Is free trade with China heretic ?

An article that is to be published next week in the new-yorker outlines that there are many similarities between the positions defended by Clinton and Obama in the primary race. This fact is in itself not surprising. Indeed we should not forget that both senators compete as democrats. In this context the candidates have to distinguish and at the same time they necessarily are attached to common views. The article of the New Yorker doesn’t therefore bring anything new on the table since it only corrects a global deformation due to media lenses.

What is common to both candidates can be named “economic nationalism”. It implies in particular to conduct higher import tariffs on China. What is surprising is that this protectionism is thought as a protection against the unequal wealth repartition. Following this logic the richer would have great benefits to keep on free trade with countries like China, since it enables to produce many goods at sinking costs. Poorer people are discriminated against since they suffer from the low cost of work raised by the international competition on the labor market. The demand for the labor security or for higher wages can’t thus be satisfied. This asymmetry in the effects of importation is meant in the article by the “belief that free trade with developing countries, and with China in particular, is a kind of scam perpetrated by the wealthy, who reap the benefits while ordinary Americans bear the cost.“ We are not interested in the question as to know if a good political strategy relies in differentiating two classes according to their economic interests and the contrasted burden of importations on their wealth.

This is politics. But we would like to emphasize the paradox presented in these terms by the New Yorker : “the very people who suffer most from free trade are often, paradoxically, among its biggest beneficiaries”. There is indeed a double effect of low prices importations. On the one hand it is unfavorable on the labor market. But on the other hand we can’t deny it has positive effects on the product market. It allows indeed to improve globally the purchase power and this is particularly most effective at the level of the low- and middle-classes, since these people concentrate their spending on goods that are subject to international competition more than richer people who expend money for services. Slowing up the importations from China could therefore have dramatic effects on the wealth of the “average American”. That’s why an alternative solution to import tariffs could come from a wealth repartition financed by taxes. If you think that danger is outside, look inside!