All free-trade bashers seem to agree (at least superficially) that competition within the U.S. is a good thing. But not competition with foreign producers. What is the difference? Why is it good to compete with other U.S. producers and workers, but not with producers/workers of other countries?

Well, before we look at their arguments, we should ask this fundamental question: What purpose does competition serve? Why is it a good thing? Who knows -- maybe even domestic competition is bad for the economy. It certainly drives many companies out of business, and it can eliminate jobs too, as labor-saving devices are introduced and companies are restructured in order to reduce costs and stay ahead of the competition.

Ravi Batra presents a case for competition on p. 164. Basically, it comes down to serving consumers. Phrases like "product quality," "innovation," "needs of consumers," etc., make it clear that the whole purpose is to serve consumers with better and less expensive products.

Now if this is the goal of competition, then we need to ask whether foreign competition serves this goal or not. If it does, then we must ask why it's not just as desirable as domestic competition.

Under domestic competition, Batra says, an entire industry cannot be wiped out in the competition, but only individual firms within an industry. And it's okay to let particular companies fail which can't keep up with the competition, but it is wrong to let an entire domestic industry fail. That's "destructive" and "predatory."

But if we preserve that industry from extinction, what are we preserving it for? Is it supposed to be like a national monument or a museum exhibit that we're putting on display? Why? Why preserve and show off something which is the worst our country has to offer? something that's essentially a failure, unable to compete? Is that something to be proud of? failure?

But workers who lose their jobs because their company fails, should not have to change their line of work, Batra insists. They should be able to change companies and stay in the same sector of the economy working for a new company but doing the same work they're already familiar with. It's especially bad if they must change from a higher-wage sector to a lower-wage sector. In the U.S., an "increasing proportion of the labor force has had to find work in the expanding service sector, which pays far less than manufacturing." (p. 166)

Notice how Batra shifts gears and forgets about the consumer. It's inevitable when you bash free trade. Why can't a protectionist retain the concept of serving consumers for any longer than about 3 seconds? Earlier he said that (domestic) competition is good because it serves the consumer. But now he's saying, in effect, that the consumers should have to pay more and be denied their freedom to buy foreign imports because otherwise some workers might have to suffer the inconvenience of having a career change.

This is no longer workers serving consumers (the original premise), but consumers serving as subsidizers of wage-earners who don't want to change careers. These wage-earners are not serving consumers and adjusting to the demands of the marketplace (competition), but instead want the market to adjust to their needs. It's not the consumer who is king, but the wage-earner, and the consumers must change their desires and tastes and preferences in order to cater to those wage-earners who don't want to change careers.

The bottom line here: consumers, not wage-earners, must change. Not only must an uncompetitive industry be preserved as a national monument to failure, but so must the wage-earners in those industries. And the consumers? They better damn well get with the program and support our industries and our wage-earners, especially buy more manufactured products. What are these consumers good for anyway, except to subsidize the higher-paying jobs of our factory workers?

To free-trade-bashers, the ideal society would be one where robots replace not workers, but consumers; the robots could perform this role better than human consumers, because they would be programmed to buy lots of U.S. manufactured goods (and consume them voraciously), thus moving workers to the higher-paying factory jobs and increasing the country's standard of living.

So, when Batra argues that domestic competition is a good thing, he assumes that the goal is to serve consumers. But when he argues that foreign competition is bad, he changes the premise and assumes that the goal is to serve producers/workers. Well, he should have stuck with his first premise, which was the correct one. Any argument can be won by arbitrarily changing the premise when it's convenient.

Consider Batra's premise when he says the following: "Foreign competition can thus be destructive if it causes a shrinkage of the high-wage sector relative to low-wage industries. However, it can also work the other way. Foreign trade is good to those nations in which it stimulates the high-wage industries."

What is the premise of this statement? The premise is that the purpose of industry or business is to provide high-income jobs; high-paying jobs are good for the economy. That was not Batra's premise when he argued in favor of domestic competition. In fact, here he contradicts that earlier premise. His premise back then was that the function of business/industry is to serve consumers. But high wages, or any high costs of production, are not good for consumers, because higher cost means higher prices.

Competition drives down all costs, including profits and wages (but then offsets this by the benefits to consumers, which translates into higher real income). More competition ALWAYS means lower profits and lower wages and lower costs of any kind for those who are forced to compete.

You cannot argue, as Batra does, that increased competition is bad because it drives down wages or some other cost of business, unless you think higher cost is good. Every cost of business is an income to someone. So, if you favor competition, ANY kind of competition, e.g., domestic competition, you are in favor of driving down costs, and thus someone's income. If you are pained that downward pressure is put on someone's income, e.g., a wage-earner's, then you must be against competition, ALL competition of any kind. All competition drives down incomes, i.e., costs, including labor cost, and thus wages.

This is a benefit to consumers, and thus a net benefit to all, except the very least competitive. Only those who are extremely uncompetitive can suffer a net loss. Only this small number are hurt so much that the benefit they gain is outweighed by the harm. The solution: they must work to become competitive enough so that the harm they suffer will be reduced to the point that it is outweighed by the benefit they gain as consumers from the increased competition in the economy.

