Here’s a letter to my frequent correspondent Nolan McKinney:
Long ago I tired of responding to protectionists’ incessant appeals for government to “level the playing field.” Whoever uses that term to plead for trade barriers reveals a failure to understand trade. Still, I’ll answer your e-mail in which you allege that Beijing “unfairly tilts the playing field against” Americans – and I’ll answer it while sticking with this tired sports analogy despite the fact that sports analogies are almost always inappropriate for discussing trade.
When Beijing subsidizes Chinese exports or tariffs Chinese imports (or both) it does indeed tilt the playing field. But it tilts that field in favor of Americans (and others who who buy Chinese exports) and against its own citizens. These interventions by Beijing raise our real incomes: our dollars buy more from China. And any resulting job losses in America mean that resources are released to produce goods and services here that were previously too costly to produce. Whenever a trading partner insists on giving you more for your money, you are made better off. This fact isn’t altered if your trading partner happens to live abroad.
Those who are hurt by this tilted playing field are the Chinese people. Their government forces them to exert more sweat and to sacrifice more resources than necessary to acquire imports.
A tilted playing field is unfair because one team, the one that must run uphill, has to work unnecessarily hard to advance, while the other team, the one that gets to run downhill, advances with artificial ease. Beijing’s subsidies and tariffs, by obliging the Chinese people to spend more than necessary to acquire imports, force the Chinese people to run uphill economically. We Americans (and others who buy Chinese exports) do, as you say, play on a tilted field, but it is one tilted in our favor. We get to run downhill.
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