Reality is Far More Complex than Protectionists Realize

by Don Boudreaux on October 12, 2018

in Seen and Unseen, Trade, War

Here’s more in my continuing correspondence with a proud protectionist:

Mr. Nolan McKinney

Mr. McKinney:

You’re correct that in his letter to the Wall Street Journal Trong Bui attempts to bolster his case for protectionism with an appeal to national security. Specifically, Mr. Bui argues that “There are also national security and economic dangers that would come with not having a robust manufacturing base right here in the U.S. and instead depending on other countries to manufacture goods for us. Time to go back to the ‘we’ll design, and we’ll manufacture’ approach that has served this country so well in the past.”

His argument suffers from several flaws. I mention here only two.

First, Mr. Bui’s argument ignores costs. It’s easy to write that we Americans should do, not only the the design portion of the manufacturing process, but both the design and assembling portions of the manufacturing process. Yet to do more assembling in America requires doing less of something else – perhaps even less designing.

Mr. Bui would respond that the additional resources we’d use to do more assembling in America would be drawn from economic activities other than those associated with manufacturing’s design phases. Perhaps. But how does Mr. Bui know that national security would not be compromised by the reduction in outputs of those other sectors? Perhaps those resources would be drawn from mining. Perhaps from agriculture. Perhaps from transportation.

Second, Mr. Bui’s argument overlooks the fact that the amounts and kinds of manufacturing design activities now done so successfully in the U.S. are themselves a product of U.S. manufacturers’ access to lower-cost assembly options in other countries. The ability to assemble abroad at lower costs than are possible in the U.S. creates a larger market for manufacturing design activities within the U.S. Therefore, if the former is shrunk by tariffs on manufactured goods, the latter will also shrink.

The final result would go beyond Americans made poorer by reduced access to manufactured goods. The final result would include also an increased portion of American workers employed in the low-value-added tasks of manufacturing assembly, and a decreased portion of American workers employed in the high-value-added tasks of manufacturing design. And given that the latter surely contributes more to the strength of U.S. national security than does the former, tariffs that bring back to America low-value manufacturing assembly jobs would weaken rather than strengthen U.S. national security.

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


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