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Tuesday, August 15, 2017

Cheap Imports Are No More Harmful than Free Sunlight

When it comes to opposition to free trade and support for protectionism, not too much has changed.

In the mid-1800s, the French government imposed tariffs on numerous imported foreign goods, on everything from sewing needles to locomotives, to protect French industries from more efficient foreign rivals that could produce and sell goods to French consumers at a lower cost than domestic producers.

Around that time, French economist Frederic Bastiat published a now-famous satirical proposal to the French government titled “The Candlemakers’ Petition” that was intended to help members of the French Parliament understand that protectionism and mercantilist trade policies would make France weaker economically and “not great again.”

Sound familiar? When it comes to opposition to free trade and support for protectionism, not too much has changed in the last 172 years.

Below is a shortened and edited version of Bastiat’s classic economic essay:

Petition of the Manufacturers of Candles, Waxlights, Lamps, Candlelights, Street Lamps, Snuffers, Extinguishers, and the Producers of Oil, Tallow, Resin, Alcohol, and, Generally, of Everything Connected with Lighting

To the Members of the Chamber of Deputies. Gentlemen:

Your chief care is the interest of the producer. You desire to protect him from foreign competition and reserve the domestic market for domestic producers.

We are suffering from the intolerable competition of a foreign rival, who has an advantage so far superior to ours for the production of light that he floods our domestic market with it at a fabulously reduced price. The moment he provides his product, our consumers abandaon us and rush to our rival; and an important domestic industry, having countless ramifications, is rendered completely stagnant. This rival, who is none other than the sun, wages an economic war war mercilessly against us.

What we pray for is that you to pass a law ordering the shutting of all windows, skylights, dormer-windows, outside and inside shutters, curtains, blinds, bull’s-eyes; in a word, of all openings, holes, chinks, clefts, and fissures, by or through which the light of the sun enters houses, to the disadvantage of the manufacturers that have accommodated our country — a country that, in gratitude, ought not to abandon us now to foreign competition.

If you close access to natural light, and create a demand for artificial light, which of our French manufacturers will not be benefit by such protectionism?

If more tallow is consumed, then there must be more oxen and sheep; and, consequently, we will see the multiplication of meadows, meat, wool, and hides.

If more oil is consumed, then we will stimulate more cultivation of the poppy, olive, and rape. These rich and soil-exhausting plants will come at the right time to enable us to avail ourselves of the increased fertility that the rearing of additional cattle will impart to our lands.

Our heaths will be covered with resinous trees. Numerous swarms of bees will, on the mountains, gather perfumed treasures, now wasting their fragrance on the desert air, like the flowers from which they emanate. Thus, there is no branch of agriculture that shall not greatly develop.

The same remark applies to navigation. Thousands of vessels will proceed to the whale fishery; and in a short time, we shall possess a navy capable of maintaining the honor of France, and gratifying the patriotic aspirations of your petitioners, the undersigned candlemakers and others.

Only have the goodness to reflect, gentlemen, and you will be convinced that there is perhaps no Frenchman, from the wealthy coalmaster to the humblest vendor of lucifer matches, whose lot will not be improved by the success of this our petition.

As long as you exclude, as you do, coal, iron, corn, foreign fabrics, in proportion as their price approximates to zero, what inconsistency it would be to admit the light of the sun, the price of which is already at zero during the entire day!

Economic Lessons:

  1. If you wouldn’t object to receiving free light from the Sun, then you shouldn’t object to receiving free goods from China, Mexico or Japan. And even though free goods aren’t usually available, you shouldn’t object to Americans being able to buy cheap goods from China, Mexico, and Japan at prices below those offered by domestic producers.
  2. If you wouldn’t object to the Sun “dumping” free light on the US economy every day, then you shouldn’t complain about foreign producers “dumping” low-cost goods on the US economy at prices allegedly below the cost of production.
  3. Suppose the Sun is able to provide free light to Americans only because the citizens/taxpayers of the Sun subsidize the production of light on their star. If you wouldn’t object to free light from the sun that is only made available for free due to somebody subsidizing that production, then you shouldn’t object to goods being made available to Americans at low prices that result from foreign subsidies.
  4. If you wouldn’t be so foolish to think that the Sun is stealing our jobs, prosperity, and wealth by providing free light, you likewise shouldn’t be so foolish to think that China is stealing our jobs, prosperity, and wealth by providing us with low-cost consumer goods.
  5. If you don’t object that the Sun provides massive amounts of free light to Americans but doesn’t buy any products “Made in the USA,” then you shouldn’t object to the fact that Americans buy (import) more products from China than we sell (export) to the Chinese.

Reprinted from American Enterprise Institute.

  • Mark J. Perry is a scholar at the American Enterprise Institute and a professor of economics and finance at the University of Michigan’s Flint campus.