One of Many Reasons to Oppose Export Restrictions

by Don Boudreaux on December 9, 2013

in Energy, Seen and Unseen, Trade

Mr. John Johnson
Independent Businessman and Consumer Advocate
Arlington, TX

Dear Mr. Johnson:

Thanks for your e-mail.  In it you describe as “goofy” my opposition to proposals for Uncle Sam to restrict American exports of liquefied natural gas.

In fact, the case against such export restrictions is powerful.  If you’re interested in exploring the matter I’ll be glad to send you links to scholarly studies that will convince you, if not to abandon your support for such restrictions, at least that the case against such restrictions isn’t goofy.  Short of a reading assignment, however, let me ask you to consider the following scenario.

Suppose that you’re concerned that the cost of medical care for you and your neighbors will rise.  Suppose also that a number of your neighbors’ children are now in medical school while a number of others are considering applying for future admission.  Would you then ask government to prohibit all newly trained physicians from your neighborhood from selling their services to people outside of your neighborhood?

If you ponder the matter carelessly you might favor such an export prohibition on the grounds that it will artificially increase the supply of medical care available within the confines of your neighborhood.  But if you ponder the matter carefully you’ll see that such a prohibition will likely backfire.  Most notably, the prohibition itself will dampen the attractiveness of studying medicine and, therefore, will likely result in reduced, not enhanced, access for you and your neighbors to high-quality medical care.

In addition, other neighborhoods might retaliate against your neighborhood’s policy by imposing their own restrictions on exports of medical services from their localities – thus further raising the costs of medical care for you and your neighbors.

While I agree that energy producers should not be subsidized, such subsidies do not justify export restrictions.  Natural-gas supplies, like skilled physicians, do not occur naturally; they must be produced – and such production requires risk-taking, investment, and effort.  Even with subsidies, to prevent those who undertake these activities from selling to as broad a customer base as they can reach is economically harmful.  And at least insofar as such restrictions affect producers who are not subsidized – or who would willingly forego subsidies – such restrictions are also ethically offensive.

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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