More on Ian Fletcher’s Misinformation about Trade

by Don Boudreaux on February 25, 2011

in Balance of Payments, History, Myths and Fallacies, Trade

Here’s a letter to the Huffington Post:

Ian Fletcher’s latest call for higher U.S. tariffs as a means of “fixing” our “trade imbalance” has too many flaws to list, let alone address, in a single letter (“Yes We Can! (Fix Our Trade Mess)“), Feb. 24).  So I confine myself here to one of these flaws.

Mr. Fletcher writes as if the only way foreign governments can retaliate against higher U.S. tariffs is to increase subsidies to their export industries.  He overlooks the most obvious means of retaliation: discriminatory tariff hikes.  So even if foreign governments won’t increase subsidies in response to higher U.S. tariffs, Mr. Fletcher is wrong to blithely assert that therefore higher U.S. tariffs won’t spark a trade war, for trade wars can be (and have been) fought with escalating discriminatory tariffs.

For evidence, Mr. Fletcher can read Dartmouth trade economist Douglas Irwin’s just-released book Peddling Protectionism.  After a careful review of the data, Prof. Irwin concludes that “Smoot-Hawley clearly inspired retaliatory moves against the United States, particularly – but not exclusively – by Canada.  This retaliation had a significant effect in reducing U.S. exports” [p. 183].

Apparently unaware of history, Mr. Fletcher doesn’t even consider the possibility – much less argue against the claim – that higher U.S. tariffs would be met by retaliatory tariff hikes abroad.

Sincerely,
Donald J. Boudreaux

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