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A Note On Export Subsidies and Trade Policy

Thursday, November 17, 2016 7:14
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(Don Boudreaux)

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Many fallacies infect the arguments of those who insist that sound economics requires that, when subsidies doled out by government X lower the prices of imports in country Y, the government of country Y should impose countervailing taxes on its citizens’ purchases of those subsidized foreign goods.  I address some of these fallacies in this 2011 article in Economic Affairs.  And Dwight Lee and I address a different yet major such fallacy here.  (I say “major” because I believe this fallacy to be important, not because it is prominent.  This fallacy remains largely ignored.)

Below the fold is another angle that occurred to me to highlight as I read this Wall Street Journal report on the growing reliance by Chinese firms on subsidies from the Chinese state.  My remarks here are aimed chiefly at market-oriented economists who believe that foreign subsidies justify domestically imposed punitive taxes on consumers who buy subsidized imports.

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