Sunday, September 20, 2009

The New York Times on tariffs:
Mr. Obama acted unwisely [by imposing a 35 percent tariff on Chinese-made tires], invoking a never-before used section of American trade law that allows him to penalize even fair Chinese competition if it results in sharply increased imports and job losses in the United States. (...)

China has not been competing unfairly on tires — just more effectively, mainly because of its far lower labor costs.
"fair Chinese competition"?

If China is offering tires at a lower cost because they have (a) a more productive factory, or (b) more skilled workers, that's fair competition. That's why you have free trade: to give countries that treat their labor the same the chance to compete.

But if the tires that are coming from China are cheaper simply because the workers are paid less - which is the case here - then you either don't import them at all or you put a tariff on them. Otherwise you put downward pressure on labor in the United States.

What's interesting is that the Times flatly admits that it's a wage differential that gives China an advantage. Free traders tend not to say that, but instead, claim that there is some magic that takes place when people in America no longer need to make tires (presumably freeing them up for lucrative careers elsewhere).

It goes without saying that Brad DeLong opposed the imposition of tariffs in this case. He's cool with the displacement of workers in this country by low-wage labor overseas. Why this guy is held in high esteem by liberals is a complete mystery.


Why this guy is held in high esteem by liberals is a complete mystery.

Being in favor of "fair trade" is pretty common even among relatively "liberal" economists.

Of course, it's not just lower labor costs. Not only do the Chinese take actions to keep their currency undervalued, even at market rates it would probably be much lower than PPP would indicate.

By Anonymous Anonymous, at 9/21/2009 11:15 AM  

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