Sunday, July 25, 2010

Did Obama appoint a mercantalist to oversee trade?

Don Boudreaux certainly things so. Three posts in two days at Cafe Hayek are about nonsense Francisco Sanchez has said. Sanchez is the Undersecretary of Commerce for International Trade, which is a pity, as Boudreaux thinks Sanchez fails to understand international trade.

From a letter to the Wall Street Journal by Sanchez:

"What Sen. Johanns dismisses as "dither[ing]" on free-trade deals, is in fact Ambassador Ron Kirk's commitment to negotiating tough bargains, ensuring that when America gives other countries the privilege of free and fair access to our market, U.S. businesses will get the same treatment in theirs...

"We heartily agree that exports deserve to be a national priority because, as Sen. Johanns said, 'Increased exports mean more jobs for American workers and more dollars in American pockets.'"

Some of us don't heartily agree. As Paul Krugman wrote in what has become one of my favorite quotes:

"... Imports, not exports, are the purpose of trade. That is, what a country gains from trade is the ability to import things it wants. Exports are not an objective in and of themselves: the need to export is a burden that a country must bear because its import suppliers are crass enough to demand payment."
Free trade is not conducted like a peaceful end to a Mexican standoff, where both sides uneasily cooperate in hopes their opponent will do the same. We do not allow other nations to import to America as a compromise so that we can export goods to them, as I've written before. Instead, we benefit from imports directly because Americans can now buy cheap goods and save money, or as Sanchez put it, keep "more dollars in American pockets."

Sanchez certainly has a great resume for politics. And it certainly didn't hurt that he was an early Obama supporter and fundraiser. However, his expertise seems to be in negotiations and policy issues - not international trade.

Sanchez could learn a lot from
Boudreaux, who wrote:

"Exports, as such, are no more or less fundamental to a country’s economic prosperity than are, say, products that are yellow. Suppose that in competitive markets growers of lemons and sunflowers thrive, along with producers of yellow polka-dot bikinis. Would it therefore be wise economic policy for government – impressed by the profits earned by these yellow-thing producers – to artificially encourage the production of greater numbers of yellow things? Clearly not; such a conclusion is obviously unwarranted. Yet a similar error in reasoning is applauded when the products are labeled 'exports.'”
Looks like another case of a non-expert appointed to a planning role.

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