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Open Letter to Rep. John Dingell

Posted By Don Boudreaux On April 5, 2013 @ 4:20 pm In Crony Capitalism,Myths and Fallacies,Seen and Unseen,Subsidies,Trade | Comments Disabled

Rep. John Dingell (D-MI)
Capitol Hill
Washington, DC

Dear Mr. Dingell:

You and some of your Congressional colleagues, in a March 12th letter [1], urge Pres. Obama “to address currency manipulation in the Trans-Pacific Partnership agreement.”  You claim that such manipulation reduces employment in America.

Please reconsider.

First, if – as every serious economist understands – genuine efficiency gains by foreign exporters increase Americans’ wealth without reducing the net number of jobs in America, then government-induced efficiency gains for foreign exporters have the very same effect for Americans.  In both cases, we get valuable goods and services at lower costs while some of our labor and capital are released to produce outputs that would otherwise be too costly to supply.  The ability of the U.S. market to create jobs is just as strong for workers who lose their jobs because of “unfair” trade practices as it is for workers who lose their jobs because of trade practices that are irrefutably legitimate.

Second, the foreign trade practices that you condemn either do or do not improve the overall economic health of the countries whose governments implement these practices.  If these practices do improve those countries’ economic health, then they are not “unfair” by any appropriate standard.  Such practices are no more worthy of condemnation and retaliation than are, say, Uncle Sam’s own NSF grants, education subsidies, highway-building projects, and the like – all of which, I’m sure, you regard as legitimate means used by Uncle Sam to strengthen the U.S. economy.

Only if these foreign practices weaken those countries’ overall economies does economic theory permit them to be labeled “unfair” – labeled as practices meant to bestow special, concentrated privileges at the net expense of the larger economy.  But in all such cases the bulk of the harm of such practices falls on the countries that practice them.  Producers in those countries become less innovative and more heavily burdened with unwarranted tax and regulatory costs.  Overall, firms in those countries become artificially less – not better – able to compete for customers in American and global markets.

I urge you not to be misled by antiquated mercantilist slogans and notions into demanding – as a means of unfairly protecting American producers – higher taxes on American consumers who buy the imports of their choice.

Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA  22030

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[1] in a March 12th letter: http://cafehayek.com/2013/04/open-letter-to-rep-john-dingell.html/support_currency_provisions_in_tpp_2-1

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