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The cost of economic nationalism

The price of flying from the US to China has risen very sharply in recent years. The primary cause is economic nationalism. Here’s the Financial Times:

The US has offered to grant Chinese airlines the same number of weekly flights between both countries as American carriers — but only if they agree not to fly over Russia, according to six people familiar with the talks.

Moscow banned US carriers from flying over the country after Washington prohibited Russian airlines from flying to the US in the wake of Russia’s full-scale invasion of Ukraine. Chinese airlines are not banned from Russian airspace.

US carriers have 12 weekly flights to China, while Chinese airlines have eight to the US. The American carriers face higher fuel costs than their Chinese rivals whose routes over Russia to the US are much shorter.

Some pundits defend economic nationalism on “national security” grounds.  And yet that argument obviously does not apply to commercial airline flights.  Nor is this about a mythical “level playing field”, as the punitive action is aimed at Chinese airlines, not those of other countries that fly over Russia:

The Chinese official said another reason not to accept the US condition about circumventing Russia was that airlines from other countries, such as India and the UAE, flew over Russia without facing repercussions in the US.

Russia’s ban on US airlines flying over their territory does give China a comparative advantage—but so what?  A warm climate gives Honduran banana producers a comparative advantage over Minnesota banana producers.  Consumers benefit when they can buy from the cheapest producers.  So does society as a whole.

If the US government got its way, large quantities of jet fuel would be consumed for no good reason.  What happened to climate change as a goal of the Biden administration?  Is protecting the profits of US airlines more important than climate change?

And what happened to this mutually agreed upon goal?

The Chinese diplomat added that Xi and Biden had agreed on the need for more people-to-people exchanges between the countries when the leaders met at the G20 summit in Bali in November and stressed that more flights were needed to meet that goal.

Is discouraging interaction between the people of the world’s two greatest powers the best way to promote world peace?

I am frustrated by the frequent references to “national security”.  Very little of US protectionism relates to sensitive areas.  For instance, the Trump/Biden tariffs on Chinese goods were imposed with the expressed aim of reducing the US current account deficit.  They failed miserably, because the deficit is caused by saving/investment imbalances, not a lack of tariffs.

PS.  Larry Summers has a good twitter thread on how we are overdoing economic nationalism.  Here’s an excerpt:

PPS.  I hope to visit China later this year—if I can afford a ticket.  As of now, I’d probably have to first fly to a third country, such as Japan.

Rayna Prime

Rayna Prime

Rayna Prime Editor