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On the (Un)Ethics of Trade “Retaliation”

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In my latest column for AIER, I examine the case for so-called “retaliation” by the home government when foreign governments abuse their own citizens with tariffs and subsidies [2]. This case crumbles under scrutiny. Those who make this case are merely grasping for excuses to profit by having the home government abuse fellow citizens in the same ways that dastardly foreign governments abuse their citizens.

Some slices:

The protectionist case for retaliation therefore implies that when Beijing imposes tariffs on Chinese imports, or subsidizes Chinese exports, it takes from us Americans something to which we are entitled. Specifically, what the Chinese allegedly take from us Americans is consumer demand that, absent the Chinese interventions, would be satisfied with sales made by American producers. The protectionist case for retaliation, in other words, springs from the belief that particular producers in the United States have at least a conditional property right to some minimum volume of consumer demand for their outputs.

Do producers really have rights — property entitlements — to at least some minimum volume of consumer demand for their outputs? The answer given by Anglo-American common law has long been a clear no. Under this law, economic competition is neither tortious nor criminal. Indeed, far from being wrong for producer Smith to lower his prices or to improve his product quality in ways that result in economic losses for producer Jones, such competitive actions by producer Smith are positively praiseworthy.

Examined from the perspective of consumers, under the law consumers are free to spend their incomes as they choose, and to change how they spend their incomes. And while businesses are free to offer for sale new goods and services, and to make their existing product offerings more attractive to consumers, businesses are not presumed to be entitled to any minimum volume of consumer demand.

Quite the contrary. The recognition is widespread that each and every business is always at risk of not succeeding, of losing sales, and even of going bankrupt. Implied in this recognition is the absence of any obligation on the part of consumers to spend their money in ways that improve or protect the economic well-being of particular producers.

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Producer entitlement to consumer demand is wholly at odds with a market economy. Fortunately, producers possess no such entitlement. Thus when foreign governments unethically abuse their own citizens by obstructing imports into their countries or by subsidizing exports from their countries, any resulting economic losses these interventions cause here in the home country to some of “our” producers are not ethically relevant.

These foreign-government actions take from no one in the home country anything to which he or she is entitled. These foreign-government interventions, therefore, supply no good ethical excuse for “retaliation.” In fact, losing nothing to which they are entitled, home-country producers themselves act unethically when they demand that the home government inflict upon fellow citizens the same unjust depravations that foreign governments inflict upon their citizens.

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