Here’s the next part of my exchange with a new correspondent.
Mr. D__:
Thanks for your reply to my email of yesterday. In your reply you write that “it is majorly unfair that foreign countries subsize exports sold here at below cost prices.”
I agree. But the unfairness isn’t to Americans; it’s to those foreigners who are taxed in order to increase the purchasing power of Americans. Just yesterday at my blog I featured a quotation from Milton Friedman who makes the case more eloquently than I can.
With respect, you seem to hold the implicit protectionist presumption that American producers are ethically entitled to a portion of the incomes earned by their fellow Americans. Putting aside concerns about national security (which you don’t raise), please explain why, say, an automobile producer in Michigan is so entitled to that portion of your income that you spend buying a car that, should you choose to buy a car from a producer in Japan or Germany, the government acts ethically if it punitively taxes your exercise of your freedom to choose. How is it morally acceptable for the government to improve the economic well-being of some Americans (those producing automobiles) by worsening the economic well-being of other Americans (car buyers, as well as those Americans not involved in producing automobiles)? As I see it, such government action is morally outrageous.
You’ll answer that it’s wrong to allow Americans to lose jobs to subsidized foreign goods – to which I respond: Why, exactly? Where is the ethical offense to Americans? I submit that there is none.
Suppose a wealthy foreign philanthropist donates two billion of his own euros to a German university, and, as a result, researchers at that university develop a technique for lowering the production cost of automobiles by 25 percent by dramatically reducing the number of workers required in automobile factories. Would it be wrong to allow Americans to buy foreign cars made with this new technique? Would it be wrong to allow U.S. auto factories to adopt this production technique? In both cases, note, many American autoworkers would lose jobs in exactly the same way they do when automobile production is subsidized by foreign governments. If you answer ‘no’ to these questions, I challenge you to explain why foreigners act unethically toward Americans by offering to sell us subsidized exports.
Why should we refuse to accept what Milton Friedman accurately describes as “reverse foreign aid” – aid that goes directly into the pockets of American producers that import some inputs, and American households who purchase imported consumer goods? How is it ethical for the U.S. government to prevent you from accepting such gifts?
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
