Commenting on this blog post at Carpe Diem, commentator (and friend of the blog) Walt Greenway says:
If people trade and not countries, should we condone theft from the Chinese people [in the form of subsidies on exported goods] just because we get a good deal in the U.S.?
Here is my response:
There are two issues here:
1) The question before us is whether or not trade with China (who subsidizes their stuff) harms us, Americans. That is an emphatic “no.”
2) As an economist, I advocate free trade for all. Were the Chinese government (or were I a Chinese citizen) to ask me what the best course to take would be, I’d argue for liberalizing trade. But I am not a consultant for the Chinese government nor a Chinese citizen. I am an American. I can only affect US barriers, not Chinese barriers. Therefore, I will content myself with reducing half of the trade barriers if I cannot reduce them all.
Allow me to elaborate in the manner of Frederic Bastiat:
There are two countries: Libertas and Protectistan. The two build a road between one another; a road which overcomes barriers like mountains and deserts, allowing the two to trade with each other more cheaply. For many years, both countries prosper from the trade. One year, in a fit of madness, both erect artificial barriers (checkpoints, potholes, erroneous signs, anything to slow the flow and raise the price) along their halves of the road to keep the other from “flooding” their market. As time moves along, the citizens of Libertas get frustrated they’re no longer once prospering the way they once did. They hold a meeting.
One man gets up and says: “Our issues began when we erected barriers on the road to Protectistan. First we paid for the road and then we paid for the obstructions! That is absurd. If we remove our barriers, we can improve our lot by making cheaper the goods we can get from Protectistan. Let us do this post haste!”
Another man (this one from the government) stands up and says: “Do not listen to that crazy person. We can only reduce our barriers if Protectistan lowers theirs! We have sent diplomats to Protectistan to negotiate the removal of barriers and they refused.”
The first man gets up again: “Sir, we have no control over what Protectistan does, but we do have control over what Libertas does. Let us uphold our end and remove our barriers. Perhaps, one day, they will see the folly of their ways, but why should we be punished just because they don’t want to remove barriers?”
The government man replies: “Do not listen to this dreamer, this theorist. We can only prosper if our barriers are kept in balance. Why, if we removed our barriers, all would be lost! It would be more difficult to go than come, to export than import. Our ruin would follow just as quickly as it has followed the cities at the mouths of the Mississippi, the Thames, the Amazon, the Yellow River, for it is easier to go downstream than upstream.”
A lady in the back responds: “The cities at the mouths are wealthier than the cities on the tributaries.”
The government man cries: “That is impossible!”
The same voice: “But it is a fact.”
The government man: “Then they have prospered against the rules!”
The government man finished his oration by appealing to all manner of things: nationalism, patriotism, etc. He spoke of murderous competition, of loss of pride. The assembly, so moved, voted to keep the barriers in place, agreeing that it is only by paying and not receiving can profit be achieved.