Congressional Quarterly reports (unfortunately gated) that several members of Congress – from both parties – seek to raise tariffs on Americans who buy foreign goods that (allegedly) are subsidized by foreign governments – with the Chinese government, of course, being singled out as a culprit apparently guilty of special deviousness at foisting low-priced goods on us hapless Americans. (HT Andy Roth)
I deal, in a short paper available here, more generally with the question of whether or not foreign subsidies justify domestic protectionism.
In this post I simply ask: Assuming that there is no question that Beijing is in fact subsidizing some of its exports to America (and I suspect that it really does engage in such subsidization), what allowance do these members of Congress make for the fact that the policies Beijing pursued from 1949 through circa 1978 cause Chinese producers today to be ‘artificially’ less productive than they would have been had such policies never been pursued? How do folks such as Sen. Debbie Stabenow, Sen. Sherrod Brown, and Rep. Dave Camp adjust for the lingering economic consequences of Maoist tyranny in China?
Had Beijing not obstructed the Chinese economy so completely during Mao’s reign, that economy would unquestionably be today far more advanced and its workers and factories more productive than it actually is. Even with Beijing now subsidizing, say, the production in China of automobile tires, the cost today to subsidized Chinese factories of producing and distributing those tires is likely higher than it would be had China not suffered decades of Maoist tyranny.
If Beijing’s intervention into the Chinese economy justifies U.S.-government ‘retaliation’ to ‘correct’ market distortions created by those interventions, shouldn’t the still-significant lingering negative consequences of Beijing’s interventions into the Chinese economy from 1949-1978 be considered? Shouldn’t Beijing’s artificial destruction, during the middle decades of the 20th century, of production efficiencies in Chinese factories be weighed against Beijing’s artificial creation, in the early decades of the 21st century, of such efficiencies?
Asked differently: shouldn’t any hike in taxes on Americans who buy products whose production is subsidized today by Beijing be reduced, perhaps even to zero (or below!), to account for the still-lingering lower efficiencies of Chinese production – still-lingering lower efficiences artificially caused by unwarranted intervention by Beijing during the mid-20th century into China’s economy?
Oh heck, one more question: how would Pres. Obama and other protectionists in Washington address the point that Dwight Lee and I raised in this 2003 essay?