Unfair Trade Is Unfair Only to Foreign Consumers and Taxpayers, Not to Domestic Producers

by Don Boudreaux on March 26, 2017

in Myths and Fallacies, Other People's Money, Subsidies, Trade

Here’s yet another letter to my prolific correspondent Nolan McKinney:

Mr. McKinney:

Subsidies given by foreign governments to foreign rivals of American producers do not (contrary to your argument) “in ethics justify retaliation by our government to protect our producers from that unfair competition.”

All arguments that protectionism be used to combat alleged “unfair competition” rest on the risible presumption that domestic producers have a conditional property right in the incomes of consumers.  ‘If foreign widget exporters enjoy an unearned advantage over domestic widget producers,’ so insists the presumption, ‘then domestic consumers of widgets are obliged to spend enough of their incomes on domestic widgets to keep domestic widget producers not only in business but also operating at levels that domestic widget producers assert are “fair.”

I reject the argument that any producer has any property right, or should be given any property right, in consumers’ incomes.  And I reject this argument in all circumstances, including when foreign governments illegitimately grant to foreign producers property rights in a portion of the incomes of foreign consumers.  Foreign-governments’ unjust violations of their citizens’ property rights do not “in ethics justify” Uncle Sam matching this foreign injustice with a domestic injustice.

The injustice of subsidies and other privileges granted by foreign governments to foreign producers is done only to – and suffered only by – foreigners who are thereby forced to pay more taxes and higher prices.  Because no American producer has any right or entitlement to any portion of my and other Americans’ incomes, subsidies and other privileges granted by foreign governments to foreign producers that prompt Americans to spend less money buying domestically produced import-competing goods visit no injustice or “unfairness” on American producers.

Donald J. Boudreaux
Professor of Economics
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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