Friday, May 3, 2013

Cafe Hayek: An Open Letter To U.S. Trade Official

Mr. Francisco S�hez
U.S. Under Secretary of Commerce for International Trade
Washington, DC

            Dear Mr. S�hez:

            In your press release yesterday you mention only one benefit of more open international trade � namely, more American exports (�Statement from U.S. Under Secretary of Commerce for International Trade Francisco S�hez on World Trade Month 2013,� May 1).

            With all due respect, although you were appointed by a president who boasts of his commitment to policies based on scientific consensus and unsullied by political pandering, your press release reads as if you are entirely innocent of the economic analysis of trade as you pander to popular prejudices against international commerce. Here are two instances of the many ways in which your press release offends basic economics.

            First, while broader export markets can have advantages, exports are always the price paid for imports.  The chief benefit of expanded international trade is more imports.  Exports are the cost of securing this benefit.  Your focus on increasing exports makes you sound more like an oblivious 17th-century mercantilist than an informed 21st-century trade official.

            Your exclusive focus on exports might be dismissed as a forgivable oversight were it not reinforced by your conclusion that �we have the best workers and the best businesses in the world, and if the playing field is level, America always wins.�

            Are you aware of the principle of comparative advantage?  It�s foundational stuff.  Explanations of it have been around, and widely accessible, since at least 1817.  Here�s a link to a famous Nobel laureate economist explaining its centrality.*  If you were to become familiar with this principle you would learn that claims such as a country having �the best workers and the best businesses in the world,� or that trade is an event at which a country �wins,� are gobbledygook � on a scientific par with belief in the existence of phlogiston or the legitimacy of phrenology.


Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030

1 comment:

  1. Truer words were never spoken.
    Mr Sanchez, I demand that you act to grow the American trade deficit. Have you learned nothing from history? Trade surpluses bring nothing but poverty, disease, and certain death. This has been true from the days of British hegemony, to the American century and the heyday of the Asian tigers.
    Frankly, Mr. Sanchez, I am appalled by the suggestion that it is appropriate for America to export anything. Period. And, by exports, clearly you refer only to our comparatively disadvantaged sectors. Mr Sanchez, you're a maniac!
    Stay uncompetitive, America.