fact, could be used to cut taxes on income, savings, and investment.rnBismarck built the German nation by shifting taxation awayrnfrom incomes and onto foreign goods. In a December 15,rn1878, letter to the Reichstag, the chancellor spoke of a crisis inrnthe German middle class, similar to our own, and proposed tornemulate the Americans: “Reform of the taxation . . . must beginrnwith the revision of the tariff on as broad a basis as possible so asrnto benefit this class of the community. The more money that isrnraised from tariffs the greater can—and must— he the reUefin directrntaxes.” (Emphasis added.) High tariffs, argued Bismarck,rnwould also give Germany leverage in “fresh negotiations withrnforeign countries concerning new commercial treaties.”rnBismarck was an apt pupil of the economic nationalists whornmade America the world’s greatest industrial power. UnderrnBismarck’s policy, Germany increased its share of world productionrnfrom 8.5 percent in 1880 to 14.8 percent by 1913; inrn1880, Germany and the United States together had less than arnfourth of wodd output, but by 1913 the two countries had nearlyrnhalf, while free-trade Britain’s share was sliced from onefourthrnto one-seventh. The great unacknowledged truth of thernsecond half of the 19th century—and of the second half of thern20th — is that the nations that followed the free trade dogma ofrnthe classical liberals lost ground to the nations that pursued thernHamiltonian policy of economic nationalism.rnReciprocity With the European UnionrnEurope would howl, but even under the old GATT rules a nationrnrunning a chronic trade deficit may use tarifi^s to end thernhemorrhaging. And our response should satisfy Europe. Believingrnin fairness, we accept full reciprocity: a 15 percent EUrntariff on all manufactured goods made in the United States.rnLincoln called the cost of ocean transport “useless labor.”rnMuch of this useless labor can be done away with if Europeanrncompanies that wish to sell in America produce in America,rnand vice versa. Ford and GM have always built cars in Europe;rnEuropeans forced them to. When American companies fearedrna protectionist Common Market, they created European subsidiariesrnto avoid being frozen out. Turnabout is fair play. LetrnBMW and Mercedes make their parts and assemble their carsrnhere in the United States if they wish to sell here on equalrnterms. As for those who prefer the cachet of European-maderngoods, they ought not be denied the freedom to buy. But a 15rnpercent tariff^ does not amount to persecution of elites who callrn55 percent inheritance taxes “progressive.” That new BMWrncan be built in South Carolina as easily as in Bavaria.rnAmericans may face a social crisis, a racial crisis, a crime crisis.rnWe do not face a crisis of consumer goods. There is nothingrnmade anywhere that we cannot make here. America-Canadarnand the EU are huge and self-sufficient markets, with similarrnlaws and regulations. Their standards of living and wage ratesrnare comparable. A reciprocal trade agreement could strengthenrnand solidify both blocs.rnBut would reduced imports cost us our technological edge?rnHistory proves otherwise. The telegraph, electric light bulb,rntelephone, “horseless carriage,” and airplane affected society asrndramatically as the computer. Yet Americans invented and exploitedrnthem as no other nation, behind a tariff wall built byrnJustin Morrill, Bill McKinley, and “Pig Iron” Kelley.rnWith the American market alone almost as large as the EuropeanrnUnion, we can support and sustain a diversity and levelrnof production no other country can match. The small andrnmedium-sized nations of Europe and Asia have no alternativernbut to create interdependencies. Germany is, after all, smallerrnthan Oregon and Washington; the United Kingdom is smallerrnthan Mississippi and Alabama; and Japan is smaller than Montanarnand less endowed with natural resources.rnCanada and JapanrnShould any country be exempt from the 15 percent tariff? Yes,rnCanada—if Canada adopts the same external tariffs. In NAFTA,rnCanada married her economy to ours, to the economicrnbenefit of Ottawa. The United States today takes 80 percent ofrnCanadian exports, and Canada’s merchandise trade surplusrnwith the United States in 1996 was $23 billion.rnHowever, Canada would have to remain inside the U.S.­Canadarnfree trade zone and accept American tariffs, or go outside.rnIf Canada chose to depart, the 15 percent tariff on allrnmanufactured goods would be applied to Canadian goods asrnwell. With the United States far and away Canada’s biggest customer,rnand with that surplus on the line, Canada would surelyrnchoose to remain inside an American free trade zone. ButrnCanada would have to choose.rnAs the United States strengthens ties to Canada, we shouldrnput an early end to our huge, chronic trade deficits with Japan.rnThe Japanese are a proud people. It is unseemly and destructivernto be hectoring them endlessly to open their markets, buyrnour rice, remove non-tariff barriers, adopt free trade. Japan doesrnnot practice free trade for a simple reason: Japan does not believernin free tiade. Japan puts its national interest in manufacturingrnand technology ahead of a free trade ideology that hasrnAmerica in its grip. Japan is different because it prefers to berndifferent. We should respect that. But while Japan’s economicrnstructure is no business of the United States, our trade deficitsrnare our business. We should notify Japan that if an end to theserntrade deficits cannot be achieved through negotiation, it will bernattained through unilateral U.S. action.rnAn horrendous imbalance in autos and auto parts is centralrnto the American tiade deficit with Japan. The United Statesrnshould follow the Harley formula and impose a special tariff onrnimported Japanese autos and auto parts on top of the 15 percentrnrevenue tariff. The Japan Tariff would enable the UnitedrnStates to recapture much of Japan’s 30-percent share of thernAmerican auto market.rnTo avoid the tariffs, Japan could shift production of parts andrnthe assembly of autos to the United States. These Japanese carsrnwould be treated exactly like Fords or Chevrolets made inrnMichigan. Toyota, Nissan, BMW, and all foreign car makersrnwould be welcome here, but to avoid tariffs they would have tornproduce here. The same would hold for GM, Chrysler, andrnFord. Fords made overseas would face the same tariff as Mazdasrnmade overseas. America would have the most competitivernauto market on earth, but every company, foreign-owned or domestic,rnwould play by the same rules, pay the same taxes, abidernby the same laws, employ the same high-wage, high-qualityrnNorth American labor. Jobs in the American auto industryrnwould explode.rnJapan is a great nation, and its people have wrought a greatrnmiracle. But the present unequal relationship cannot continue.rnOur sales to Japan in 1995, $65 billion, were one percentrnof our GDP; Japan’s sales to us, $125 billion, were four percentrnof its GDP. With an economy twice as large as Japan’s, we stillrnJULY 1998/15rnrnrn