The Silence of the Wolves

by Don Boudreaux on September 30, 2016

in Crony Capitalism, Seen and Unseen, Subsidies, Trade

In some earlier post (or posts) – that I cannot now find – I’ve tried to convey the thought that I’ll convey here.  Yet given the rain (and reign) of silly talk today about trade, it’s a point that is worth repeating.

Protectionists are fond of declaring that foreign-governments’ subsidies (both real and imagined) of those foreign-countries’ economic activities – and particularly of those foreign-countries’ exports – are reason enough for ‘our’ government to ‘protect’ our economy, with tariffs and other barriers to trade, from the distortions and damages visited upon our economy by those foreign subsidies.  Never mind that many of those same protectionists self-righteously champion similar subsidies as being economically appropriate and wise when issued by the domestic government.  Also ignore here the fact that when foreign governments really do subsidize their export industries those subsidies make those foreign economies weaker and poorer rather than stronger and richer (while, at the same time, almost certainly making ‘our’ domestic economy stronger and richer).  (There’s no such thing as a free subsidy.)  Instead ask: why do we never hear, from protectionists, calls for negative domestic tariffs when foreign governments are plainly pursuing policies that artificially reduce the abilities of producers in those foreign countries to profitably export to ‘our’ domestic economy?

Why, for example, do protectionists in the United States never call on Uncle Sam to subsidize Americans’ consumption of tobacco, steel, and sugar from Zimbabwe?  After all, everyone today understands that the economic policies of the Mugabe government have severely damaged Zimbabwe’s economy.  These destructive policies in Zimbabwe create artificial inefficiencies throughout the Zimbabwean economy and, therefore, artificially raise the costs to Zimbabweans of producing and exporting goods.  Americans, in turn, pay artificially high prices for whatever goods they import from Zimbabwe.  If protectionists really do care about ‘leveling the playing field’ and about global economic efficiency – and if protectionists are correct that the domestic use of discretionary trade policies is an economically and ethically appropriate means of achieving these fine goals – protectionists should complain that American producers enjoy an unfair advantage as they compete against their Zimbabwean rivals.  American protectionists should complain that the policies currently pursued by the Zimbabwean government make the prices that Americans must pay to buy Zimbabwean exports too high.  American protectionists should demand that Uncle Sam impose negative tariffs – subsidies – on imports from Zimbabwe in order to cause the prices of those imports to better reflect their ‘true’ costs – that is, the costs that those imports would have been produced at had the Zimbabwean government not pursued the market-distorting policies that it has pursued for the past 36 years.

Likewise, American protectionists prior to 1981 should have complained that the number of imports into America from the horribly inefficient economy of Maoist China was unfairly and inefficiently too low and their prices too high and, therefore, that Uncle Sam should have artificially stimulated American consumption of those imports by subsidizing that consumption.

Ditto for imports from war-ravaged countries such as Afghanistan and Syria.  Those wars render the economies there far less efficient than they would be if peace were reigning.  Therefore, the prices that American consumers must pay for goods produced in those countries are too high and the quantities that Americans import from there are too low.  According to protectionists’ express logic, it follows that Uncle Sam should subsidize American consumers’ purchases of imports from those devastated countries even if doing so causes, as it would, consumer demand for American-produced rival goods to fall.

But protectionists never, ever make this case for such import subsidies – despite the fact that most of the policies followed by most of the world’s governments cause most of the world’s economies (and producers) to be far less efficient than they would otherwise be.  This silence from protectionists who unfailingly call for positive tariffs when they believe that foreign governments are taking steps to make imports into American artificially abundant and too low in price is booming.

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