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Low Prices Are a Benefit

Here’s a letter to the Washington Post:

You complain about China’s allegedly undervalued currency (“Mr. Wen confesses,” Oct. 10).  Please explain why we Americans should be upset if the Chinese government spends Chinese taxpayer funds to subsidize our consumption of Chinese-made goods.

The standard explanation is that China’s cost advantage is ‘unnatural’; it’s the product of government policy.  True – and were I a Chinese citizen I would protest against this wasteful misuse of my resources.  But I’m an American, and so I – and Americans generally – benefit from the largesse that Beijing’s policy bestows upon us.

Those who disagree with the previous paragraph should ask themselves if they would object to Beijing using Chinese-taxpayer funds to subsidize, say, world-class forestry schools throughout China in order to create there a comparative advantage in producing wood products – an advantage that it would not gain otherwise.  Would Americans be harmed by this Chinese policy?  Should Uncle Sam, under such circumstances, impose punitive taxes on Americans who purchase wood products from China?  Of course not.

In principle, the education subsidies in the above example are no different than whatever subsidies Beijing now bestows on us fortunate consumers of Chinese exports.

Donald J. Boudreaux