Jagdish Bhagwati on Protectionism – Econlib

Amidst the ongoing debates surrounding free trade, tariffs, and non-tariff barriers, I found myself drawn to a brief yet captivating volume by trade economist Jagdish Bhagwati. The book, published in 1988 and aptly titled Protectionism, offers a timeless perspective on these issues. I penned a concise review of this work in the June 5, 1989 edition of Fortune.

A recurring theme, both then and now, is the American business community’s concern over what they perceive as “dumping” by foreign competitors.

Here’s a salient excerpt from my review:

U.S. companies frequently assert that foreign rivals benefit from unfair government subsidies, prompting them to urge the U.S. government to impose countervailing duties and antidumping measures against these foreign firms. Bhagwati critiques such actions as largely being tactics to stifle competition from abroad. For instance, he notes that U.S. rice producers successfully lobbied for a countervailing duty on rice imported from Thailand, claiming that the Thai government subsidized rice exports by less than 1%—while conveniently overlooking that Thailand imposed a 5% tax on its rice exports. The conventional wisdom suggests that a foreign firm is guilty of dumping if it sells products at lower prices in the U.S. than in its home market. However, the U.S. government once levied an antidumping measure against Polish golf carts, even though no such carts were sold in Poland.

I lacked the space to delve into Bhagwati’s amusing retort to an argument presented by Stephen Cohen and John Zysman in their influential 1987 work, Manufacturing Matters. Fortunately, I can elaborate here. Cohen and Zysman argued, as Bhagwati quotes:

There are…other kinds of linkages in the economy, such as those which tie the crop duster to the cotton fields, the ketchup maker to the tomato patch, the wine press to the vineyards (to return to our focus on agriculture). Here the linkages are tight and quite concrete…the linkage is a bind, not a junction or substitution point. Offshore the tomato farm and you close or offshore the ketchup plant. No two ways about it.

In response, Bhagwati noted:

As I pondered this profound observation about the tomato farm and ketchup plant, I was enjoying my favorite Crabtree & Evelyn vintage marmalade. It had truly never crossed my mind that England cultivated its own oranges.

(For those interested, Bhagwati also contributed an article titled “Protectionism” to David R. Henderson’s edited work, The Concise Encyclopedia of Economics.)