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Open Letter to Rep. Sandy Levin

Posted By Don Boudreaux On March 7, 2012 @ 5:05 pm In Country Problems,Myths and Fallacies,Seen and Unseen,Subsidies,Trade,Uncategorized | Comments Disabled

Rep. Sandy Levin (D-MI)
Longworth House Office Building
Washington, DC

Dear Mr. Levin:

In support of Congressional action to punish Americans who buy goods from China, you complain in the Detroit Free Press that “China gives its manufacturers whatever advantage it can over U.S. and other competitors.  China provides massive loans at below-market interest rates, cheap or free land, extensive tax breaks and other subsidies in an effort to advantage domestic industries….  And it engages in a large-scale manipulation of its currency to make its exports significantly cheaper” (“Level the Playing Field with China [1],” March 2).

Let’s reword this complaint to reveal a reality that your prose masks: “China gives AMERICAN CONSUMERS whatever advantage it can over CHINESE CONSUMERS.  China provides massive loans at below-market interest rates, cheap or free land, extensive tax breaks and other subsidies in an effort to advantage AMERICAN CONSUMERS WHO, AS A RESULT OF THESE ACTIONS BY BEIJING, HAVE ACCESS TO MORE GOODS AT LOWER PRICES….  And it engages in a large-scale manipulation of its currency THAT, WHILE IT DISTORTS AND DAMAGES CHINA’S OWN ECONOMY, FURTHER REDUCES AMERICANS’ COST OF LIVING.”

This reality isn’t rendered irrelevant by the fact that Beijing’s actions harm certain American producers: all newly created benefits for American consumers harm certain American producers.  Improved road surfaces, for example, ‘destroy’ some jobs that would otherwise be held by workers who repair automobiles and tires.  So unless you also advocate policies such as those that would prevent state and local governments from spending money to keep our roads from going to pot(holes), you have no business trying to prevent the Chinese government from bestowing similar benefits on Americans.

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

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[1] Level the Playing Field with China: http://levin.house.gov/level-playing-field-china


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