Thursday, February 07, 2008

1845 vs. 2008: Protectionism Hasn't Changed

In a classic, satirical anti-protectionism essay by French economist Bastiat, French candlemakers' in 1845 petitioned against "the ruinous competition of a rival who apparently works under conditions so far superior to our own for the production of light that he is flooding the domestic market with it at an incredibly low price; for the moment he appears, our sales cease, all the consumers turn to him, and a branch of French industry is all at once reduced to complete stagnation. This rival is none other than the sun."

According to yesterday's
FT Times, The European Candle Institute is currently petitioning the European Union against "a surge in Chinese candle imports that is unfairly damaging our businesses."

The complaint says that hundreds of jobs have been lost in the past few months, and that Chinese producers are selling below the costs of their EU rivals.


The French candlemakers in 1845, according to Bastiat, wanted to pass a law "requiring the closing of all windows, dormers, skylights, inside and outside shutters, curtains, and blinds -- in short, all openings and holes through which the light of the sun can enter houses, to the detriment of the candle industry."

The European candlemakers today want to impose anti-dumping duties against China in retaliation against "unfair prices."

Same difference.

HT: Tim Worstall

13 Comments:

At 2/07/2008 11:29 PM, Anonymous Anonymous said...

The US just did the same thing on tires imported from China initiating a 250% tariff.

 
At 2/07/2008 11:57 PM, Blogger BxCapricorn said...

It's not like they pay their workers slave wagers, have no "humane" policies, and impose no environmental restrictions....they are fairly competing, as a civilized nation and environmentally-conscious custodian of the planet.

 
At 2/08/2008 1:22 AM, Anonymous Anonymous said...

If the European candle makers want to stop the Chinese imports all they have to do is get the Chinese candles analyzed for toxic substances.

 
At 2/08/2008 8:28 AM, Anonymous Machiavelli999 said...

bxcapricorn,

First of all, the "slave wages" you are talking about are rising as predicted. As the economy grows and the range of options for employment increases for the average Chinese worker, the wages have gone up. The same is true in countries like India. By the way, implementing free market policies in China has lifted millions of people out of extreme poverty in a relatively short number of time. Much more so than 50 years of the communist economic policy that you ascribe to.

Second of all, when you engage a country economically and show it the benefits of being integrated into the global community, you can use that a way to pressure a nation to agree to other things such as environmental restrictions. Read this (http://www.economist.com/world/asia/displaystory.cfm?story_id=10566907). The article talks about the extreme pressure the Chinese government is feeling on protecting the environment and eventually I have no doubt it will have to do something about it or risk protectionism from its trading partners.

Would you rather its people remain in poverty? It could not afford the environmental regulation when the economy was in shambles. Now it can, but naturally it is hard to get businesses to put these regulations on themselves. Same was the case in the US. But political pressure mounted and environmental regulation went into effect. Same will be true with China.

Its much better to cajole your neighbors economically rather than militarilly.

 
At 2/08/2008 8:51 AM, Anonymous Anonymous said...

OT
People's confidence in the economy sank even lower amid heightened fears about shrinking job opportunities and the possibility the country is falling into recession.

According to the RBC Cash Index, confidence dropped to a mark of 48.5 in early February, from 56.3 last month. The new reading was the worst since the index began in 2002 and surpassed the previous low reached in January.

The continued erosion in confidence comes despite the fact that Federal Reserve Chairman Ben Bernanke has gotten much more forceful in cutting interest rates to induce people to buy more and bolster the economy.

http://www.iii.co.uk/news/?type=afxnews&articleid=6538914&action=article

The answer to all the problems of a debt based economy is if people will just spend money. What hoot.

 
At 2/08/2008 12:23 PM, Blogger bobble said...

ok, lets talk fair trade.

it's not really "fair trade" when exporters (china, india) manipulate their currency, is it?

 
At 2/08/2008 4:07 PM, Anonymous Anonymous said...

it's not really "fair trade" when exporters (china, India) manipulate their currency, is it?


What the hell do you think we're doing right now? The dollar is going to become the new carry trade currency. Oil up 4 1/4% that should help this dead man walking economy of ours.Might as well just send the stimulus to Hugo.

 
At 2/08/2008 4:56 PM, Blogger Marko said...

Let's not talk fair trade, comrade. Only free trade is fair.

If they want to cut their prices and thereby in effect send us tons of money, why would we object?

 
At 2/08/2008 5:54 PM, Blogger bobble said...

marko:"Let's not talk fair trade, comrade. Only free trade is fair."

oops, my mistake. you're right. i'm just so used to hearing the corporations and politicians calling it fair trade. of course, we know it's not.


marko: "If they want to cut their prices and thereby in effect send us tons of money, why would we object?"

here's a thought:

think of it as predatory pricing. that's when a large business prices below cost to drive the competition out of business. then they can raise prices to whatever maximise profits later.

 
At 2/08/2008 8:37 PM, Anonymous Anonymous said...

Bobble,

Love the irony of a developing nation that is powerful enough to put the world's largest economy out of business. By what logic, do you arrive at that supposition.

Look up the term "comparative advantage" in your first year econ textbook. What happens is that businesses that offer used to offer Americans starvation wages (think sweat shops in the garment district in NY) go to lower cost destinations and higher wage jobs develop based upon leveraging the productivity of others (think management jobs and high skilled manufacturing) are created.

The U.S. unemployment rate has been low for a reason. Trade leverages productivity and economic opportunity on a global scale. Peter Drucker wrote about the fundamental shift in the U.S. economy toward knowledge work decades ago long before the rise of China as a manufacturing force.

What is amazing is that the same protectionist and mercantilist arguments exploded by Adam Smith 300 years ago are still being used today. As the Chinese say "Things change and things remain the same".

 
At 2/08/2008 8:50 PM, Anonymous Anonymous said...

Bobble,

Perhaps, you could explain how China in accumulating a vast sovereign wealth fund if it is pricing its goods below cost.

 
At 2/09/2008 2:38 PM, Blogger KauaiMark said...

For those looking for the 1845 French petition:

http://bastiat.org/en/petition.html

 
At 2/22/2008 10:34 PM, Anonymous Anonymous said...

Just a little reminder of the “sense” of protectionism:

The United States collects more tariff money from Cambodia than from Britain.

Americans bought $1.96 trillion worth of imported goods last year. On this, the Customs Bureau collected $26 billion in tariff money.
Overall, therefore, the tariff rate is a low “trade-weighted” average of 1.3 percent. But most of this money — about $13.5 billion — comes from a narrow swathe of household goods in which one finds most of America’s higher tariffs.
These include $9.5 billion on clothes; $1.9 billion on shoes; $1 billion on luggage, purses, and wallets; $0.7 billion on towels, rugs, and linens; $0.7 billion more on sporting goods, plates, glasses, clocks, watches, and silverware. These products total $131 billion in imports, or less than 7 percent of all imports; but they raise nearly 60 percent of tariff money.

Some people seem to be paying attention to the cost to American consumers:
In the Affordable Footwear Initiative, Reps. Joe Crowley (D-NY), Kevin Brady (R-TX), and Nancy Boyda (D-KS) seek to scrap tariffs on low-priced sneakers and shoes not made in the United States.
Source: Progressive Policy Institute

Now, consider.
$11.4 billion in duties on clothes and shoes.
Most of the highest duties on products from low-cost (poor) countries, which logically means that the products themselves are destined for Wal-Mart rather than Saks.
In other words, PROTECTIONISM IS ANTI-POOR.
.

So, the next time you take a protectionist to lunch, try him medium rare, with a nice pepper sauce.

 

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