October 30, 2012 by Anders Ingemarson
In the foreign policy presidential debate, supposedly in an effort to garner votes in Ohio industrial towns, both Romney and Obama accused China of granting unfair subsidies to exports to the U.S. This is a mistaken view. If the Chinese government wants to subsidize American consumers, who are we to stop them? We may express sympathy for Chinese individuals and businesses who have to pay higher taxes to finance those subsidies, but that should be the extent of our concern.
However, in case there is more substance than vote fishing to their accusations, let’s take a look at what a proper trade policy should look like. As I’ve said before, the cornerstone of our foreign policy should be to lead by example at home. As advocates for laissez-faire Capitalism, for the total separation of state and the economy, this means promoting free trade. How do we lead by example in this regard? By unilaterally removing all trade barriers – tariffs on imports, export subsidies, restrictions on the movement of labor, etc. Obviously, we should encourage others to follow the same policy, but trade agreements such as NAFTA are superfluous. If we lead by example, we will send a strong message to the world and others will follow sooner than we think.
There is one exception. Countries which represent a threat to the rights of U.S. citizens should be blockaded or economically boycotted. Iran is the prime example these days. No country can survive for long under an effectively enforced U.S. blockade or economic boycott. And no, the sanctions currently imposed on Iran are neither sufficient nor effectively enforced.
Some would argue that China falls in the same category as Iran, but I think China of today is only as big a threat as we allow them to be. For instance, if our own house were in order, if our budget were balanced and our debt under control, there wouldn’t be any U.S. treasuries and government bonds for the Chinese to gobble up. If you think China is a threat, argue for government spending cuts at home to shore up our finances; don’t fall into the trap of restricting free trade.
If you’re with me thus far you may be asking “What about John in Youngstown, OH, and his colleagues who just lost their jobs because the company couldn’t compete with the Chinese?” Firstly, the main reason why some American companies cannot compete is because the Chinese have certain comparative advantages, first among them cheap labor; on the whole, Chinese export subsidies play a minor role. Secondly, and more importantly, as much as we may feel for John and his colleagues, the fact that the company went out of business does not give them a claim check on the rest of us. Nor do we have a claim on them if we’re laid off. The fact that we may lose our jobs due to low cost imports is not an argument for violating the individual rights of others; it’s not an argument for subsidizing American exports with tax dollars, or forcing others to pay a higher price at the store due to tariffs imposed on foreign goods.
Regardless of who wins the election, let’s make sure he hears the argument for free trade loud and clear. Free traders unite!