government contracts enable them to gobble up high quality American scud missiles and hard-working Japanese robots as soon as they come off the line. If somebody over at Brookings says, “Only a robot armed with scud missiles could possibly stop Nuclear Iran from becoming a reality!” you know a bunch of military contractors will be wetting their pants with excitement.
If the tariffs keep adding up and Japan and America can’t think of another way to distract their citizenry, they might enter a protracted “trade war.” If this happens, our business folks might quit visiting Japan for extramarital affairs and no longer be concerned with blowing it up. Same goes for the Japanese business folks and their sweaty American romps.
When that happens we’re all screwed. Because that’s when we go to war with Japan. Again.
Except this time they’ll have robots.
If this post made you laugh or think, kindly “like” MightyHeaton.com’s Facebook page: