Empowering the Sovereign Nation-State by Rethinking Trade Policy
Before American workers paid federal income taxes, the US Government was largely funded by tariffs and other fees imposed on those looking to access the American economy. As the world grew more complicated and expensive, the Federal government passed the Sixteenth Amendment in order to collect a "fair share" of revenue from American citizens. At the same time, emerging liberal economic theories on what we now call "free trade" were embraced by Democrats then later Republicans. From there, our government started making, often uneven deals against us, with other nations that basically eliminated tariffs.
Although it does seem quite silly to punish individuals and corporations for helping build the US economy by taxing them more than those who simply want to access the US economy, a quasi- free market, which a truly free trade system cannot exist in reality, does have many advantages that we can and should exploit. Of course, in the wake of the Great Recession even free market cultists should now recognize such philosophies also have disadvantages while our global economy has short-circuited many of the control mechanisms needed to deal with those shortcomings.
For example, the most often used argument against any form of regulation is that regulation will drive businesses out of the Country. In other words, instead of addressing issues like pollution, safety, worker rights, the National Debt, i.e. higher corporate taxes, when legislation is passed, companies are incentivized to leave America and import their goods. The effects of this is a lack of government intervention, which some view as a net positive, the weakened ability of workers to negotiate the value of their goods, i.e. their labor, in order to maintain Middle Class lifestyles and spending, the propagation of unhealthy business practices, and the displacement of pollutants/hazards onto foreign workers willing and/or forced to absorb these costs in order to have some form of economic success. In theory, the global community can collectively address these issues through demand, but as the US Congress demonstrates a handful of people can rarely come together to take a stand, let alone billions of people.
Furthermore, there are many industries that are vital to the economic health and national security of the US; however, one-size-fits-all free trade agreements, which make quality American goods that once supported Middle Class jobs far more expensive than foreign knockoffs versus cheapening foreign goods made more efficiently outside of the US and opening new markets for high quality American products, undercut these industries. The solution has not been to refine our free trade agreements, but rather, to spend money, or cut taxes, by subsidizing various industries, including oil, agriculture, etc. to spend money, as well as time, constantly retraining workers for jobs that may not exist or pay sustainable wages, and to spend more money buying imports with the hope that foreign countries like China will eventually play fair and support free trade agreements by buying US goods instead stealing US technology.
At the same time, we use sanctions to attempt to address crises around the world. Of course, what limited success these policies bring generally does not outweigh the damage done to the Peoples underneath misbehaving regimes and, due to the increasingly fractured nature of our International Community, sanctions hurt the economies of those willing to institute sanctions as these countries cannot sell their goods to regimes like North Korea or Iran while countries like China have used sanctions to their benefit in the past by supporting rogue states.
The US economy is the largest consumer in the world, so, whether we tariff or not, other nations are going to want to do business with us. Granted, much damage has been done over the last few decades and this prevents us from simply raising tariffs as we once could have done while I certainly would not suggest we try to reset our trade policies back to the early Twentieth Century. World leaders are trying to address issues like global climate change and human rights by creating a one-size-fits-all approach involving supposedly binding and nonbinding international agreements that rely on member states to play fair, even though they can profit by cheating. Like true capitalists, I think we can find a more concrete solution. Since money talks and we have the WTO, let's use it to level "protectionist" policies that allow governments to undermine other economies.
Granted, living standards in developing countries can be maintained and improved upon at lower wages, but there are such things as abusive wages and practices that allow countries to illegitimately undermine competition in other nations. At the same time, displacing the costs of industry onto the environment and populations, which increases healthcare costs, allows countries to undermine foreign economies while hurting our health as well. Because the International Community can rarely, or quickly, agree to specific policies, setting up a system of allowable tariffs under trade "enforcers" such as the WTO, which would level the playing field, will both help address these issues by punishing governments that do not address these issues as well as incentivizing and empowering governments to answer the demands of their People.
Of course, penalties will not be used against populations with weak governments and trivial, or nonexistent, industries as the goal is not to punish emerging countries trying desperately to improve the lifestyles of their Peoples, but to "level the playing field" for what we, as a global community, would determine to be "fair trade" and disincentivize governments undermining world powers . As such, tariff driven policies could target countries that espouse policies, which undermine foreign industries to grow wealthy without properly distributing wealth, i.e. paying workers reasonable wages, and failing to follow regulatory standards that keep the environment healthy.
Meanwhile, sanctions are becoming less and less effective. As such, we might consider, as a collective of nation-states, the option of charging such large fees to access the global market that we punish countries like North Korea and Iran, yet allow an opportunity for them to generate limited economic activity to provide for basic humanitarian needs, or force these nations to develop economies that cannot support their rogue behavior. In other words, we profit from rogue nations instead of paying for sanctions; this also has the advantage of demonstrating what cooperation with the International Community could mean for the People while it potentially allows their economies to stay intake so when their leaders relent, or disappear, the People of such nations can more easily rebuild their economies.
In truth, the implementation of such a policy shift would have similar components to our current sanctions policies and tariffs, as well as resemble somewhat inverted "cap-and-trade" proposals minus the over focus on carbon, while there are a lot of details that would need to be worked out and many criticisms that would have to be addressed, but we should explore the possibilities of using taxing versus spending. Consider some areas where we already employ very similar strategies: the Rico law effectively taxes criminal at a rate of 100% on all their ill-gotten gains while law enforcement has long used proceeds from fines to fund various programs.
Albeit somewhat unsettling to profit in order to punish a reckless government, when the expense of a People's pain looms, such a policy shift might also allow us to fund humanitarian efforts in such a way that we can actually divert money away from rogue behavior, such as building nuclear bombs, in order to feed, cloth and heal a People. (Of course, we also need to work on a propaganda strategy that shows the People they could have better lifestyles if their government didn't engage in rogue behavior.)
Additionally, empowering nation-states so they can more readily punish trade partners for failing to act as responsible members of the International Community and benefactors of the global market with the support and approval of global community would bolster the sovereign powers of individual nations in a world where global governance is becoming a reality, despite its ineffectiveness. Moreover, our blanket free trade agreements and current sanctions do not quite address our interests nor will they in the future, especially when major players like China, Brazil, and/or Russia disagree with the US, while we are capitalists at heart, so let us find capitalist solutions to global problems.