The Post Confuses Free Trade
and Free Lunches
Tuesday, October 30, 2012
Hope springs eternal, but no more so than the Washington Post’s impulse to publish editorials on U.S.-China trade relations that defy all reason – not to mention common sense and sound economics. What else can GLOBALIZATION FOLLIES conclude from the paper’s latest take on the Commerce Department’s recent decision to impose tariffs on dumped and subsidized Chinese exports
of solar panels to the United States?
Howlers abound in “A crackdown on solar panels threatens U.S.-China trade.” But the argument that should cost the paper all credibility on such issues is the one concerning the impact of China’s predatory trade practices on global panel markets. Specifically, the Post condemns the U.S. sanctions even though it admits that because they have received state resources, “Chinese panel manufacturers have driven down global prices to the point that even they have lost hundreds of millions of dollars this year.”
As should be obvious to anyone who remembers their first economics course, this line of thought completely ignores the main reason advanced for the unfettered global trade that the Post believes it is defending – that such commerce promotes the greatest possible degree of worldwide prosperity by encouraging the most efficient possible usage of worldwide resources.
Instead, the paper is acknowledging that massive government intervention that is so far backfiring even on China’s own producers is also warping global patterns of consumption and production, and therefore trade, beyond recognition. But as if simply urging Washington to respond with inaction wouldn’t be inexplicable enough, the Post is actually applauding the short-term results of this blatant market-rigging – unrealistically low prices for “the U.S. solar installation business, which has thrived during this period of low-cost panels.”
One of the greatest contributions made by economic analysis is its insight that ultimately there are no such free lunches. As the financial crisis should have reminded the entire world most vividly, trends and patterns not justified by economic fundamentals invariably end badly and sometimes disastrously. For these reasons, the Post often calls for eliminating U.S. government subsidies
that distort market forces.
Since innumerable foreign subsidies have persisted or proliferated despite equally innumerable international negotiations, as long as the current world trading system remains in place, American tariffs obviously represent the only realistic hope for restoring valuable market disciplines in these sectors. Why does this avowed champion of free trade
so doggedly oppose them?
Source: “A crackdown on solar panels threatens U.S.-China trade,” The Washington Post, October 18, 2012, http://www.washingtonpost.com/opinions/a-crackdown-on-solar-panels-threatens-us-china-trade/2012/10/18/556bba04-14b0-11e2-bf18-a8a596df4bee_story.html
Alan Tonelson is a Research Fellow at the U.S. Business & Industry Educational Foundation and the author of The Race to the Bottom: Why a Worldwide Worker Surplus and Uncontrolled Free Trade are Sinking American Living Standards (Westview Press).