Many politicians are bitching that China’s government subsidizes their domestic manufacturers. (Oh, and we don’t? Riiiiiiiiiight.)
Their beef is that it makes our manufacturers’ products less competitive. While this is true, why should we care? Is our solution to put countervailing duties on those goods? Apparently so. This is flawed.
Follow the logic:
U.S.: ”China, we think you are doing a bad thing by making your country’s citizens poorer by using their taxes to subsidize businesses. Therefore, we will tax our citizens who buy your goods to “correct” your bad decision and make things “fair.”
This doesn’t make much sense.
Imagine you have a daughter and some douchebag in your office has a daughter. They are in rival troops. Cookie time comes around. Your douchebag co-worker wants to “win” the sales game, and decides to subsidize his daughter’s cookies. Instead of selling them for $4 a box, he’s gonna sell them for $2 — paying $2 per box out of pocket.
Is your office right to impose a $2 per box tax on his cookies then? If he is dumb enough to make himself that much poorer to “help” the troop, who should care? Cheaper cookies in the short-term. (I say “help” because a $2 per box subsidy will result in a net loss, given that troops get less than $2 per box.)
If you are cunning, you should decide to buy every box you can from him. Now you can sell them for $3 a box and give your profit to your daughter’s troop.
Bottom line: If other countries are dumb enough to subsidize their goods with taxpayer dollars, why should we stop them? We are getting a deal. They can’t do it forever, and why penalize our citizens for getting a deal?
Cue up some Milton Friedman and fade to black.