Many countries – most especially Communist China – subsidize their domestic products that are then sold on the global market.
This isn’t free trade.
Some countries – most especially Communist China – intentionally subsidize to such an extent they sell their domestic products on the global market at a loss.
This isn’t free trade. And this goes light years beyond anything remotely resembling economic sense.
The ONLY reason to sell things at a loss – is to gut the countries purchasing your products.
Communist China has mastered doing it to us. They have spent the last half-century plus undercutting and thereby dismantling major sectors of our economy – to be reassembled there. We’ve handed them trillions of dollars and millions of jobs. It has really been titanically stupid.
Communist China is almost inarguably the best at doing this. They are by no means the only ones doing it. And we are by no means the only victims of it.
To wit: The European Union (EU). Who in the face of massive foreign subsidies – did what some Americans think we should do: unilaterally disarm. The results for the EU were catastrophic.
Behold a report: Lessons from the 2006 EU Sugar Regime Reform. Authored by Brit Patrick Chatenay:
“Patrick Chatenay has been involved with the sugar industry since 1985….In 2008, he founded ProSunergy which provides strategic advice and implementation services for the world’s sugar, renewable energy and bio-fuel industries.”
That is a severely truncated biography excerpt. Seriously – read the whole thing. Suffice to say – Chatenay knows of which he speaks.
Per Chatenay’s report, this bio portion is of particular interest and import:
“From 2003 to 2008, Patrick researched investment opportunities in the Brazilian sugar/alcohol industry for the Südzucker Group, following its acquisition of Saint Louis in 2000.”
The Brazilian government – subsidizes sugar to the tune of more than $4 billion per year. As a result – they alone control about half of the entire global sugar market.
Get that? More than 100 countries sell sugar – and Brazil has mass-subsidized its way to control of half the market.
This isn’t free trade.
And Chatenay was involved in the Brazilian sugar industry – immediately before and during the EU’s unilateral removal of all aspects of its sugar program.
A titanically stupid decision – resulting in maximum EU damage:
“Chatenay reported, ‘After dropping 22%, bulk refined sugar prices in Europe are now (2012) some 10% above what they were before the reform….’
“The European job losses were…disastrous…ultimately (leading) to the closure of 83 sugar mills and the loss of 120,000 jobs.”
The EU – having suffered so dramatically as a result of their titanic stupidity – returned to sanity:
“In a 2015 follow-up report about policy reforms, Chatenay found that sugar supports had been restored in the EU….”
Fake free traders will bemoan this restoration. We actual free traders – understand and embrace Reality.
And the reality is – unilaterally disarming is demonstrably, titanically stupid. The EUs disaster – proves it.
And the global market – has only gotten more fake-free-market subsidized:
“(I)n 2017 alone China, and mammoth exporters India and Brazil among others, announced new, expanded protectionist measures for their sugar industries.”
So if we were to replicate the EUs titanic stupidity and unilaterally disarm?
The damage to our economy – would be even worse than was the damage to the EUs.
The solution – is negotiating actual free trade deals. That bring down government subsidies – everywhere.
Thereby rendering protectionism – actually-no-longer-necessary.
As the EUs folly taught us:
Pretending unfree markets are free – is titanically stupid.
And incredibly damaging to the pretenders.
This first appeared in Red State.