Protectionism (1992)

George Grosz (1893-1959 ) Inflation

On Tariffs and Protectionism – Consisting of two prior documents from 1992 

The question of tariffs and protectionism has become controversial again. We here give two documents.

They show how the ‘Communist League’ and ‘Alliance Marxist-Leninist’ viewed the situation in 1992.

We will be updating them in regard to the current upheavals following the USA President Trump’s new tariff wars.

March 7, 2025

Document One: W.B.Bland, unpublished, a draft in letter form on behalf of the ‘Communist League’ (UK); Ilford, 14 January, 1992

1. The national bourgeoisie of a relatively undeveloped capitalist country wants to develop its industry but cannot compete with the cheaper manufactured goods produced in more developed capitalist countries.
2. It is in the interests of the working people of such a country that industry should undergo development there; otherwise, the country is doomed to colonial-type status.
3. In order that industry may undergo development in such a country, its economy needs to be protected from the competition of more developed capitalist countries.
4. There are two principal forms of such protection: import duties and subsidies for home-produced manufactures.
5. If duties are imposed on imports, the prices of such imports are raised, enabling home producers to compete at the higher price. The proceeds of such import duties accrue to the state. i.e., to the capitalist class as a whole. The higher prices resulting from the imposition of the import duty are borne equally by consumers, i.e., the population as a whole, so bearing most harshly on the poorer strata of society.
6. If subsidies are granted to home manufacturers, these manufacturers may sell their products at lower prices which are competitive with those of foreign more developed capitalist countries and yet (with the subsidies) provide an adequate rate of profit to the capitalists involved. The subsidies are paid for out of taxation, which may be geared to income in such a way as to bear least harshly on the poorer strata of society.
7. If it is made clear that protection (in either form) is a temporary measure, this must encourage home producers to develop the efficiency of their industries so that they can compete with foreign competition without protection.
8. To sum up either form of protection may achieve the objective of stimulating home industrial development, but import duties bear most heavily on the poorer strata of society while subsidies may bear least harshly on these poorer strata.
9. It follows that, where it is socially desirable to impose protection, Marxist-Leninists should fight for this to be brought about through subsidies.

Document Two: Reprint from “CRISIS IN CAPITAL AND THEIR SOLUTION – FREE TRADE AND PROTECTIONISM IN DEVELOPED COUNTRIES”;  October 1992; at: Alliance 3.

Section 13. THESES ON FREE TRADE.

1. The Home Market and the metropolitan bourgeoisie.
Protection of markets is seen by capitalists as part of their exclusive “right to exploit” their “own working class”. They do not want to share this with capitalist competitors of other countries.

Under such protectionist policy, “their” workers suffer higher prices than with competition from foreign imperialists. This policy is used especially in situations where the capitalist class is aware that their country’s industries are weak and unable to compete with foreign capitalist exports.
This tends to drive down living standards of the workers.

But because of the capitalist need to ultimately drive down the workers’ wages, in order to gain the maximum brake on the tendency of profit to fall; any potential benefit of free trade is limited to the capitalist class.

Capitalists accompany this protectionist policy with chauvinist exhortations to “buy home goods”. They try to convince the workers that they also have a vested interest in protectionism. This is sold to the workers in the guise of saving jobs. This is often true. Witness for example the loss of jobs in the auto industry in Canada following the so-called Free Trade Pact with the USA.

2. Strategic considerations of the working class.
In such countries, the working class should decide its attitude to protectionism according to other criteria than bourgeois appeals to chauvinism.

More than short-term gains in living standards resulting from protectionism,  are very unlikely to occur – as the capitalist will use the opportunity to drive down the effective wage in order to defend the falling rate of profit. The class’s attitudes then should be based on strategic considerations of the working class.

In the current late decay of imperialism, appeals to protection are driven by an increasing tendency to form larger markets.

The Marxist-Leninist consideration should, in these circumstances, be aimed at whether or not:
i) the dominant imperialism is strengthened or weakened by the formation of a larger bloc.
ii) “their own” bourgeoisie can be weakened.

3. The current crisis of capital forces formation of blocks.

The current epoch is one of a disintegration of the power of the USA imperialists and an increase in power of the German and, thereby European imperialists and the Japanese imperialists. Each of these competitors strives to create a super trading bloc; within whose borders free trade (or ‘ freer trade’) occurs. Outside of the bloc, protectionism is the policy.

These policies result from the major crisis of over-production that the world is experiencing. The final rupture of the Comecon capitalist block offers the only untapped market; and so the Blocks are trying to extend themselves into the ex-Comecon markets.

In the case of the USA Free Trade Bloc being set up between Mexico, the USA and Canada; the Block is clearly under the domination of the USA.  Here there is no effective balance between opposing international imperialism.

The differences between the European imperialists do allow for a certain balance; this is not achievable between the USA and Canada; and less so between USA and Mexico.

In fact, part of the strategic plan of the USA currently is to weaken the federalism of Canada to the point where its’ effectiveness as a separate State is disintegrated.

The European Economic Community is more delicately balanced between the competing imperialists. Of the nations within the fold, only Britain ( now a junior partner ) has significant allegiance to the USA. The others are far more committed to the EEC; even risking domination by Germany.
In the Far East, it is likely that a massive trading block between Japan and China is going to make it impossible for many of the Pacific basin nations not to enter an alliance dominated by the Japanese imperialists.

These manoeuvres are the first salvoes of the next World War.

4. Workers’ response
The correct policy for Marxist-Leninists in these countries can be therefore legitimately considered as being parallel to the attitudes of Marxist-Leninists in war.

That is a twofold policy whereby they should act to:
i) Initially, retard the capitalist forces that tend towards market concentration, by fighting the political steps that accompany such conglomeration. Such was the policy of the Communist League in the UK towards the early days of the European Common Market. This was also the line of many progressives that accompanied the so-called Free Trade talks between Canada and the USA.

OR:

ii) If the struggle to prevent conglomeration of the powers into one giant trading block is unsuccessful, the policy of Marxist-Leninists in that country should be to preserve living standards of the working class. This is akin to defeat of “their own bourgeoisie”. On no account can the class struggle be muted because of bourgeois cries that the country is becoming “uncompetitive”.

Marxist-Leninists recognise that this process of conglomeration is an inevitable tendency under the present phase of monopoly imperialist development. If their strategic attempt to weaken the process fails; they should fight to protect living standards within these markets. At the level of trade, they should support international free trade. But more importantly, they should form multi-national trade union links to ensure worker unity within the trading block.

This is the current situation within the European Common Market. There are advantages in this policy for the less well-developed labour movements. Thus in the EEC, it is recognised that working conditions are much poorer in Britain, Ireland and Portugal than they are in the countries such as Germany and France.

Toronto, 1992