The Bush administration announced last week that it would place restrictions on imports of knit fabric, robes and brassieres from China. The reason given was that these imports are supposedly costing jobs in North Carolina.
I know what some of you must be thinking. How on earth are Chinese brassieres taking out jobs in North Carolina? What the — Whoah! This is a good question. The Bush administration says China is engaging in “unfair competition.” Now, normally when trade restricters use the sinister-sounding phrase “unfair competition,” they mean that the competitor is offering an equal or even superior good at a lower price, one that they cannot match. Their competitor, in other words, has a competitive advantage. To them, this is “no fair.”
To consumers, on the other hand, this is good news. It means that they can get more value from their present income. The emergence of a more efficient, lower-cost provider encourages greater wealth creation. That is an economic way of saying that people can now trade their money for a greater amount of goods. Each trade, in economic theory, creates greater wealth, because when individuals trade (or purchase), they trade one asset (usually money) for an asset that they value more. In other words, if they don’t want the item more than the money, they would not buy it. And their trading partner would not part with the item if they didn’t want the money more than the good. Thus both sides end up wealthier after the trade.
Upon investigating the Bush administration’s claims, however, I have determined that this time, superior competition is not behind their use of “unfair competition.” Instead, with these restrictions, they have in fact uncovered and thwarted a secret, trade-war plot by the Chinese government.
Furthermore, the president is taking a bold stand to foil this plot, apparently without regard for his re-election hopes. With the economy now appearing to emerge from recession, the steel tariff already in place, Europe and China already threatening retaliatory tariffs on U.S goods, and Federal Reserve Chairman Alan Greenspan sounding an uncharacteristically clear warning over “creeping protectionism,” it seems as if Bush is pursuing the Smoot-Hawley economic-recovery strategy that worked so memorably for another Republican president’s re-election hopes.
Just how insidious is this Chinese plot? See for yourself. This flowchart explains what the Bush administration knows, and it’s something to bear in mind as prices rise. As Chairman Mao said, “Today the bra; tomorrow the world!”