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Who’s Harmed If Beijing Engineers ‘Predatorily’ Low Prices for Chinese Exports?

Here’s a letter to the Wall Street Journal:

Greg Ip falls for the myth that what he calls “China’s predatory trade behavior” is a threat to Americans (“Trump Alienates Allies Needed for a Trade Fight With China,” March 7).  In fact, to the extent that China engages in such behavior, it’s a threat overwhelmingly to the Chinese themselves.

The only way that Beijing can possibly enable some Chinese producers to sell their exports at artificially low prices is for it to artificially divert resources to these favored producers.  But each and every resource diverted to these favored producers is a resource artificially diverted away from other Chinese producers.  This diversion of resources causes the favored Chinese producers to expand to inefficiently large sizes, and the disfavored Chinese producers to shrink to inefficiently small sizes.  The Chinese economy is unambiguously harmed by these Beijing-engineered inefficiencies.

In his famous book The Antitrust Paradox Robert Bork reviewed the many reasons why an economic entity that attempts to harm its rivals with predatorily low prices will destroy itself if it persists in the folly of selling outputs at prices below costs.  Bork concluded his summary with this comical yet insightful advice: “the best method of predation is to convince your rival that you are a likely victim and lure him into a ruthless price-cutting attack.”*  If Beijing truly is attempting to damage America with predatorially low prices, it is inflicting grave economic harm, not on Americans, but only on the Chinese people and their economy.

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

* Robert H. Bork, The Antitrust Paradox (New York: Basic Books, 1978), p. 152.


Because we outside of China benefit the stronger is the Chinese economy, we are harmed slightly by China’s self-damaging actions (although not by the low-priced imports themselves; these are a benefit to us).  But the Chinese people themselves overwhelmingly pay the price for any ‘predatory’ behavior engineered by Beijing.