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The Protectionist Beauty of Trade Embargoes

If protection against imports from country C (say, China) by the state of country A (say, the United States) is good, then an embargo by the government of C on exports to A must be good too. Anybody in A, or at least its government, should cheer. Something similar may happen regarding Chinese exports of some equipment used to manufacture solar panel components. The Wall Street Journal reports (“New China Rule Threatens to Disrupt U.S. Solar Ambitions,” January 31, 2022):

China’s Ministry of Commerce and Ministry of Science and Technology are considering adding advanced technology used in the production of ingots and wafers, some of the building blocks of solar panels, to a list of technologies that are subject to export controls.

Such a ban would cause an increase in the world prices of these high-tech machines and of solar panels. No surprise that American producers of solar panels, who can’t compete with Chinese producers at current prices, are thrilled:

“China’s proposed export restraints are Exhibit A on the need to rapidly scale American solar manufacturing,” said Abigail Ross Hopper, president and CEO of the U.S. business lobby Solar Energy Industries Association.

This must imply that, should the French government decree an embargo on the exportation of wine, it would be Exhibit A on the need for the UK government to rapidly scale up domestic wine production.

Adam Smith already explained in The Wealth of Nations:

By means of glasses, hotbeds, and hotwalls, very good grapes can be raised in Scotland, and very good wine too can be made of them at about thirty times the expense for which at least equally good can be brought from foreign countries.

Criticizing the 1908 protectionist platform of the Republican party, Frank Taussig wrote in his The Tariff History of the United States (I quote from the 1914 sixth edition):

Anything in the world can be made within a country if the producer is assured of “cost of production with reasonable profits.” … very good pineapples can be grown in Maine, if only a duty be imposed sufficient to equalize the cost of production between the growers in Maine and those in more favored climes.

The benefit of trade, whether domestic or foreign trade, is that buyers can get their products (and services) from the least costly source. I leave it as an exercise for my reader (especially if he is an economics student) to persuade himself that imports are more important than exports. Interestingly, this belief should be more prevalent  among protectionist conservatives, who should not want “our national resources” to be used to produce goods and services for foreigners instead of for “us.” But protectionists are not known for their logic; you may want to have a look at my Regulation article “Logic, Economics, and Protectionist Nationalism.”

Why do protectionist forces typically beg their government to ban imports, not exports? Because protectionism is mainly a way for special interests, both corporate and trade-union, to steal from their fellow citizens.

Except if the goal of life is to fight members of neighboring tribes and control one’s own tribe, national defense does not normally provide a sufficient reason to block trade (although, in extreme cases, it may); see my EconLog post “Fearing Leviathans With Feet of Clay.”

Rayna Prime

Rayna Prime

Rayna Prime Editor