Economic History Lesson: Trump's Protectionism Will Not Pay

The U.S. trade deficits that have prompted the Trump administration to raise tariffs have a result of the universal use of dollars and are unrelated to 'unjust' trading practices.

Economic History Lesson: Trump's Protectionism Will Not Pay
Ricardo Arriazu


BUENOS AIRES — Amid debates in England in the early 19th century on the wisdom of tariffs on corn imports, legendary economist David Ricardo argued that the measure would only benefit landowners — and harm all consumers.

With eminent logic, Ricardo argued that it is best that every country specializes in certain fields of production, which would allow them all to trade with each other, selling products in which they had a relative advantage and buying those in which they had a relative disadvantage. This specialization at the level of production necessarily leads to specialization at the level of nations, so that all countries will show a positive balance with some countries and negative with others.

The aggregate balance does not depend on this specialization, as it reflects the difference between a country's total expenditures and revenues, and must include the financial component (I cannot spend more than I earn unless someone finances the difference). History shows that countries open to trade have always achieved better growth. The Republic of Venice of the Renaissance era and the late Middle Ages Hanseatic League in northern Europe are specific examples of how exchanges have fueled economic growth of nations through history.

It might be useful to review this concept today when the heads of some of the world's most powerful states have challenged many of the limits of diplomacy and raised the threat of a trade war. The focus today is on the bilateral relationship between the United States and most of the countries with which it trades, and its recent decision to impose tariffs on imported steel and aluminum. This measure is the culmination of a series of threats against several countries enjoying a positive trade balance with the United States.

History has shown that this remark is simply wrong.

The United States has persistently had a negative trade balance with most countries for more than half a century now. This has prompted President Donald J. Trump to argue that trade is unfair and that most countries are abusing the United States' good will. As he recently declared via Twitter: "trade wars are good and easy to win." History has shown that this remark is simply wrong.

In the trade war unleashed in 1934, U.S. imports fell dramatically in the wake of tariff applications, but not, to the country's surprise, as much as an even sharper fall in exports. Clearly accumulated trade deficits have generated tensions throughout history. When the Bretton Woods agreements were signed, the economist John Maynard Keynes put special emphasis on reducing such tensions by creating an international currency, the Bancor, though its failure to materialize led instead to the generalized use of the U.S. dollar in international transactions. That led to foreigners holding on to their dollar reserves, which could only be obtained in exchange for goods and services. Inevitably that accumulation was reflected as part of the emitting country's trade deficits.

Photo: Chris Kleponis/ZUMA

Transactional demand for dollars grows constantly because the value of international trade is also rising, and these dollars are acquired in exchange for goods and services. Contrary to what President Trump claims, the United States benefits from these deficits instead of losing out. It does not have deficits for the actions of other countries or for not being competitive, but for being the emitting country of the currency used most widely in international trade.

Trump has argued that slapping tariffs on aluminum and steel is in line with national security objectives. Regardless of whether or not this is valid, such blatantly protectionist measures may trigger trade wars of differing magnitude, which will, instead of protecting certain sectors, end up impoverishing the nations involved. Trade wars happen when countries compete to limit, through tariffs and other instruments, international trade. Europe has already expressed its intention to respond to these measures by imposing its own importation tariffs on an increasing number of products from the United States. It is commonly argued that such measures protect industries and by extension the economy, from outside competition. In fact, the benefits given to these sectors are ultimately paid for by other sectors in the country, which must pay more for the same products. The effective global protection given to the economy is, by definition, equivalent to zero.

The United States should not lose sight of the fact that for the size of its economy, its measures will have a significant effect on the entire world's economy. Changes in the structure of the world economy could thus lead other countries to trade among themselves, and leave the U.S. isolated.

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How Thailand's Lèse-Majesté Law Is Used To Stifle All Protest

Once meant to protect the royal family, the century-old law has become a tool for the military-led government in Bangkok to stamp out all dissent. A new report outlines the abuses.

Pro-Democracy protest at The Criminal Court in Bangkok, Thailand

Laura Valentina Cortés Sierra

"We need to reform the institution of the monarchy in Thailand. It is the root of the problem." Those words, from Thai student activist Juthatip Sirikan, are a clear expression of the growing youth-led movement that is challenging the legitimacy of the government and demanding deep political changes in the Southeast Asian nation. Yet those very same words could also send Sirikan to jail.

