Obama continues U.S. trade war

According to the Financial Times:

The US will impose tough new duties on Chinese steel piping imports, raising tensions with its biggest trading partner and emerging geopolitical rival.

With Chinese piping imports worth $2.8bn in 2008, the case is the biggest against China brought before the International Trade Commission, a US trade body, but follows other US actions to counter a flood of goods that Washington claims China is exporting at below market prices.

Friction between the US and China has been building this year after disputes over tariffs on tyres, cars and chickens. China denounced a move by the US earlier this year to tax imports of Chinese car and light truck tyres as a “serious act of trade protectionism”.

Something is seriously wrong when China denounces protectionism and the U.S. defends it.

Iran by the Numbers

Here is an excerpt on the economic conditions in Iran from Michael Ledeen’s upcoming book, Accomplice to Evil: Iran and the War Against the West:

The country’s wealth is firmly in the hands of the regime’s elite families. More than 80 percent of the country’s gross national product comes from the petroleum industry, which is entirely in government hands. The mullahs have effectively ruined this primary source of national wealth: Oil production is currently around three million barrels per day. It was 6.2 at the end of the shah’s rule. According to a study released by the National Academy of Sciences on Christmas Day 2006, oil exports are expected to decline by upwards of 10 percent a year for the foreseeable future.

HT: Andrew Sullivan

Kosher Economics

A lesson in demand for meat from one of my favorite economists, Daniel Hamermesh:

The Economist reports that pork prices have plunged 24 percent in the past year, partly because the demand for U.S. pork exports has dropped sharply. I don’t eat pork, so how does this help me?

With a lower price of pork, the quantity demanded will rise, as people shift into this now-cheaper meat. And that will shift the demand curve leftward in related markets, including pork substitutes, such as beef and perhaps even chicken. Since I eat those, I will benefit indirectly from the drop in pork prices.

Furthermore, the drop in pork prices may be a long-run phenomenon, since one reason for it is a set of technological improvements in pig-raising. With lower long-run average costs, prices will remain lower than they were last year for quite a while. That means that my benefits will continue even without any efficiency gains among beef and chicken producers.

This, of course, only works under the assumption that pork, beef and chicken are substitutes (which, to the majority of consumers, they are). This same principle, moreover, applies to imported goods that are cheaper than domestic goods.

For instance, foreign cars in the U.S. drive down (our should have driven down) the prices of domestic cars –resulting in a greater consumer surplus. Where does the surplus go? Either into other sectors of the economy or capital markets (i.e. investment). Sadly, the U.S. government has instead chosen to extort money from taxpayers to allow domestic car manufacturers to keep producing at their inflated costs and selling at their inflated prices. The consumer surplus–instead of flowing back into the economy–evaporates to the government where it is allocated less efficiently than it would have under a market mechanism.

A free market leads to innovation, production and prosperity. A government-run economy results in nothing but stagnation and poverty.

Outsourcing is good for the economy

Governments do not “ship jobs overseas,” businesses do. Governments can only prevent job movement. Governments that have done this have consistently weakened their own economies as inefficient industries are protected while efficient ones front the cost of protection. Results, rather than intentions, must be the focus in these matters.

The US imports a wide variety of products that are no longer domestically produced because of cheaper foreign labor. The US no longer produces TVs, for instance. What has been the result? Some jobs were shipped overseas, but even more were created at home. TV prices dropped, Americans had more money in their wallets, and they spent more on American products. New, higher-paying  American jobs resulted. Moreover, the dollars that the outsourced workers received in pay were spent on a growing American export industry.

A 2006 study by the McKinsey Global Institute tallied up the costs and benefits associated with outsourcing and found that for every dollar the US sends abroad, its gets back about $1.12, resulting in a net gain of $0.12.

So, outsourcing is good for the economy. Tell your friends.