Here’s a letter to the Wall Street Journal.
Editor:
You report that, in response to increased riskiness of trading with China, General Motors “has quietly seeded the revival of the domestic magnet industry, locking down supply amid trade tensions” (“GM’s Rare-Earth Gamble Pays Off as China Tightens Magnet Exports,” October 13). This news is further evidence against the case for high tariffs.
Protectionists routinely assert that free trade leaves our ‘supply chains’ vulnerable and, therefore, government must restrict our trade in order to ensure that we’re not dependent on unreliable foreign sources of supplies. But as G.M.’s actions show, the market gives private firms strong incentives to take steps to better secure their supply sources when the riskiness of relying on foreign suppliers becomes too great.
Nearly all U.S. imports are purchased by businesses that either will retail these goods to American consumers or use these goods as inputs in production that occurs on American soil. No one has incentives as strong as do these businesses to correctly assess the riskiness of relying on foreign suppliers, and to reduce this reliance when (and only when) that riskiness rises to dangerous levels. To suppose that politicians and bureaucrats, with no economic skin in the game, know better than do the private businesses that purchase imports if and when foreign sources of supplies are becoming too risky is preposterous.
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
