The Gathering Storm

Anyone who's been keeping up with politics lately knows the new Congress has all but declared a trade war on China. A storm of protectionism is gathering on Capitol Hill, and if enacted, this proposed legislation will deal a severe blow to the current economic expansion we've been enjoying the last 6 years.

The argument from the labor-backed Left is of course that higher trade barriers with China must be enacted because the Chinese government artificially undervalues its currency by something like 40%. They're not "playing by the rules" and so the trade is simply "not fair." "We want free trade, but on a level playing field," Pelosi & Co. quip. These kinds of statements are so chock-full of economic fallacy it's impossible to know where to start.

First of all, I'm not sure if the 40% figure is true, but let's go ahead and assume it is. In fact, let's take it even further and say they undervalue their currency by 100%. Hell, let's just go ahead and pretend their government fully subsidizes all Chinese factories, allowing them to sell their products to American consumers free of charge.

If someone gives you a gift, why turn it down? If you got a Playstation 3 for Christmas, would you refuse to accept it and complain to your parents that its "unfair" and that you'd rather them take it back so you can instead pay $300 for one? CNN commentators and hundreds of politicians are constantly bashing China, when in reality they should be thanking them and their taxpayers for propping up industries that are essentially giving away cheap goods to us. This frees up extra money that we as Americans can invest or spend on other things we otherwise wouldn't be able to, thus allowing more profitable ventures to be pursued and better jobs to be created.

So why are all these folks seeing things so backwards? What makes their claims so irrational? Is it because they're misinformed? Maybe; probably some of them are (hippies, college kids, WTO protestors, etc.). But the true force behind this movement know full well what is really going on: the high-paid lobbyists for big business and labor unions. This brings out a point well-worth mentioning: being in favor of free trade and being pro-"big business" are not the same thing; in fact, they usually mean the exact opposite, as the biggest threat to capitalism is not the interests of the poor (quite the contrary, as they are the ones that have by far the most to gain from capitalism), but is instead the interests of big business and labor unions who are in bed with the government and its regulators.

I find it humorous that self-proclaimed "progressives," who claim they're out to help the poor, are so hell-bent on abolishing free and voluntary exchange with poor countries and replacing it with the misnomered policy of "fair" trade, which is basically codeword for "we'll only trade with you if you're rich enough to afford First World environmental standards and working conditions."