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Fair’s Fair

Here’s a letter to U.S. Senator Sherrod Brown (D-OH):

Sen. Brown:

You’ve introduced the “Level the Playing Field Act.”  This legislation would impose higher taxes and other burdens on American consumers who buy imports offered for sale in the U.S. at artificially low prices – that is, offered for sale in the U.S. at prices that are low only because foreign governments grant subsidies or other special privileges to these foreign producers.

You obviously believe that Uncle Sam should adjust the prices of American imports to offset any effects on these prices of foreign-governments’ economic interventions.  So will the final version of your bill also contain provisions to subsidize Americans’ purchases of the vast majority of imports from countries such as China and India?  By your logic, it should.

A statesman with your keen interest in using Uncle Sam’s power to offset the economic effects of foreign-governments’ economic distortions must realize that by far the most consequential of these distortions are not today’s relatively piddling exchange-rate pegs and industrial subsidies.  Instead, the foreign-government interventions that most powerfully distort the prices that Americans today pay for imports are the decades of communism, socialism, and central planning once practiced in these countries – policies whose lingering negative effects continue to keep almost all production costs in these low-wage countries artificially high and, hence, to keep artificially high the prices of most of these countries’ exports to America.  Most producers in these countries therefore – and by your reasoning – are suffering an artificial competitive disadvantage relative to their American rivals.  These foreign producers today export far less to America than they would had their governments not intervened to distort their economies so calamitously.

Surely a man so concerned as you are that trade be both “fair” and free of the distorting effects of government interventions will want to encourage Americans to import far more from almost all producers in low-wage countries.

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