Who Competes with Who?

President Trump (and other protectionists) like to frame international trade as a context: the domestic nation is competing with foreign nations and that imports must necessarily harm and exports necessarily help.  Aside from the numerous logical and mathematical issues with this interpretation, it is economically incorrect from the perspective of competition.

International trade represents the exchange of goods and services across political borders by individuals.  More simply put, it involves buyers on one side of an arbitrary line and sellers on another.  The fact this is buyers and sellers matter for a simple reason: buyers and sellers do not compete with one another.  They cooperate.

Buyers compete against other buyers.  Sellers compete against other sellers.  Buyers and sellers do not compete with one another.  The seller must offer a price acceptable to the buyer.  The buyer must offer a price acceptable to the seller.  The two will cooperate to make the exchange happen (or else they go their separate ways and other buyers and sellers step in).  What this indicates for international trade is this: when foreign producers are harmed, either through tariffs or quotas, they are not the only ones harmed: their domestic customers are harmed as well.  When Trump mentions “punishing” foreign companies for having the gall to offer Americans the best possible deal, what he is actually talking about is punishing Americans by reducing their options and preventing their cooperation with other people.

If we are to use the (highly misleading) language of nations trading with one another, this means that international trade is not a competition but rather cooperation.  It is impossible for one nation to be losing at trade because there is no competition!  Buyers and sellers cooperate.  When two nations trade, they cooperate.

5 thoughts on “Who Competes with Who?

  1. Nice post Jon. Gets right to the heart of the matter in an extremely concise and lucid manner.

    It is always surprising to me how easily those long portraying themselves as militantly opposed to any and all tax hikes can so eagerly support a new tax on American consumers. It’s the kind of thing Mark should make a Venn Diagram about. Pleas feel free to suggest it to him if you like since my seeing this potential was inspired by your post.

    Liked by 1 person

  2. Ah, Jon, you are applying economic principles to politics again. Economic principles are about what is right, while politics is about gaining power to impose your will on others to their detriment. Trump has co-opted the political issue of “fair” trade from democrats, “progressives,” and “liberals” in order to win a temporary majority, which has forced democrats, “progressives,” and “liberals” to pretend to be free traders for at least a while. Your post indirectly proves the point that government — no matter whether run by democrats, republicans, socialists, national socialists, fascists, communists, etc — should never have the power to interfere with trade.


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