Don't you mean Fair Trade?

Steve Sailer makes the following argument:

  • Reagan instituted tariffs on Japanese cars.
  • Today, most Japanese cars are made in the US by Americans.
  • Thus, those tariffs were good policy.

The poverty of the argument lies in not imagining what the alternative world might look like had the tariffs not been instituted. The implication is that Americans would not be making Japanese cars on American soil[1]. And what if they didn't? Would that be a bad thing?

The same argument has been used by opponents of trade for hundreds of years. They imagine that because Americans who today make cars, in that alternative universe of no tariffs, would not be making cars, that they would have no jobs at all.

But are cars the only thing people want to buy? Do they want to buy other things? How strong is people's desire for things? A wise man once said that human wants are unlimited. I can't prove that's true, but everything I know about human nature tells me he's probably right.

Let me imagine a possible alternate universe in which those tariffs aren't instituted:

  • Japanese make Japanese cars on Japanese soil because it's cheaper. This is presumably why they didn't make them in the US before the tariffs (according to Sailer's argument, anyway. See footnote.)
  • Americans thus have cheaper cars to buy. Americans' standard of living is raised.
  • Those Americans who in our universe make Japanese cars on American soil instead make other things that people want in the alternate universe.

If Americans don't produce item X, that is not necessarily a bad thing. In fact, it could be a very good thing. And it'd be a very bad thing to use tariffs to keep Americans producing X. Isn't it a good thing that a quarter of Americans aren't farmers today like they were a hundred years ago? Basic stuff.

This pattern has been the evolution and growth of all economies: inefficient production seeks out more efficient places, countries don't keep on producing the same stuff year-in-year-out, and on net, everyone benefits over the long run.

He ends with:

It's hard to say exactly why the dogma of free trade has triumphed so completely, but status striving can't be ruled out. Economists are terribly proud that Ricardo's Law of Comparative Advantage is both significant and not trivial, so showing that you understand has become a major status marker.

Comparative Advantage theory should have starring role in the sequel to Stuff White People Like.

How I wish the "dogma" of free trade had triumphed completely! Very few people are supporters of free trade. It's really only supported by economists and a few of us wacky libertarians. And the White People from Stuff White People Like? The ones that support free healthcare and hate multi-national corporations? More likely, they're expounding on evils of free trade while drinking their fair trade coffee at the local Starbucks.

1. Even that's debatable: how expensive is to build cars in Missouri and sell them in Missouri vs building them in Japan and shipping them to Missouri?

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Sailer also knows nothing about the car market

He makes another mistake prior to the one you point out in assuming causality. The Japanese car makers make *all* their cars in all their markets using localized production. That is required for them to gain the benefits from their invention of just-in-time production methods.

Rather than have cars become out of date and take up capital on a boat from Japan (where worker costs had become exorbitant, the manufacturers figured out it's cheaper and faster to just hire Americans to build their own damn cars. Then they just have to truck their cars from their non-union plants in the South to dealers around the country.

It's not a US-specific strategy because of Regan's tariffs (which again bring into question the presumed free-market "principles" of the Republican Party). It was a business decision.

If Sailer had made a cursory investigation into this he would have discovered it. (I'm not attacking him really with this statement. I screw up all the time on my own blog by not making cursory investigations before blogging about them. Like most people, I've kept my day job.)

My take

  • Reagan instituted tariffs on Japanese cars.
  • Today, most Japanese cars are made in the US by Americans.
  • Thus, because of tariffs, the US cars developped slower than Japan's and now the relative positions of US and Japan in the car business are reversed.

Considering the wage scale

Considering the wage scale in Missouri, probably cheaper to build cars there.

Speaking of Missouri

Of course all Asian

Of course all Asian countries follow mercantilistic policies.They could never build cars outside Japan as this could "betray" the common good of the country.This is how decisions are made in these countries...Western countries have nothing to gain trading with these countries as they simply don't play fair. This is happening for decades.The only thing Asian consumers can buy from western countries is debt and scrap metal...