April 28, 2008

• The Iowa car crop

  Hillary Clinton and Barack Obama are competing for the title of the most antitrade candidate. They disagree with the vast majority of economists, who know that impeding trade is analogous to closing down freeways. Yes, San Diego fish tacos might be cheaper if we didn't allow LA residents to buy them. But would we really be better off?

  What is free trade, really? Here's the clearest explanation that I've heard.

     There are two technologies for producing automobiles in America. One is to manufacture them in Detroit, and the other is to grow them in Iowa. Everybody knows about the first technology; let me tell you about the second. First, you plant seeds, which are the raw material from which automobiles are constructed. You wait a few months until wheat appears. Then you harvest the wheat, load it onto ships, and sail the ships eastward into the Pacific Ocean. After a few months, the ships reappear with Toyotas on them.
     International trade is nothing but but a form of technology. The fact that there is a place called Japan, with people and factories, is quite irrelevant to to Americans' well-being. To analyze trade policies, we might as well assume that Japan is a giant machine with mysterious inner workings that convert wheat into cars.
     Any policy designed to favor the first American technology over the second is a policy designed to favor American auto producers in Detroit over American auto producers in Iowa. A tax or ban on "imported" automobiles is a tax or a ban on Iowa-grown automobiles. If you protect Detroit carmakers from competition, then you must damage Iowa farmers, because Iowa farmers are the competition.

  That's Steven Landsburg writing; more here. The original idea is due to David Friedman.

  Also, a piece in the NY Times argues that free trade will reduce starvation.

  • 6:12 pm
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