The Post had a major article front section article on the Steelworkers Union's efforts to get the U.S. government to adopt a trade policy that is more supportive of manufacturing. At the one point the article told readers that: "In the critics' [of the Steelworkers] view, the steelworkers campaign is a form of protectionism that risks provoking a broader trade war, which in turn could endanger the global economy. A trade war could, the argument goes, backfire on the union by making manufacturing in the United States more difficult because it would become more difficult for companies to acquire cheap imported supplies. It would also raise prices for consumers." Actually, the fact that prices will rise for consumers is not an argument that protectionism will backfire on the union. If higher prices reduce demand by a small percentage, but a much larger share of that demand is domestically produced, then U.S. workers will almost certainly benefit. This is almost always the case with most of the trade measures that have been put forward in recent years. Also, in many cases, the items (like tires) are directly sold to consumers, so there is no risk that they would boost the cost of producing goods here. The real argument that economists would make is that China and other exporters would retaliate by putting up their own trade barriers. This would reduce U.S. exports, destroying jobs in export industries. The end result of this story would economies that are more self-reliant, but benefit less from the efficiencies of a global division of labor. In that world, any specific group (e.g. manufacturing workers) may end up better off, but the economy as a whole would be worse off. Maybe if the Post had relied on critics with names, it could have found someone who could correctly present the standard economic argument. It is worth noting that the most distortionary protectionist barriers protect people like doctors and lawyers and Washington Post reporters. It is not legal for the Post to fire its reporting staff and hire 400 Indian reporters at one-third the current staff's wages. This type of protectionism helps to sustain high salaries for the most educated workers, but it imposes costs to consumers and the U.S. economy that are several orders of magnitude greater than the tariffs on Chinese tires.
--Dean Baker
