This morning, Guy Mason of the Morrisons
supermarket chain appeared on the BBC Breakfast
news programme where he lamented a tariff that came into force on goods from China at midnight.
Apparently, half the tableware sold in Europe nowadays is manufactured in China; somebody in Europe - one anonymous entity - thinks this is unfair
, and has complained. As a result of this one complaint, there will be a tax of from 17-59% on all such goods until next May, when it will be reviewed.
So what are the Chinese doing wrong? This is something called dumping, and it is one of the great fallacies of economics, although it is one that is both widely and wilfully misunderstood because there is so much vested interest attached to it.
The theory is that wicked overseas businessmen (Chinese in this case) sell their goods at predatory prices, this will bankrupt their competitors, and they will then be able to raise their prices at will due to their new monopoly.
That is the theory, although throughout history there has never been one example in practice, because the only way a monopoly can be maintained is through legislation. Murray Rothbard explained this scam in a 1984 speech
at the Mises Institute. He began by talking about steel and steel imports then turned his attentions to money, but let's stick with imports.
Who really wants to protect
British and other European consumers from predatory
Chinese businessmen? Obviously European businessmen who can't match them on either quality or cost.
China may be the victim here, but the Chinese are not averse to imposing tariffs
of their own to protect
their industries, including the steel industry. Obviously they didn't listen to Murray Rothbard either.
Tariffs are popular with domestic businessmen, they are also popular with trade unions because keeping out foreign competition, or failing that, keeping imports artificially high, is good for them. But it is bad for all of us, including the government, even if it does make money from tariffs, because if people bought goods cheaply from abroad, they would have more money to spend at home. Still not convinced? Okay, let's look at a few other examples. How many cars are there on Britain's roads nowadays, and how many horses? Should we have banned cars in order to protect stables and blacksmiths?
Take a letter, Miss Smith.
What does the secretary use to type this letter: a computer or a typewriter?
Want to write to your aunt in Florida? Why send her a letter when you can send an e-mail? Why spend money on a phone call when you can use SKYPE? Get the message?
Frederic Bastiat published an excellent polemic in 1845, The Petition of the Candlemakers
, which exposes both the folly of protectionism and the vested interests behind it. It seems our leaders have not learned anything at all in the intervening 167 years.