Debating Point

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Here’s another letter to “proud Trump man” Nolan McKinney:

Mr. McKinney:

Your friend is correct that, if measured by audience reaction, Steve Moore defeated me in our debate yesterday on trade. I obviously did a poor job in making the case for unilateral free trade.

But your friend is incorrect to describe Steve’s comments as “air tight in their logic.” Here’s one example of illogic that was displayed yesterday.

Steve argued that, because China under Pres. Xi is moving away from markets and back toward statism, the Chinese economy will suffer. Innovation and entrepreneurship there will be suppressed by modern-day mandarins. Steve here is correct. But he also said that the Chinese, in part because of their alleged theft of Americans’ intellectual property, pose “an existential threat” to America.

This conclusion doesn’t follow. If the Chinese continue to backtrack away from free markets and toward state control of the economy, no amount of access to Americans’ intellectual property will enrich either the Chinese people or the government in Beijing. The reason is that the kinds of ideas protected as intellectual property do not automatically turn themselves into valuable capital goods or consumer products. Producing outputs in ways that cause economies to grow and, in turn, that give governments, in addition to ordinary people, greater access to valuable goods and services requires competitive markets and their attendant profits, losses, and market prices that guide resource allocation.

If the goal really is to “beat China in trade” (as Trump puts it, and as I try to make sense of this absurd statement), then we should encourage their subsidies, tariffs, and insecure property rights, for these anti-market practices will, without question, make the Chinese less prosperous. These practices are the equivalent of the Chinese self-immolating.

But of course our goal ought not be to “beat China in trade.” Our goal ought to be to trade freely with the Chinese so that our prosperity is further enhanced along with that of the Chinese people. Trade is a win-win, not the zero-sum contest that Pres. Trump thinks it to be and that Steve Moore, in some of his comments yesterday, implied it to be.

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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