Here’s a second note to a commenter at my Facebook page.
Mr. Schlomach:
Commenting on my Facebook page, you allege that China ‘dumps’ goods in the U.S. and, in doing so, “has used our love of cheap stuff to suck our country of strategically critical technology/industry.”
By suggesting that your fellow Americans buy stuff simply because it’s cheap, you reveal your poor opinion of your fellow Americans. (And also: do non-Americans love “cheap stuff” less than do Americans?) But the principal problem with your assertion isn’t the contempt that it conveys for your fellow citizens, but its unsound economic reasoning.
First, if we Americans import from China mostly cheap stuff, that means that the U.S. industries that are displaced by these Chinese imports produce cheap stuff. These cheap-stuff-producing American industries are unlikely to be “strategically critical.” Consider, for example, that among the U.S. manufacturing sectors that has declined the most in the past 30 years – with this decline accelerating around the time when China joined the WTO, in 2001 – is apparel and leather goods. Is this industry strategic? Over that same time period, an American sector that has expanded is computers and electronic products, the output of which today is more than 300 percent greater than it was in 2001. And the single largest manufactured output in the U.S. today is chemicals, with U.S. chemical output now being about 25 percent higher than it was when China joined the WTO. Do you regret that, because of freer trade, Americans today stitch together fewer pieces of clothing while we manufacture more chemicals and computers and other electronic goods?
Second, if the Chinese truly are dumping strategically critical goods in the U.S. with the aim of taking such industries away from America, the Chinese must have a comparative disadvantage at producing those goods, otherwise they wouldn’t have to price below their costs in order to undersell American producers. If the Chinese want to expand their global market share of this or that strategically critical good, it would make far more sense for them, not to waste money (and enrich Americans) by selling such goods in the U.S. at below-cost prices, but instead to spend that money trying to improve their efficiencies at producing these goods. A country that expands its market share of supplying goods that it produces at a comparative disadvantage ensures either that that larger market share will soon be lost, or that the country will bankrupt itself as it attempts to maintain its artificially large market share.
Though often told, the tale of Americans being harmed by alleged dumping of imports on our shores makes no economic sense.
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
