Finally, when Dikembe Mutombo came to Georgetown University in 1987, what was his career plan? Answer: to become a doctor and return to the Congo and help his people, who badly needed doctors. But then Georgetown Hoyas basketball coach John Thompson recruited Mutombo to play basketball. He excelled at the game and had a lucrative eighteen-year career in the NBA, playing for the Denver Nuggets, the Atlanta Hawks, and the Houston Rockets for fifteen of those years.
But Mutombo didn’t forget his original goal. He donated $3.5 million of his earnings toward building a hospital in the Congolese capital of Kinshasa. If he had stuck with his plan to become a doctor, he would have been only one doctor in the Congo. Instead, by specializing in basketball, he earned enough to pay multiple doctors in the Congo.
This is from David R. Henderson, “A Refresher Course on Free Trade,” Defining Ideas, June 17, 2021.
If free trade is such a good policy, why do so many non-economists think it’s controversial? Part of the answer lies in the asymmetry between producers and consumers. Consider the case of sugar. We in America pay approximately double the world price of sugar because the US government sets tight quotas on sugar imports. That, incidentally, is why Coca-Cola is produced with corn syrup in the United States but with sucrose (sugar) in Canada and Mexico. Over 300 million of us pay a little more annually for higher-price sugar but the few major sugar producers in the United States make tens of millions to hundreds of millions more in revenue, and their employees make a few thousand dollars more in annual income than they would make in their next best use. The overall loss to consumers calculated by Washington State University economics professor William S. Hallagan a few years ago was $2.25 billion annually. The offsetting gain to domestic sugar producers was $0.85 billion and the gain to the lucky importers who got to buy the sugar at the world price and then sell it at the higher US price was $0.30 billion. The loss to consumers outweighs the gain to producers and importers but the average consumer’s loss is only about $10 per year, while the average producer’s gain is large. This gives producers a large incentive to be involved in the setting of sugar quotas, while the average consumer pays virtually zero attention. That’s why it’s true that even though the intellectual case for free trade is largely settled, those interest groups that want to limit trade are creating most of the buzz.
That buzz occasionally misleads even some scholars who study trade and generally understand it. Zack Beauchamp of Vox recently quoted the following comment on Biden’s trade policy by Tufts University scholar Dan Drezner: “It’s totally America First.” No, it’s not. It’s American producers first; consumers don’t seem to count. Are US consumers not Americans? To ask the question is to answer it. Of course they are. If Trump truly favored or Biden favors an “America first” policy on trade, both would be strong advocates of free trade because with rare exceptions, the consumer losses from restrictions on trade exceed the gains to producers.
By the way, even my point above about the Biden/Trump trade policy being “producer first” is overstated. Trump imposed, and Biden has kept, some protectionist measures on items that are inputs into production. Those measures hurt some U.S. producers.
Read the whole thing.
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Author: David Henderson
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