In response to my op-ed regarding trade with China, a reader writes:
[The op-ed] is wholly simplistic, written from the usual academia point of view.
I will admit that my argument regarding free trade is simplistic. It should be. On its very core, free trade ensures that individuals have the freedom to interact and trade with one another without obstacles created by the government. There is no economic or moral reason why individuals should only be allowed to trade with only those within arbitrary lines on a map.
Additionally, calling my piece the typical academic point of view is no better an argument than if I were to call his view the non-academic point of view. I am unaware of any circumstance under which an academic point of view is any less credible than the alternative. In fact, I find it quite ironic that academics that favor free trade are derided for their academic point of view, while those academics who specialize in climate change are treated as though their word is gospel.
More substantively, he goes on to claim that I am wrong to assert that the Chinese are only buying U.S. Treasuries and that the Chinese are using government and private funds to purchase U.S. assets. Unfortunately, he apparently wasn’t reading closely enough because I never claimed otherwise in the piece. In fact, my discussion of U.S. Treasuries was merely used to point out that the federal government creates debt, not the trade deficit.
Finally, and most amusing, is the gentleman’s arguments regarding why we should not trade with the Chinese:
The communist leaders trade using predatory trade; they target industry after industry using any and all unfair trade practices at hand: currency manipulation, intellectual piracy, industrial espionage, counterfeiting and requiring products sold in-country to be produced in-country.
Point by point:
1.) I acknowledged that counterfeit goods should be of concern.
2.) Pegging a currency to another currency — or basket of currencies — is not currency manipulation. As an economist and a supporter of free markets, I would always prefer that the value of currencies be determined on the open market. However, if a state wants to outsource their central banking to another country — or group of countries — they are free to do so at their own risk.
3.) The most ironic argument is his claim that we should resist trade with China because they require that products sold within the country should be produced within the country. So should we retaliate by requiring that products purchased here should be produced here?
Carrying protectionist logic to the fullest extent would require self-sufficiency. If I should not trade with someone in a different country, why should I trade with someone in another state? Or city? Or on another street? Or in another house? Self-sufficiency is the road to poverty. Utilizing specialization and the division of labor will only lead to greater prosperity.
China is an easy target for protectionists. They can easily point to the corrupt, authoritarian government. However, I suspect if this discussion were in regards to another country, the rhetoric from the other side would be the same because the Chinese government merely serves as a red herring.