More Ominous Trade News from the Trump Team

by Don Boudreaux on January 3, 2017

in Balance of Payments, Myths and Fallacies, Seen and Unseen, Trade

This news isn’t surprising, but it is nevertheless distressing: Trump’s nominee for U.S. Trade Representative will be the lawyer Robert Lighthizer.  Lighthizer is a trade ‘pragmatist’ – which means that he opposes free trade.  Lighthizer has written a fair amount about trade in past years in the popular press, all of it revealing that his understanding of trade is no better than that of the economically ignorant Mr. Trump and the equally economically ignorant man-in-the-street.

As Tyler Cowen correctly notes, “None of this is good news.”

Here are links to my responses to many of Mr. Lighthizer’s specimens of economic ignorance.  And pasted below is one of my letters (this one to the New York Times) in response to his trumpeting of trade fallacies.

Complaining about America’s trade deficit, Robert Lighthizer claims that foreign investments in the U.S. necessarily “will leave our children dependent on foreign decision makers” (“Throwing Free Trade Overboard,” Nov. 13).  What jingoistic jabber!

When, for example, Ikea builds a store in Milwaukee, America’s trade deficit rises.  But this investment in America by foreigners doesn’t make our children more “dependent on foreign decision makers.”  Ikea cannot force Americans to shop or to work at Ikea; it must compete against other retailers and employers.  Ikea has the same power over Americans and over “our children” as does Levitz and La-Z-Boy – which is to say, zilch.

In addition, Americans who supply the land and labor Ikea employs to build this store can use their proceeds to start their own firms or to invest in existing American businesses.  To the extent that they do so, not only are both America’s trade deficit and capital stock thereby increased, but whatever decision-making ‘power’ Ikea gains in the U.S. by opening a store here is offset by the additional decision-making ‘power’ and prosperity Americans gain because Ikea’s operations in the U.S. enabled these Americans to make investments that would otherwise have not been undertaken.

Donald J. Boudreaux

UPDATE: See this post from November by Cato’s Dan Ikenson.  (HT David Boaz)


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