… is from page 103 of the 5th edition (2020) of Douglas Irwin’s excellent book Free Trade Under Fire:
There is no such thing as a free lunch. Every government intervention involves a tradeoff of some sort. Higher sugar prices increase employment in sugar production but reduce employment in food-manufacturing industries. Higher semiconductor prices increase employment in the semiconductor industry but decrease employment in the computer industry. Higher steel prices increase employment in the steel industry but decrease employment in steel-using industries. When an industry asks the government to impose trade barriers that would raise the domestic price above the world price, the choice means trading off jobs in one sector of the economy for jobs in another sector, not creating or losing jobs overall.
DBx: Yep. And, of course, what’s true for jobs is true also for output. Protectionism can indeed cause the domestic outputs of industries X and Y to rise, but only by also causing the outputs of industries A and B to fall. Further, this tradeoff is negative-sum because protectionism keeps workers and resources in inefficient domestic industries X and Y, thus slowing – or preventing altogether – the domestic thriving of efficient industries A and B.
This undeniable truth is nearly universally ignored by protectionists – many of whom have the chutzpah to fancy themselves more realistic and practical than free traders.