David R. Henderson  

Richard McKenzie on Foreign Export Subsidies

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The subsidization of foreign exports enables Americans to tap into the income bases of foreign countries and impose a tax on foreigners every time a subsidized product is imported into this country. Communist China, for example, would never consider allowing the U.S. government to tax its one billion citizens directly; nevertheless, that is what China permits indirectly through the subsidies it gives its exporting industries, for example, textiles. The tax is realized in terms of higher prices and lower real incomes in China and lower prices and higher real incomes in the United States.
This is a quote from Richard McKenzie, Competing Visions: The Political Conflict over America's Economic Future‚Äč, 1985.

Over at Cafe Hayek, Don Boudreaux has a longer quote of which this is a part.

I highlight this part because this is the nicest statement of the issue I've ever seen. Milton and Rose Friedman come close with their statement that such subsidies are a form of foreign aid--to us. Still, I like the McKenzie statement even more.

It's right up there with that famous quote from 19th-century free trader Henry George.:

What protection teaches us, is to do to ourselves in time of peace what enemies seek to do to us in time of war.


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COMMENTS (2 to date)
Tom West writes:

Interestingly enough, we have quite a few voices decrying foreign aid because of the effects on the receiver's development.

Would someone saying that subsidies are not a problem also dismiss such concerns about the effects of foreign aid upon the recipients?

Is foreign aid the extreme version of export subsidies?

BC writes:

I like both of these quotes. Both France's subsidies of Airbus and China's alleged "currency manipulation" are examples of foreign governments taking money from their own people and giving it to us.

I especially like the Henry George quote. Protectionist trade barriers are economic sanctions that countries impose on themselves. If trade protectionists were right, the blockade of Gaza and economic sanctions on Iran should have resulted in tons of Palestinian and Iranian high-wage manufacturing jobs.

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