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Here’s a letter to a new correspondent.
Mr. D__:
Thanks for your email.
You accuse me of having “a blind devotion to free trade fundamentalism which ignores foreigners’ unfair trade practices like subsidies.”
With respect, I do not ignore those practices. Like every serious advocate of free trade, I’m well aware that foreign governments often subsidize some of their exports. But also like every serious advocate of free trade, I see no good reason why those subsidies justify our government restricting our freedom to trade.
Suppose that you’ve long bought tomatoes from your local Safeway. Recently, however, the teenager next door has started to grow tomatoes in his parents’ backyard. His parents don’t charge him for using the land. Further, his parents pay for his gardening tools. In short, his parents subsidize his production of tomatoes. Your teenage neighbor, therefore, offers to sell tomatoes to you at prices lower than are charged by Safeway. You now commence to buy all of your tomatoes from your teenage neighbor.
Does your teenage neighbor trade “unfairly”? Are you harmed by your ability to purchase subsidized tomatoes from your neighbor? Should Safeway be able to call on government to obstruct your ability to buy your neighbor’s tomatoes?
My guess is that your answer to each of these questions is the same as my answer: “No.” So why do you answer “yes” when the seller is a producer located in a foreign country and the subsidies come from a foreign government? I can see no difference between the two cases that justifies different answers.
The one difference between the two cases is that, in the case of your neighbor’s tomatoes, the subsidies are paid voluntarily, while in the case of foreign exporters, the subsidies are extracted from the taxpayers of that foreign country. So there is indeed, in the case of subsidized exports, an unfairness. But this unfairness is not to us Americans; it’s exclusively to the foreigners who are taxed in order to make our cost of living lower. Yet all complaints about “unfair trade” are premised on the mistaken belief that the unfairness is to us. Reflecting, as they do, the economically uninformed notion that foreign subsidies are unfair to us, all calls for protective tariffs in response to “unfair trade” should be ignored.
Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030
The post “Unfair Trade” Is Unfair Only to Foreigners appeared first on Cafe Hayek.