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An Open Letter to a U.S. Trade Official

Posted By Don Boudreaux On May 2, 2013 @ 11:47 am In Crony Capitalism,Myths and Fallacies,Seen and Unseen,Trade | Comments Disabled

Mr. Francisco Sánchez
U.S. Under Secretary of Commerce for International Trade

Washington, DC


Dear Mr. Sánchez:


In your press release yesterday you mention only one benefit of more open international trade – namely, more American exports (“Statement from U.S. Under Secretary of Commerce for International Trade Francisco Sánchez on World Trade Month 2013 [1],” May 1).


With all due respect, although you were appointed by a president who boasts of his commitment to policies based on scientific consensus and unsullied by political pandering, your press release reads as if you are entirely innocent of the economic analysis of trade as you pander to popular prejudices against international commerce. Here are two instances of the many ways in which your press release offends basic economics.

First, while broader export markets can have advantages, exports are always the price paid for imports.  The chief benefit of expanded international trade is more imports.  Exports are the cost of securing this benefit.  Your focus on increasing exports makes you sound more like an oblivious 17th-century mercantilist than an informed 21st-century trade official.

Your exclusive focus on exports might be dismissed as a forgivable oversight were it not reinforced by your conclusion that “we have the best workers and the best businesses in the world, and if the playing field is level, America always wins.”


Are you aware of the principle of comparative advantage [2]?  It’s foundational stuff.  Explanations of it have been around, and widely accessible, since at least 1817 [3].  Here’s a link to a famous Nobel laureate economist explaining its centrality.*  If you were to become familiar with this principle you would learn that claims such as a country having “the best workers and the best businesses in the world,” or that trade is an event at which a country “wins,” are gobbledygook – on a scientific par with belief in the existence of phlogiston or the legitimacy of phrenology.


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


* Paul Krugman, “Ricardo’s Difficult Idea [4]
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And yet we’re supposed to politely discount the significance of such abject ignorance – overlook the insulting of our intelligence – when it is issued by people, such as Mr. Sánchez, known to face political constraints.  Remind me again why we call government officials “public servants” or bestow upon them titles such as “Hon.”  Remind me again why we are supposed to look with admiration upon politics?
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URLs in this post:

[1] Statement from U.S. Under Secretary of Commerce for International Trade Francisco Sánchez on World Trade Month 2013: http://www.ita.doc.gov/press/press-releases/2013/statement-from-us-under-secretary-of-commerce-for-international-trade-francisco-sanchez-on-world-trade-month-2013-050113.asp

[2] the principle of comparative advantage: http://www.econlib.org/library/Enc/ComparativeAdvantage.html

[3] at least 1817: http://www.econlib.org/library/Ricardo/ricP.html

[4] Ricardo’s Difficult Idea: http://web.mit.edu/krugman/www/ricardo.htm

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