Misunderstanding of Free Trade: Instance 23,784

by Don Boudreaux on November 30, 2010

in Myths and Fallacies, Trade

Here’s a letter sent yesterday to Washington’s WTOP radio:

During today’s 1:00pm hour your news anchor interviewed a Wall Street economist who asserted that free trade “works” only when the economy “is at or near full employment.”

The notion is that the greater is the American consumer’s access to outputs made abroad, the lower is the demand for American workers to produce outputs made in America.  So – this economist concludes – during recessions government should raise the cost to consumers of buying goods and services that are made available on the market by any means other than the current employment of American workers.

If this economist is correct, why slap higher tariffs only on imports?  Why not also impose tariffs on used cars?  After all, in 2010, consumer expenditures on 1999 Fords and 2007 Cadillacs employ no more American workers than do expenditures on brand new Hyundais and Kias.  And why not also slap tariffs on goods sold at flea markets and garage sales?  Consumer purchases of second-hand clothing and used furniture deflect demand from newly produced American clothing and furniture no less than do consumer purchases of new clothing and furniture imported from abroad.

Sincerely,
Donald J. Boudreaux

And as Bob Higgs suggests in an e-mail to me, “Better yet, slap a high tax on the purchase of used houses. That policy ought to do wonders to restore the depressed construction industry.”

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