Monday, April 25, 2016

Why not just let China destroy US steel companies?

Economic Policy Journal is having an argument over free trade, managed trade, and outright protectionism. sees this as a non-issue. If China wants to ship cheap steel to the U.S. and severely diminish our steel industry, why would we want to stop them?

You see the problem here is one of enforcement: govenments do not like being told they can not unfairly benefit their domestic industries, whether they originate these penalizing subsidies or adopt them as retaliation. Now, who will do better at forcing the CHICOMs to stop this unfair practice? Trump has business sense but we are unsure how tough he would be at prosecuting a trade war with China without triggering a shooting war, or the seizure of ROC Taiwan. Sanders would probably invite the CHICOMs over to tell Americans how awesome Socialism is and how our steel industry should be nationalized. Cruz is an unknown: he's very smart but we don't know how he would approach this problem. Hillary: well, what a question. Would she be happy with billions in CHICOM bribes to distribute to now-unemployed steel workers or would she push sanctioning tariffs?

Perhaps we could to grant a tax break to US steel industries until China stops their practices, but again, that leaves us open to CHICOM action in the South China Sea.

Or perhaps the true solution is to admit that the U.S. is a costlier place to do business in, admit the government won't get such high tax receipts under a free trade regime at first, and triple the deduction businesses get for employee wages under $30k/yr, keeping those jobs in the U.S. Perhaps we should limit it to jobs subject to loss via trade: steel workers, yes; plumbers, no, but I think this would be subject to broad abuse and perhaps should be flat.

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