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'Chicken Little' and the Myth of International Trade
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14906 |
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Section : |
MODERN THOUGHT
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| Issue
Date : |
10 / 1988 |
7,261 Words |
| Author
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Lioyd R. Cohen
Lloyd R. Cohen is an associate professor of law at California
Western School of Law and was formerly special counsel to the
United States International Trade Commission. |
Popular discussion of trade issues reminds me of two fairy tales, "Chicken Little," and "The Emperor's New Clothes." Fairy tales often have a way of capturing salient insights into human character. You remember Chicken Little, the bird who panicked when she was unexpectedly struck by an acorn falling on her head and thought that the sky was falling and went to tell the king of the danger. Like many people who find themselves confused by the world around them, our little chicken thought the world was coming to an end, and sought solace from her government. Imports, the value of the dollar, and trade deficits have become the acorns of our era. Like the Emperor's subjects, many people, ignorant of the facts and ashamed of admitting it, succumb to the mythical fears of our chicken littles.
Since Richard Gephardt won the Missouri primary on a protections platform and Congress has been willing to support tariffs, it may be appropriate to focus on several questionable assumptions:
1.International trade does not represent a net benefit to the United States;
2.We should protect jobs threatened by import competition;
3.Imports and trade deficits are bad, and exports and trade surplus are good;
4.The dollar is overvalued, which is bad for the United States;
5.Imports are threatening to extinguish our "basic industries";
6.The United States can increase its national wealth by setting an "optimal" tariff;
7.In a world where no nation practices free trade, we need a policy of "fair" trade rather than free trade;
8.The world is different that it used to be, so the old verities about the gains from international trade are no longer true.
My analysis of these various myths is bottomed on a simple premise: the purpose of economic activity is to provide goods and services; the best economies provide those things in as much abundance as cheaply as possible.
Let me begin with the widely
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