Here’s a letter to the Gatestone Institute: (For alerting me to Chang’s essay, I thank Rob Friedman.)
Editor:
Gordon Chang drains all credibility from his case for high U.S. tariffs against China by presenting “America’s merchandise trade deficit with China” as economically meaningful (“Trump’s China Tariffs: Extraordinarily Good for America,” July 29). In fact, this grammatically sound construction is economic gibberish.
There’s nothing special about imports and exports of tangible things (that is, merchandise) as opposed to services. More than three quarters of U.S. GDP is produced in the service sector while just over half of China’s economy produces services – meaning that Americans are far more specialized at producing services than are the Chinese. It would, therefore, be quite surprising if we Americans exported as much merchandise to China as we import from China – and it’s not surprising that we Americans export more services to China than we import from China. (Question for Mr. Chang: Should the Chinese fret about their services trade deficit with the U.S.?)
Mr. Chang might respond by pointing out that Americans import from China more goods and services in total than we export to China. But this response would fail. In a world of more than two countries, there’s no reason whatsoever to expect any pair of countries each to sell to the other the same amount as each buys from the other – or, at least, there’s no more reason to expect this outcome than there is to expect Mr. Chang to sell to, say, his dentist the same amount as he buys from his dentist.
Writing, as Mr. Chang does, as if trade in merchandise is economically superior to trade in services alone reveals that he’s unqualified to pronounce on matters involving trade. Ditto for his writing as if America’s trade balance with China has economic meaning. Both concepts have no use other than sowing confusion among the general public in the hope of convincing voters to support policies that will harm them.
A final point: Mr. Chang writes that we free traders are obliged to explain how we’d deal with Chinese theft of intellectual property. This point is fair, but contrary to his implication, we’ve already done so. See, for example, this 2018 analysis by Scott Lincicome, this 2018 essay by James Bacchus, and this 2019 paper by Daniel Griswold and me.
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
