I know, the title isn't completely on the mark, for the world has in fact embarked on considerable free trade in recent centuries. But there's real problems on the horizon, which could negatively impact what thus far has been the most beneficial free trade of all: our tradable sectors. It is the lack of free markets for our aggregate time value (only the "best" need apply), which make job loss in tradable sector activity, appear more dangerous than necessary. As labor force participation declines in the face of non tradable sector protectionism at home, policy makers increasingly resort to protectionist actions, abroad.
Regular readers of this blog are familiar with my arguments for free trade. Perhaps mercantile reasoning would not have gotten such a stronghold, had existing trade imbalances already been addressed via a marketplace for time value. What many of us aspire to accomplish - and experience - in our lives, is scarcely represented in today's marketplace. This dearth of wealth creation is like a gaping hole, in both the supply and demand dimensions of non tradable sector activity. Hence the free market reference of my title.
A more recent aspect of protectionism, is the possibility of what - as far as I can tell - is essentially heavy tariffs that are somewhat disguised as border adjustments. The effects of such a revenue grab could play out similarly for low income levels and retailers - both of which have already been compromised by tight money conditions for some time. I'm concerned that the ongoing circumstance of grocery retailers is not well understood, at all. Scarcely anyone noticed not long ago, when some of them sounded the alarm about low profit margins which were making it difficult to keep their doors open. There's a good chance that extremely low profit margins for basic foodstuffs, is a sign of overly tight monetary representation.
Since grocery retailers are already in a compromised position, they may experience more difficulty in setting aside additional government revenue, than people realize. In all likelihood, already low profit margins would mean passing most additional costs to the consumer - some of whom may respond by cutting back on grocery budgets.
Also, some of the potency of free market advocacy (re gains) for the poor could be reduced, should widespread tariffs on imports be adopted. It saddens me to think of the extent to which tradable sector good deflation could be undercut by these measures, especially as nations begin to retaliate. However, grocery retailers have experienced additional layers of bad deflation since the Great Recession due to tight money, on top of decades of good deflation which brought food prices well within reach of most budgets. In all of this, non tradable sectors have been unwilling - thus far - to encourage free market environments which permit deflation of any sort.
Nevertheless, it must be tempting for policy makers to consider the high tariff route, since incomes for many have risen enough that tariffs may not pose a burden to the average consumer, as in the earlier days of the nation. Hopefully, policy makers will remember, that should tariffs once again become a reality, history has shown how difficult they can be to reverse. For anyone who still believes in the potential of free markets, it's more important than ever, to make one's voice heard in Washington in the days ahead.