I’ve been hearing about U.S.-China trade relations for a long time. I know there are myriad tussles, but I don’t know the details, much less how to think about this situation as a Christian. Should we try to buy American? With different parts being made all over the world, is that even possible? If we want to love the people of China and also compete economically with her, how do we manage trade tensions?
Almost exactly 20 years ago—on December 11, 2001—China was admitted to the World Trade Organization, which meant it could trade more easily with the world’s biggest economies. In the next decade, economists estimate “import growth from China between 1999 and 2011 led to an employment reduction of 2.4 million workers.”
That sounds like a lot. In 2016, Donald Trump raced to the White House on a protectionist platform, and Joe Biden has kept Trump’s tariffs in place.
So I’m not surprised that you’re wondering if we need to “buy American,” lest Americans descend into poverty. Have the Chinese done something sneaky and underhanded by selling us goods and services at lower prices than domestic producers can manage? Should we retaliate because the Chinese are “cheating” on trade? Did they take our jobs?
No. As a general principle, restricting international trade with tariffs and quotas or discriminating against foreign workers are bad ways to address trade liberalization’s distributional consequences.
Protectionism impoverishes the financially vulnerable in the United States and the financially vulnerable in China. It’s easy to see Susie Steelworker clock in at the mill and believe that tariffs are making America great again, but this is only part of the story. That same tariff means American consumer Sally Singlemom has a harder time making ends meet because tariff-protected goods are more expensive.
It’s easy to believe that tariffs are making America great again, but this is only part of the story.
Chinese workers, too, have harder times because cutting them off from global markets reduces their earnings. Unleashing the world’s productive potential with free trade will help a lot more people permanently. Let’s dig into this a little bit more.
Division of Labor
As economist Bryan Caplan points out, foreigners are our friends. International trade makes it possible for us to grow cars in Iowa and steel in South Dakota. People in other countries earn higher incomes by increasing our incomes, not by taking something from us.
How? By extending the benefits of the division of labor. We see the goodness of this design at multiple points in the Bible. The transportation of the temple was divided into four tasks and given to separate groups of Levites (Num. 4). Ministry leaders are given different responsibilities from lay people (Eph. 4:11–12). Everyone in the body of Christ has different gifts and tasks (Rom. 12:4–8). The principle is also clear in 1 Corinthians 12:12–31, especially verse 21: “The eye cannot say to the hand, ‘I have no need of you,’ nor again the head to the feet, ‘I have no need of you.’”
Eighteenth century economist Adam Smith observed the wisdom of this: “the greatest improvement in the productive powers of labor, and the greatest part of the skill, dexterity, and judgment with which it is anywhere directed, or applied, seem to have been the effects of the division of labor.”
If economists have spent the last two and a half centuries doing anything, it has been exploring and ultimately vindicating this truth. When people specialize, they can do more with less.
Trading and Tariffs
War is a zero-sum game. One side wins, the other side loses. The Olympics and the World Cup are zero-sum games too, in which one person or team can win only if everyone else loses. International trade isn’t like that. By the grace of God, it’s a positive-sum game.
International trade is a positive-sum game. If Chinese workers are better off, it’s not necessarily at the expense of American consumers.
If Chinese workers are better off, it’s not necessarily at the expense of American consumers. On the contrary, they gain by making Americans better off. It works like this: when we specialize and trade, we can get more goods and services with less labor. It doesn’t matter if we are trading with people down the street or people on the other side of the world.
We make our trading partners better off, too. They can help themselves take care of the things they find important (soybeans, oil) by helping us take care of the things we find important (smartphones, toys).
But don’t we make Americans better off when we “get tough” on trade with foreign countries? No: ultimately, we make Americans worse off overall. Suppose the government imposed a tariff on fruit produced in foreign countries. American fruit producers would make more money because they would get higher prices and sell more fruit.
But fruit producers need resources if they are going to produce more fruit. Using $4 worth of land, labor, gas, and capital to produce $3 worth of fruit (as measured by what it could have cost on the world market) wastes resources. Second, people buy less fruit as prices rise, which means American consumers don’t receive that nutrition.
Finally, remember that the revenue the government raises doesn’t come from foreigners. The tariffs are paid by American companies, who pass them through to American consumers in the form of higher prices.
A Good But Imperfect System
You might object that the Chinese are not playing fair because they are subsidizing exports or imposing tariffs on American goods. In either case, the people who are really getting a raw deal are Chinese consumers. They are being taxed to produce things for Americans (in the case of subsidies) or overpaying for goods and services they could have gained at lower prices had they been able to trade freely with United States.
While free trade makes us better off on net, it might leave some people worse off. For example, when factory or mill work can be done more cheaply overseas, those jobs tend to move there. In those cases, American workers may need some help as they find another way to support themselves (2 Thess. 3:10).
At a practical level, we can soften the blow through the institutions of civil society. Historian David Beito and economist John E. Murray have shown that, contrary to popular belief, privately provided welfare works pretty well in relationship-rich communities. Even government programs are a more efficient way to address job loss than trade restrictions.
Churches in a region where jobs are changing—either due to international trade or technological development—have an important opportunity to care for those who are struggling financially (Lev. 19:9–10, Prov. 31:8–9, Luke 12:33–34). Let’s see the trade conversation not as a war, but as a way to love our neighbors, both down the street and overseas.