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Trade Hooey

Not knowing who at the Federalist Society – an organization that I greatly admire and respect – wrote that which I criticize in my letter, I address my letter generally.

Federalist Society:

Yesterday an e-mail from you announced an event titled “Fair Trade: Reinvigorating American Leadership in the 21st Century,” the opening address for which will be delivered by Commerce secretary Wilbur Ross.

While everything that Sec. Ross says about international trade is sheer nonsense, it’s not inappropriate for you to invite him to speak at your event. But it’s extremely disappointing to encounter your description of the event – a description that reads as if it were penned by the White House P.R. shop.

In that description, for example, you complain of “unjust trade imbalances” that we possibly must “address” with “bold action.”

Can you define “unjust trade imbalances”? At what point does the willingness of foreigners to invest here transform from being “just” to being “unjust”? Why might weak interest by foreigners to invest their savings on our shores be “just,” while strong interest to make such investments – strong interest that reflects high confidence in the U.S. economy and that pumps more capital into it – be “unjust”?

And answer me this: Among the many particular foreign investments here – all of which raise U.S. trade deficits – can you distinguish those that are “just” from those that aren’t? Was, for instance, Toyota’s construction of a factory in Georgetown, Kentucky, “just” or “unjust”? What about the purchase by Europeans of U.S. government bonds: “just” or “unjust”? How about foreigners’ purchases at the New York Stock Exchange of shares of companies such as Apple, 3M, and Alphabet, Inc. – purchases, by the way, that buoy the value of many Americans’ 401(k)s: “just” or “unjust”?

Also, given the fact that nearly all acquisitions by foreigners of assets in America involve Americans selling those same assets to foreigners, are we also to accuse many of our fellow Americans of behaving unjustly towards the rest of us by their voluntarily selling to foreigners – presumably at the highest prices available – assets that these fellow Americans lawfully acquired?

Your announcement overflows with other errors and misconceptions. But your apparently serious mention of “unjust trade imbalances” is alone sufficient to alert me, and everyone else with at least a modicum of understanding of trade, that the individuals in your shop who organized this event understand trade about as well as do Sec. Ross and Pres. Trump – which is to say, not at all.

It’s disheartening to learn that some people at the Federalist Society have apparently become ensnared in the nest of fallacies and gobbledygook that is Trump’s trade polices.

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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