Irwin vs. Navarro

by Don Boudreaux on August 6, 2013

in Crony Capitalism, Seen and Unseen, Trade

Peter Navarro – who called recently in the New York Times for special privileges for corporations – likely didn’t read Dartmouth economist Douglas Irwin’s January 31, 2009, New York Times op-ed on the ill-consequences of trade restrictions.  (HT John Murphy)  Here’s a key paragraph from Doug’s op-ed:

That might sound reasonable, but history has shown that Buy American provisions can raise the cost and diminish the effect of a spending package. In rebuilding the San Francisco-Oakland Bay Bridge in the 1990s, the California transit authority complied with state rules mandating the use of domestic steel unless it was at least 25 percent more expensive than imported steel. A domestic bid came in at 23 percent above the foreign bid, and so the more expensive American steel had to be used. Because of the large amount of steel used in the project, California taxpayers had to pay a whopping $400 million more for the bridge. While this is a windfall for a lucky steel company, steel production is capital intensive, and the rule makes less money available for other construction projects that can employ many more workers.

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