Acton Institute Powerblog

Trade with China, or Blockade Their Ports?

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Congress insults our intelligence when it tells us that Chinese currency games are to blame for our trade deficit with that country and unemployment in our own. Legislators might as well propose a fleet of men-o’-war to navigate the globe and collect all its gold: economics is not a zero-sum game.

An exchange on yesterday’s Laura Ingraham Show frames the debate nicely. The host asked Ted Cruz, the conservative Texan running for U.S. Senate, what he thought about the Chinese trade question. Said Cruz, “I think we need to be vigorous in dealing with China, but I think it’s a mistake to try to start a trade war with them.”

“The trade war is on, and we’re losing it,” Ingraham responded. “[China is] subverting the principles of free trade.”

We blockaded the ports of the Barbary pirates when they subverted the principles of free trade — is Ingraham looking for a similar response now? No, she wants weenier measures: just some punitive sanctions here and there to whip China back into shape (because those always work).

Conservatives who are looking through the Mercantilist spyglass have got to put it down, because it distorts economics in the same way Marxism does. Economic growth and expansion of the labor market don’t come by the redistribution of wealth; they come by allowing man to exercise his creative talents, to innovate, to produce.

Protectionists also tend to ignore the inverse relationship between the trade deficit and the inflow of capital to a country. We are a nation of entrepreneurs, and entrepreneurs require investment. All business requires investment. If it’s Chinese investment, then Chinese investors see long term value in the U.S. economy. Sorry I’m not sorry about that.

Our leaders do the country a disservice by proclaiming that unemployment is caused by a trade deficit, and that a build-up of retaliatory tariffs is the way to fix the trade deficit. And they do other countries a disservice also, because U.S. protectionism hurts our trade partners (or potential trade partners). Holding back U.S. economic progress by artificially retaining manufacturing jobs, for example, means that workers in China or Vietnam are denied employment opportunities. It’s mindless selfishness.

Kenneth Spence


  • I seem to remember something about rash and reactionary raising of tariffs and the Great Depression as well….

  • Also note that the balance of trade numbers are very distorted.  The $300 iPod story is a good one to look up.  When the iPod is imported from China it is credited as a $250 import ($50 markup).  But all the parts to make the iPod were imported from other places, US included.  Indeed only about $5 of value added was contributed in China in the form of final assembly labor.  That’s a 5000% over-estimation of trade imbalance.  Xenophobes may build their battleships, but we must not give our approval.

  • Anonymous

    Shoplifters can get things for you cheaoer too.

    China steals via inflation and stealing land to give to oligarchs (without compensation), and lets them dump toxic waste into the nearby river.

    It is trading with pirattes.

    They also have political prisoners, and we need organs for transplant…

    Is “free trade” a definition so expansive that no price however low can be considered illegitimate no matter the quantity andseriousness of violated rights?

    Where does the “virtuous” come in for society, or canwe be as viceous and barbaric as long as that has higher marginal utility?

    • I think Kenneth’s point is that tariffs hurt Chinese business (which, in turn, ultimately hurts us), not all of which ought to be considered pirates simply due to their being Chinese. That would be a genetic fallacy. The effect of tariffs is indiscriminate, hurting the virtuous and the vicious alike. Would it not be better to advocate the freedom to choose which Chinese businesses to freely trade with, unimpeded by tariffs? That way people could better support the virtuous ones, which would help Chinese people who depend on them for jobs, give our economy more partners in investment, and lower the prices of Chinese goods for us, helping those who are poor be able to better afford them. I think that is where virtue comes in.

      • Anonymous

        But ‘freedom to choose which’ means you can choose to buy pirate booty on the same basis as honestly acquired merchandise. You are right that tarriffs are indiscriminate. But then there’s the problem of how to tell which and enforce it. If i can violate rights, i have a competitive advantage

        • It is only a competitive advantage if you presume that no one out there is like yourself: someone who values not only an affordable product, but an ethically made one as well. It is my conviction that you are not unique in that. Governments, companies, and individuals simply need to do their research and make prudent decisions about which Chinese businesses to do business with, not support tariffs which simply discourage trade in general. That some, no doubt, will make poor decisions does not justify putting up a disincentive to those who would make good ones, imo.

          • Anonymous

            That is absurd. No one has the time or wealth to trace every product or component they buy from wal-mart. Do uoy also favor the repeal of all US laws prohibiting in posession or trade of merchandise stolen in the US? And what if the companies LIE? There will be no penalty for breaking 2 commandments over 1

          • How is that absurd? Your argument is dependent upon the presumption that most goods from China are morally tainted. If you are not basing this on any research, then your point is unfounded. If you are, then apparently you do have enough time and money.

            Furthermore, my point is that tariffs, which are general, are not the solution to corruption, which is specific. In the same way, if we discover corruption in a particular US industry, the solution is not to tax all the goods of that industry, whether or not a particular business was actually involved. To do so would only damage the economy and fail to obtain justice. Worst of all, the people who would be most hurt by such action would be the employees at the bottom, whose wages would be reduced or whose jobs would be laid-off, rather than the people responsible for the corruption at the top. Of course I am against theft and lying. To be clear, I am even for laws against them. But tariffs, on the other hand, do nothing to prevent corruption and only create more problems.