Trade policy should be about consumers

This is an open letter from my friend Professor Don Boudreaux at George Mason University to Congressman Sherrod Brown of Ohio, published at Professor Boudreaux’s popular Cafe’ Hayek blog (Emphasis is mine). It makes a very important and usually missed point about trade and trade policy.

“Mr. Brown:

In a letter yesterday to Pres. Trump, you urge him to pressure Beijing to reduce what you call “excess overcapacity” in some Chinese industries, including that of steel.  You complain that the effect of such overcapacity is to “distort global markets and disadvantage U.S. companies and their workers.”

I hope – although I’m not hopeful – that the president will ignore your plea, for it reflects deep economic ignorance.

First, your plea springs from the false premise that trade policy is to be judged by its effects on producers.  In fact, trade policy is to be judged by its effects on consumers.  People toil in order to expand their opportunities to consume; they do not consume in order to expand their opportunities to toil.  And so if the Chinese really are so gracious as to offer unusually large supplies of some goods to us Americans at unusually low prices, they are helping us to expand our opportunities to consume.  They are helping us, in other words, to achieve the very goal – expanded consumption – that each of us sets out to achieve every morning when each of us goes off to work.  We therefore owe the Chinese thanks rather than threats.

Second, if you really are as concerned as you insist you are about correcting distortions in global markets, why are you silent about those Chinese industries that artificially shrink as a result of Beijing arranging for other Chinese industries to artificially expand?  If you’re correct that Chinese state intervention directs excessive amounts of resources into industries that produce steel and a handful of other goods, those resources are necessarily directed away from other Chinese industries – some of which might very well otherwise compete more vigorously in global markets against American products.

Given that you incessantly call on Uncle Sam to punitively tax Americans who buy imports the prices of which are made artificially low by foreign-government interventions, consistency requires that you also call on Uncle Sam to subsidize Americans who buy imports the prices of which are made artificially high by those very same foreign-government interventions.  Yet never do you act with such consistency.  This fact reveals that your true goal isn’t to protect the global economy from “distortions”; it is, instead, to protect powerful producer groups in your state from the competitive consequences of us American consumers being left unmolested by you and your ilk to spend our money as we choose.”

Sincerely,

Donald J. Boudreaux

Roy Cordato / Senior Economist and Resident Scholar

Roy Cordato is Senior Economist and Resident Scholar at the John Locke Foundation. From January 2001 to March 2017, he held the position of Vice President for Research at the ...

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