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Navarro’s Freight Train of Fallacies

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Here’s a letter to the Wall Street Journal:

Editor:

Peter Navarro’s “A Tariff Issue on Which Free and Fair Traders Can Agree [2]” (May 29) is a train freighted only with fallacies. Here are three.

First, free-trade economists do not “insist” that tariffs result in less employment. In reality, free-trade – that is to say, competent – economists recognize that tariffs, although they shift workers and resources from more- to less-productive uses, have no effect on the overall employment level.

Second, Mr. Navarro leaps heedlessly from an accounting identity to a false economic conclusion when he writes that “imports don’t contribute to gross domestic product.” It’s true that the value of imports is not directly included in GDP. But because at least half [3] – and on some calculations [4] nearly all – imports are inputs into domestic production, increased production efficiencies made possible by lower-priced imports do indeed contribute to a higher GDP.

Third and most fundamentally, Mr. Navarro writes as if, when assessing international trade, exports are benefits and imports are costs. Yet this assessment is backwards. To anyone who disagrees with me and agrees with Mr. Navarro, I hereby offer to accept from you as many automobiles, consumer electronics, household furniture items, and other real goods and services as you wish to give to me and I promise to give to you in exchange nothing but pieces of paper on which I’ve scrawled the face of George Washington.

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

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