Looking at Congo’s Protectionist Experiment

23.03.2018 • France

Simone Wapler – La Chronique Agora (France) –

Competition – even unfair – is preferable to protectionism and tariffs. Because competition is advancing but not taxes.

In Les Echos , Jean-Marc Vittori joins the camp of partisans of protectionism and customs and signs an editorial entitled: “Economists discover the damage of free trade”.

“What if Donald Trump was right to close the borders? For a long time, the vast majority of economists would have jumped at this question. Come on, the benefits of free trade are too obvious! Its benefits are, moreover, one of the subjects on which researchers are most in agreement (1). But now they publish disturbing works.

Chinese competition would kill more than 100 jobs a day in France (2). It would account for a quarter of the destruction of jobs in US industry (3) (figures for the early 2000s).

Misconceptions are like weeds or invasive species. They always end up resurfacing when we thought we had got rid of it.

The Chinese, the Mexicans, the Polish plumbers would steal / destroy the jobs of the Americans or the French.

In the 19th century, the Italian mason already stole the “French bread”.

In the middle of the twentieth century it was the Japanese who destroyed the jobs of Westerners.

“All economists now admit that globalization is winners and losers. They are using new tools to analyze the effects of trade more precisely. The debates remain lively. A recognized international trade expert, Gary Hufbauer (4), has calculated that US tariffs imposed by the United States in 2009 on Chinese tires have saved 1,200 jobs in the US tire industry … but that they have destroyed three times more in commerce.

Globalization may be winners and losers, but taxes are only losers: those who pay them.

Without the Chinese competition – very unfair – how much would cost our t-shirts, our electronics, cheap porcelain, cooking utensils, bicycles, cars …? What would be the purchasing power of the “French victims” of globalization?

Perhaps Mr. Vittori and his economists should make a study trip to countries with strong protectionism to live their beautiful ideas in the real world.

I do not even speak of the borderless countries of North Korea or the former USSR.

I am talking for example of the Congo where I am currently staying. All imported products are subject to high taxes. Of course, it is to help the local industry develop, according to the official speech of its leader Denis Sassou-Nguesso, “the tireless builder”, as proclaimed by his latest campaign slogans.

Customs duties in Congo Brazzaville

customs duties in Congo

As a result, a simple mixer tap costs around € 600, hardware is overpriced, people arrive with two-wheel tires in their luggage. The only things that are not expensive in Pointe Noire are the lobster and the local beer.

As for the Congolese industry, well, if it had developed, all that would not cost so much, right?

What we see and what we do not see

Without wanting to, Jean-Marc Vittori brings water to the mill of free traders and makes us touch the finger the principle exposed by the French liberal economist of the nineteenth, Frédéric Bastiat.

“In the economic sphere, an act, a habit, an institution, a law do not only produce an effect, but a series of effects. Of these effects, the first alone is immediate; it manifests itself simultaneously with its cause, as we see . The others take place only successively, we do not see them; happy if they are planned .

Between a bad and a good economist, here is the difference: one sticks to the visible effect ; the other takes into account and the effect one sees and those to be expected .

But this difference is enormous, for it almost always happens that when the immediate consequence is favorable, the subsequent consequences are fatal, and vice versa . – From which it follows that the bad Economist pursues a small current good which will be followed by a great evil to come, while the real economist pursues a great good to come, at the risk of a small current evil.

Frédéric Bastiat, What we see and what we do not see, 1850

There is always in the trade, what is seen and what is not seen and few modern interventionists are able to apprehend what is not seen. Jean-Marc Vittori gives us a magnificent example:

“David Autor, a labor economist working at MIT in Boston, launched a pavement in the pond (5) five years ago. By examining with David Dorn and Gordon Hanson the impact of Chinese imports in the US counties exposed to this competition, he showed that they destroyed a million and a half industrial jobs between 1990 and 2017.

‘Are you against free trade?’ a colleague asked him when he presented his work. Robert C. Feenstra of the University of California, along with Hong Ma and Yuan Xu of Tsinghua University, took the same tools to show (6) that the growth of US exports had created almost as many jobs .

The destruction of jobs is visible, but the rise in exports (and related jobs) is not visible …

We can always conduct a lot of statistical studies and make them pay taxpayers but there is evidence that should never be lost sight of:

  • Competition is the only way to progress, even unfair competition!
  • The current trade imbalances would not be possible with an honest and healthy monetary system, backed by commodity money and not with vague promises to pay one day what can not be paid. [Editor’s note: Invest in healthy growth start-ups in competitive markets and aim for a tenfold increase in your investment. Everything is here. ]

1- http://www.cae-eco.fr/IMG/pdf/cae-focus018-2.pdf 2- https://publications.banque-france.fr/sites/default/files/medias/documents/818071_rdb57_en_v5 .pdf 3- https://seii.mit.edu/wp-content/uploads/2013/11/Autor-Dorn-Hanson-The-China-Syndrome-Local-Labor-Market-Effects-of-Import-Competition- in-the-United States-American-Economic-Rev.pdf 4- https://piie.com/publications/pb/pb12-9.pdf 5- https://seii.mit.edu/wp-content/ uploads / 2013/11 / Autor, Dorn-Hanson-The-China-syndrome-Local-Labor-Market-Effects-of-Import-Competition-in-the-United-States-American-Economic-Revi.pdf% C2% A0 6- http://cid.econ.ucdavis.edu/Papers/Feenstra_Ma_Xu.pdf

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