Thailand's Criminal Code 'Lèse-Majesté' Article 112 imposes jail terms for defaming, insulting, or threatening the monarchy, with sentences of three to 15 years. This law has been present in Thai politics since 1908, though applied sparingly, only when direct verbal or written attacks against members of the royal family.

But after the May 2014 military coup d'état, Thailand experienced the first wave of lèse-majesté arrests, prosecutions, and detentions of at least 127 individuals arrested in a much wider interpretation of the law.

The recent report 'Second Wave: The Return of Lèse-Majesté in Thailand', documents how the Thai government has "used and abused Article 112 of the Criminal Code to target pro-democracy activists and protesters in relation to their online political expression and participation in peaceful pro-democracy demonstrations."

Criticism of any 'royal project'

The investigation shows 124 individuals, including at least eight minors, have been charged with lèse-majesté between November 2020 and August 2021. Nineteen of them served jail time. The new wave of charges is cited as a response to the rising pro-democracy protests across Thailand over the past year.

Juthatip Sirikan explains that the law is now being applied in such a broad way that people are not allowed to question government budgets and expenditure if they have any relationship with the royal family, which stifles criticism of the most basic government decision-making since there are an estimated 5,000 ongoing "royal" projects. "Article 112 of lèse-majesté could be the key (factor) in Thailand's political problems" the young activist argues.

In 2020 the Move Forward opposition party questioned royal spending paid by government departments, including nearly 3 billion baht (89,874,174 USD) from the Defense Ministry and Thai police for royal security, and 7 billion baht budgeted for royal development projects, as well as 38 planes and helicopters for the monarchy. Previously, on June 16, 2018, it was revealed that Thailand's Crown Property Bureau transferred its entire portfolio to the new King Maha Vajiralongkorn.

photo of graffiti of 112 crossed out on sidewalk

Protestors In Bangkok Call For Political Prisoner Release

Peerapon Boonyakiat/SOPA Images via ZUMA Wire

Freedom of speech at stake

"Article 112 shuts down all freedom of speech in this country", says Sirikan. "Even the political parties fear to touch the subject, so it blocks most things. This country cannot move anywhere if we still have this law."

The student activist herself was charged with lèse-majesté in September 2020, after simply citing a list of public documents that refer to royal family expenditure. Sirikan comes from a family that has faced the consequences of decades of political repression. Her grandfather, Tiang Sirikhan was a journalist and politician who openly protested against Thailand's involvement in World War II. He was accused of being a Communist and abducted in 1952. According to Sirikhan's family, he was killed by the state.

The new report was conducted by The International Federation for Human Rights (FIDH), Thai Lawyer for Human Rights (TLHR), and Internet Law Reform Dialogue (iLaw). It accuses Thai authorities of an increasingly broad interpretation of Article 112, to the point of "absurdity," including charges against people for criticizing the government's COVID-19 vaccine management, wearing crop tops, insulting the previous monarch, or quoting a United Nations statement about Article 112.

Juthatip Sirikan speaks in front of democracy monument.

Shift to social media

While in the past the Article was only used against people who spoke about the royals, it's now being used as an alibi for more general political repression — which has also spurred more open campaigning to abolish it. Sirikan recounts recent cases of police charging people for spreading paint near the picture of the king during a protest, or even just for having a picture of the king as phone wallpaper.

The more than a century-old law is now largely playing out online, where much of today's protest takes place in Thailand. Sirikan says people are willing to go further on social media to expose information such as how the king intervenes in politics and the monarchy's accumulation of wealth, information the mainstream media rarely reports on them.

Not surprisingly, however, social media is heavily monitored and the military is involved in Intelligence operations and cyber attacks against human rights defenders and critics of any kind. In October 2020, Twitter took down 926 accounts, linked to the army and the government, which promoted themselves and attacked political opposition, and this June, Google removed two Maps with pictures, names, and addresses, of more than 400 people who were accused of insulting the Thai monarchy. "They are trying to control the internet as well," Sirikan says. "They are trying to censor every content that they find a threat".

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