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Tariffs Aren’t a Terrible Idea—If They’re About Well-Being of People Not Corporations

Tariffs on imports could be part of reorienting the global economy. Now is a good time to talk about it.

“We have thoroughly tested the neoliberal theory that whatever profits a global corporation serves the common good. The result is that it doesn’t.”  (Photo: Illustration by Stuart Kinlough/Getty Images)

“We have thoroughly tested the neoliberal theory that whatever profits a global corporation serves the common good. The result is that it doesn’t.”  (Photo: Illustration by Stuart Kinlough/Getty Images)

Those who pay attention to trade and economics saw President Trump’s imposition of new tariffs—25 percent on steel and 10 percent on aluminum—as just one more bad policy decision by an administration in disarray. Trump may, however, have done us all the favor of reopening a discussion of tariffs, trade, and the competing interests of communities and corporations.

Contrary to the position of most media pundits, tariffs on imports are not necessarily bad. In fact, they may be just what we need as part of a larger set of policy measures to turn from a global economy that maximizes corporate profits to one that maximizes the well-being of people and nature.

Trump is right that free trade agreements are bad for American workers. The corporate lobbyists who supervise their crafting aren’t paid to benefit workers. They are paid to serve the bottom lines of the corporations that hire them—in part by minimizing labor costs.

Consequently, existing agreements are mostly bad for workers everywhere. Yet Trump’s critics are also right that the precipitous imposition of a tariff on steel and aluminum is a bad idea. We need a dialogue in search of a better framework.

Now is the time to examine how best to rewrite international trade and investment agreements so that they truly serve humanity and sustain a living Earth.

Corporations seek international agreements and domestic laws that secure their self-proclaimed right to move jobs to wherever labor is cheapest, regulations are weakest, and taxes are lowest. In the name of market freedom, they fight restrictions on contributing to political campaigns, concentrating monopoly power, deceiving consumers, extracting resources from public lands, and contaminating Earth’s air, water, and land. These actions increase corporate profits and leave impacted communities struggling to deal with the consequences.

The “free” in free trade and investment mostly refers to corporate freedom to dump the consequences of their decisions onto communities stripped of their right to protect themselves. That “freedom” violates the fundamental principle of market theory (not to be confused with free market ideology), that markets allocate efficiently only when decision makers bear the full cost of their decisions. The question is not whether protectionism is good or bad, but rather of who is protected.

Although the corporate PR machine floods the media with claims that the global economy is ending poverty and bringing unprecedented prosperity to everyone, the daily experience for most people is an increasingly desperate struggle to make ends meet. This is an inevitable consequence of a global economy that is:

  • Destroying Earth’s capacity to support life.
  • Creating the greatest economic inequality in human history.
  • Driving disintegration of community and family relationships.
  • Stripping funding from social safety nets.

These are indicators of terminal economic failure.

We have thoroughly tested the neoliberal theory that whatever profits a global corporation serves the common good. The result is that it doesn’t.

We now face a defining choice. We can continue to protect the freedom of global corporations to maximize returns to their managers and shareholders. Or we can reorganize to maximize the ability of communities to make their living in a balanced relationship with one another and nature. These are mutually exclusive choices and call for very different global rules.

An organizing framework for the community option was succinctly outlined in 1933 by economist John Maynard Keynes: “I sympathize, therefore, with those who would minimize, rather than with those who would maximize, economic entanglement among nations. Ideas, knowledge, science, hospitality, travel—these are the things which should of their nature be international. But let goods be homespun whenever it is reasonably and conveniently possible, and, above all, let finance be primarily national.”

In line with these foundational principles, future international trade and investment agreements should support national communities in meeting self-defined needs in ways that support full domestic employment and the continuous recycling and regeneration of domestic resources. In such agreements, tariffs can and should be applied judiciously, to prioritize domestic ownership and banking. These agreements also need to prohibit financial speculation, penalize monopolistic concentrations of corporate power, and reward local cooperative ownership.

A universal tariff on cross-border exchange, of 10 percent, for example, would provide a modest initial advantage for domestic sourcing of raw materials and consumer goods. Compensatory tariffs might be added to products from countries that do not maintain international standards of environmental protection, wages, health and safety standards, and social safety nets, thus encouraging higher standards for all people everywhere.

Allowing corporations to write the rules of global commerce to favor their purely private interests was a grave error. Now is the time to examine how best to rewrite international trade and investment agreements so that they truly serve humanity and sustain a living Earth. The consequences of inaction are simply unacceptable.

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David Korten

David Korten

Dr. David Korten is the author of Agenda for a New Economy, The Great Turning: From Empire to Earth Community, and the international best seller When Corporations Rule the World. He is board chair of YES! Magazine, co-chair of the New Economy Working Group, a founding board member of the Business Alliance for Local Living Economies, president of the Living Economies Forum, and a member of the Club of Rome. He holds MBA and PhD degrees from the Stanford University Graduate School of Business and served on the faculty of the Harvard Business School.

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