Friday, August 31, 2018

Why Trump's Trade Swami is Wrong

 Don Boudreaux  letter to a reader:
Mr. Larry Tidrick
Mr. Tidrick:
Thanks for your e-mail.
Trump’s trade swami Peter Navarro does indeed insist that other governments’ “management” of their citizens’ international trade requires that Uncle Sam “manage” Americans’ international trade. But Navarro is mistaken.
“Managed trade” is a euphemism for cronyism. It is implemented and operated to artificially
enrich a handful of producers. Like all species of cronyism, “managed trade” substitutes the inescapable ignorance and political biases of government officials for the collective intelligence and impartiality of competitive markets. In this way – and also, of course, because it increases scarcities in the home market – “managed trade” makes the economies of countries that practice it weaker and the peoples of those countries poorer.
I cannot, therefore, understand why any American without outsized political muscle would want Uncle Sam to “manage trade” in response to other governments’ “management” of trade.
If I’m correct that “managed trade” damages the economies of any country that uses this policy, then our ‘retaliatory’ use of it makes us Americans worse off rather than better off. Our use of this policy, even when other governments use it, is counterproductive and, in fact, stupid. And if I’m incorrect about the consequences of “managed trade” – that is, if “managed trade” does generally strengthen the economy of any country that uses it – then Uncle Sam should “manage” our trade regardless of whether or not other countries “manage” their trade.
Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030
The above originally appeared at Cafe Hayek

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