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Economists Agree on Tariffs

Wednesday, October 5, 2016 6:30
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(Before It's News)

In the media, the issue of trade is sometimes presented as two sides debating whether free trade is good for the economy, with no way to determine the answer. For example, when Donald Trump suggests imposing tariffs on Carrier or Ford or Nabisco if they produce in Mexico and sell in the U.S., commentators may treat it as a serious suggestion that should be considered.  When you ask economists, though, you get a pretty clear answer: This is a bad idea. Recently, a group of leading economists was presented with this proposition:

Adding new or higher import duties on products such as air conditioners, cars, and cookies — to encourage producers to make them in the US — would be a good idea.

The 39 economists who answered the question all said – not surprisingly – that they disagreed or strongly disagreed with this proposition.

What was particularly interesting was a comment offered by one of the economists. David Autor of MIT said this: “Taxing consumers to subsidize domestic production is bad economics and a violation of the WTO agreement.”  I’m interested in his views because his paper that has been cited by some people to claim that trade with China is different, and the old rules do not apply.  As my colleague Dan Ikenson explains:

Unfortunately, a recent academic paper called “The China Shock,” by economists David Autor, David Dorn, and Gordon Hanson, which finds evidence of prolonged labor market adjustments in regions where local industries faced direct competition from imports from China last decade, is being portrayed by some in the media as a refutation of free trade. These interpretations have found their way into the political debate and are serving to obscure the proper meaning of the paper’s findings: Labor market frictions have been too severe for some workers with certain skills in certain industries in certain traditionally high-tax, pro-union states to find new jobs. The collective residue of decades of piling bad policies on top of bad policies has gummed up the works.

When you read Autor saying that these tariffs are bad economics, it becomes even more clear that the implications of his paper are being distorted. The laws of economics have not changed, and protectionist tariffs are still bad.  Perhaps what we need to get this point across to the media is to have all 39 of the economists on CNN at once to “debate” the issue. The host can ask each of them about Trump’s tariff proposals, and we can settle the issue once and for all.

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