Open Letter to Robert Samuelson

by Don Boudreaux on October 8, 2011

in Myths and Fallacies, Seen and Unseen, Subsidies, Trade

Mr. Robert Samuelson, Columnist
Washington Post
Washington, DC

Dear Mr. Samuelson:

You argue that we Americans are harmed by foreign subsidies that lower the prices of our imports (“Our one-sided trade war with China,” Oct. 7).  But why?  Why are we harmed by these lower-priced imports if (as I know you agree) we benefit from imports whose prices are lowered by natural market forces?

In both cases, some U.S. workers lose jobs.  And in both cases, not only does Americans’ cost of living fall, but, also, opportunities are thereby opened in America for the creation of new industries and new opportunities that would otherwise be economically out of reach.  In America, absolutely nothing about jobs lost to imports whose prices are made lower by foreign subsidies distinguishes them from jobs lost to imports whose prices are made lower by natural market forces.

If you’re skeptical of my claim, ask first: Would you oppose the successful private efforts of a Chinese physician to invent an inexpensive pill that safely and completely cures people of cancer?  I’m sure not, despite the fact that such a pill would destroy many American jobs – from those of physicians to hospital orderlies.  Now ask, would you oppose the successful efforts of the Chinese government to subsidize the invention and production of such a pill for export to America?

The logic of your position is that such subsidies would hurt Americans and, therefore, Uncle Sam should retaliate with measures to protect us from the scourge of such a low-priced cancer-curing pill.

But honestly, would Americans really be made better off by retaliatory tariffs that prevent us from buying this pill – or that force up the price of this pill to levels sufficient to protect the jobs of oncology physicians, nurses, and other health-care workers?  If you (rightly) suspect that the answer is no, then you should realize that your case for retaliatory trade restrictions against whatever goods Beijing might now subsidize for export is without merit.

I attach, fyi, a just-published paper of mine that answers in the negative the question “do foreign subsidies justify retaliatory protectionist measures?”

Donald J. Boudreaux
Professor of Economics
George Mason University
Fairfax, VA 22030


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