Here’s a letter to a protectionist commenter on my Facebook page.
Mr. Seligman:
Unhappy with my opposition to U.S. tariffs on aluminum imports from Canada – imports that allegedly are subsidized by the Canadian government – you write this on my Facebook page: “In 2000, there were 23 aluminum smelters in America. Now it’s down to four. Is the de-industrialization of Pennsylvania Ohio Indiana Michigan the Free Trade Policy?”
You’re confused about both facts and theory. First the facts.
As Richard Fulmer notes in his reply to your comment, the real value of manufacturing outputs in Indiana, Michigan, Ohio, Pennsylvania are all higher today than twenty years ago (the earliest date for which these data are available). Indeed, in all four of these states, also higher is the real value of primary metals production. (Note that these data on primary metals production go back to 1997.)
In addition, as Gary Winslett has shown, whatever adjustment problems are suffered by manufacturers in rust-belt states are largely due to unfavorable regulatory policies in those states. Manufacturing in U.S. states with fewer tax and regulatory burdens is especially booming.
Now some straightforward theory. If Canada subsidizes its aluminum producers, it draws capital, workers, and resources in Canada away from other Canadian industries. These other Canadian industries reduce their output. Canada’s non-aluminum exports likely fall, thus opening greater opportunities for American producers who compete with Canada’s non-aluminum exports. Why do you not celebrate the Canadian government’s creation of larger markets for these American producers? And if U.S. trade policy were to successfully protect American aluminum producers from subsidized Canadian aluminum, would you shed the same number of tears for the resulting shrinkage of markets and jobs in America’s non-aluminum industries as you now shed for the shrinkage of markets and jobs in America’s aluminum industry? If not, why not?
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
