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Tax the Rent-Seekers

Here’s a letter to the Wall Street Journal:

American steel producers, claiming entitlement to the dollars that American consumers spend on Chinese steel, seek punitive taxes on Americans who buy such steel (“Why Chinese Steel Exports Are Stirring Protests,” March 16).  Specifically, these American producers assert that their Chinese competitors are acting wrongfully by incurring losses in order to maintain or to build market share in the United States.  This assertion is self-serving nonsense.

Forget that, contrary to the premise of ‘anti-dumping’ regulations, there are many sound and competitive economic reasons for firms to spend (that is, to “lose”) money today to improve their chances tomorrow of maintaining or increasing market share.  Focus instead on the fact that, if American producers are correct to claim that it’s wrong for firms to spend money to protect or to enhance market share, then these American producers themselves are guilty of that very same offense.  After all, these American producers are spending lavishly on lobbying and public-relations efforts to persuade government officials to impose protectionist policies designed to protect or to enhance American-producers’ market share.  If it’s wrong for Chinese producers to spend money to protect or enhance their market share, it must also be wrong for American producers to do the same.

In fact, though, the only wrongful spending is being done by the American steel producers.  Chinese producers merely offer their steel to consumers at low prices – offers that consumers are free to accept or reject.  American steel producers, in contrast, demand that government force consumers to pay higher prices for steel.  So if there is any economically unjustified and wrongful act here that should be discouraged with punitive taxation, it is the American steel producers’ gluttonous and wasteful pleading for special privileges.

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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