If a market constrained by national borders is what you want, all you need do is look around.
If a market constrained by national borders is what you want, all you need do is look around.
O ren Cass, the executive director of American Compass, has written a long article called “Searching for Capitalism in the Wreckage of Globalism.” In it, he describes his personal journey from being a proponent of free trade to becoming a skeptic. He argues that economists have been reading economic theory on trade wrong for years and what we need is a “bounded market.”
Cass writes that the bounded market he envisions would not be a closed economy, nor would it be centrally planned. He writes, “A great benefit of defining clear boundaries for the market and then deferring to private-sector competition therein is that this strategy requires far less state intervention than with the enormous demands placed on bureaucracies to make globalization work.” The idea is not state control, but rather “choosing a free but bounded domestic market over globalization.”
By so choosing, we can ensure interdependence, which “translates the pursuit of private profit into public benefit,” he writes.
An indispensable element for maintaining this interdependence is the bounding of the market, so that the various economic actors have no alternative to each other. In a bounded market, economic analysis and legal treatment of activity depends on whether it occurs within the boundary, across it, or beyond it. That boundary might hypothetically take any form, but in practice it will be a physical boundary, typically a national one. By contrast, globalization and its underlying theory make the goal a boundless market, in which borders have as little relevance as possible to economic transactions.
Cass is a clear writer and gifted analyst, and his 2018 book The Once and Future Worker is well worth reading, even if you won’t agree with all of it. (Its chapters on education and environmental policy are especially strong.) In this most recent essay, he is certainly correct that borders are meaningful and important, and arch-globalists who want to erase them are misguided. But he writes as though the arch-globalists have actually been in charge, and the U.S. is just an open free-for-all in which any person anywhere can do whatever he’d like.
That country does not exist. If a bounded market is one where “legal treatment of activity depends on whether it occurs within the boundary, across it, or beyond it,” as Cass writes, the U.S. is most certainly a bounded market already. Simply having customs agents at our ports of entry ensures that that is the case, but we go well beyond simple enforcement measures. The Harmonized Tariff Schedule of the United States has 98 chapters’ worth of tariffs, and the full document comes out to 4,394 pages. It does not suffer from lack of attention to detail: Imported lily bulbs are taxed at 55.7 cents per 1,000, but lily-of-the-valley pips are taxed at $1.44 per 1,000.
On top of that, though, the U.S. has any number of zillion-page trade agreements with various countries around the world. All of these are based on the principle that there is a meaningful legal difference in how we treat one country’s goods vs. another’s, and the sets of rules that govern international-trade relationships should be separate from the sets of rules that govern domestic trade.
The true nature of Cass’s displeasure is thus not that the U.S. isn’t a bounded market — it most certainly is. It’s that he wishes the market were bounded differently than it has, in fact, been bound.
But here’s the thing about government-bound markets: They will always be subject to special-interest pressure. This is especially true in the United States, where forming associations and petitioning the government for a redress of grievances are constitutionally protected rights. Trade groups and lobbying firms have every right to make demands in Washington that they believe will protect their members and clients. Other trade groups and lobbying firms have every right to disagree.
Every duty and every exception in the Harmonized Tariff Schedule has a backstory. These policies are not made by wise philosopher-kings seeking to create a flourishing and virtuous economy. They’re made by bureaucrats and members of Congress and presidential appointees, with input from the Chamber of Commerce and the American Association of Widget Makers of America.
In a representative republic with strong civil liberties, which is what the United States is, the moment you give the government power to set a boundary in the market is the same moment that interest groups you hadn’t even heard of before will be lining up to tell you where to draw it. Some of them are corrupt sleazes, but most of them are just exercising their First Amendment rights. And elected politicians chasing votes and campaign donations are going to listen to some of them.
If a bounded market is what you want, all you need do is look around. And the federal government’s track record on establishing market boundaries is not inspiring.
We’ve seen the results of President Trump’s trade war with China (continued under President Biden), and those market boundaries didn’t achieve their goals. We’ve seen the results of the Jones Act, which makes water transportation one of our most bounded markets, and it turns out to benefit our enemies and drive up prices for us. We’ve seen the results of punitive tariffs on truck chassis, a market boundary enacted to increase domestic interdependence in logistics, which not only exacerbated the supply-chain crisis but prevented a Chinese company from moving its manufacturing process to the United States.
These policies may not be what Cass has in mind for his ideal bounded market — he opposes Trump’s trade war with China in his book, for example — but they’re examples of how market boundaries are inevitably set in practice. If Cass is unhappy with the results of the bounded market we have, perhaps he’d be open to making the government a little less powerful instead.