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Here’s an open letter to Cafe Hayek commenter C___ W___:
Mr. W____:
In response to the argument that foreign-government subsidies supply no good excuse for home-country protectionism, you ask rhetorically [2] “So you’re ok with governments favoring your competitor?”
You’re correct to imply that the correct answer is ‘no.’ But you’re incorrect to assume that this ‘no’ answer justifies home-country protectionism.
The chief economic problem with government favoring one firm over another is that such favoritism creates waste – waste that is paid for overwhelmingly by the taxpayers and the consumers of the country whose government dispenses such favors. Therefore, when Beijing subsidizes Chinese exporters who compete with your American company, those who bear the bulk of the costs are not Americans but, rather, citizens of China. Indeed, Americans are net beneficiaries of such Chinese subsidies. I object to Beijing’s subsidies not because they harm American firms but, instead, because they harm the Chinese people.
More fundamentally, such subsidies take property only from the citizens of China, not from you or anyone else outside of China. Beijing’s subsidies take from you nothing that you own or have any contractual or ethical claim on. Therefore – and especially because such Chinese subsidies redound on net to the benefit of Americans – you have neither an economic case nor any ethical standing to demand that Uncle Sam seize property from fellow Americans (in the form of punitive tariffs) in retaliation for Beijing’s practice of seizing property from the Chinese people.
If the ethics of your case for protectionism were sound they would imply, for example, that when bandits rob a little old lady on her way to the supermarket, the supermarket has right to rob me and others in order to acquire the profits that the supermarket owner estimates he would have earned had the little old lady not been robbed.
I believe that such ethics are unambiguously unsound.
Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030