This is the merit or the virtue of increased competition. By this argument, more competition is always better. When is it not better? The introduction of foreign competition increases the competition. Why isn't this increase a net benefit to all just as an increase in domestic competition is a net benefit? At what point does the pain to producers/workers become greater than the benefit to consumers?

Batra laments that an entire U.S. industry may be ruined. Whereas with only domestic competition, and thus less competition, this wouldn't happen.

In reality, the only kind of U.S. industry that could be totally ruined would have to be one that is hopelessly inefficient. What do U.S. companies do when they are faced with stiff foreign competition? Do they just go under? No, they adjust. They move some of their operations abroad. They figure out which parts of their business can be operated efficiently within the U.S. and which parts can be performed better in China or Singapore or Mexico. It is not typical for an entire U.S. industry to go to ruin. And the few which were so frail and so helpless that they could not adjust to the foreign competition are not something we should want to preserve, and our country is better off without them.

What makes a company a "U.S. company" or an industry a "U.S. industry"? Does it matter? No. All that matters is that U.S. consumers are served. Any company or industry which serves U.S. consumers is, for all practical purposes, a U.S. company or industry. If half of that company or industry operates abroad, or even 90% of it, so what? As long as it serves U.S. consumers, as long as U.S. consumers dictate to that company or industry what to produce, then that company is the virtual slave of U.S. consumers. Even if that company operates from another planet, or another galaxy, it is still virtually owned by the consumers it serves. Without its customers it is nothing.

Batra argues that in an economy with only domestic competition, the workers for a failing company could at least remain in their chosen career by joining another U.S. company. That is, another uncompetitive U.S. company which would also fail if it were not protected against the foreign competition, and thus, a company which is not serving consumers as well as the foreign competitors.

Are consumers served better by keeping alive this uncompetitive company? Are they served by pandering to the workers who don't want to change careers, by keeping alive uncompetitive companies where these workers can go and be protected against having to change, and be preserved in their uncompetitive jobs? Obviously this does not benefit consumers. This benefits only uncompetitive wage-earners who want to leech off society and be subsidized.

This makes sense, if we assume that the wage-earners are worthless scum who are incapable of changing. Most arguments against free trade seem to assume that less competitive workers are worthless and irresponsible, and that all that can be done is to pity them and subsidize them in some fashion, such as giving them a makework charity job.

Again Batra's premise, when he argues against foreign competition, is that the role of companies is to provide jobs and incomes for people, especially uncompetitive workers, not to serve consumers. And again his premise is wrong. His first premise, when he explained the virtues of competition, was the correct premise. It is the role of companies to serve consumers. And again, foreign competition does this just as well as domestic competition.

Because of foreign competition, Batra says, the U.S. is only a "minor player" in new industries which have come up since the 1970's -- robotics, video equipment, and fax machines. Japan, not the U.S., is "dominant" in these industries. At one time, U.S. companies were "technology leaders" in the world. They were "innovative, vigorous, and dynamic." (Then they should have been able to compete, shouldn't they?) The U.S. was once the "sole economic superpower," whereas now it is a "vast graveyard of rusting plants and factories."

So has foreign competition failed? It was supposed to serve consumers -- right? Have they been served or not? Do they have the video equipment and fax machines or don't they? Which is more important -- to be a major rather than "minor player," to be "dominant," to be the "technology leaders," to be the only "economic superpower," and to have dynamic fire-breathing factories smoking away in every neighborhood? Or to have the best products at the lowest prices? Free trade brings the latter. It puts that much of industry into the U.S. which is most competitive and thus best serves consumers, and puts the rest somewhere else, wherever it will best serve consumers.

But what does protectionism promise us? To Batra, it is some sense of dominance, technology leadership, economic superpower status. Is this something good? If so, why wouldn't it include competitiveness as an ingredient? And if the U.S. industrial superpower is truly competitive, why should it need protection against foreign competition? No, apparently this technology leadership and superpower status does not include the element of competitiveness. It's not a lean and mean consumer-serving superpower economy he's talking about, but an overweight hyperactive high-calorie economic volcano, exploding with energy, snorting smoke and ash, rumbling and shaking and roaring and frightening away the foreign competition with all its awesome noise.

And what purpose will be served by this bombastic job-creating, fuel-burning, cost-consuming economic supercolossus? It appears that nostalgia is a primary element. "Once upon a time, major U.S. companies of today were the technology leaders in the world." Ah, for a return to those glory days of the 1950's (only this time dominance for the sake of dominance), with factories huffing and puffing away in every neighborhood. Oh, if only we could resurrect that abandoned factory, where hundreds of workers once spent forty hours a week hammering and clanging away. Ah, to hear those sounds again, to relive the busyness of days gone by. What a shame that it's gone!

So, is nostalgia, a mere craving to relive the past, a legitimate reason to suppress individual choice in the marketplace by imposing punitive tariffs? Those factories once hummed away because they served consumers at that time. Now the consumers are being served better. What's more important -- to serve consumers? or to resurrect nostalgic images of the past and relive the clanging and banging and busyness of outmoded factories?

Is "dominance" always healthy for the economy? The new "dominance" will be costly, because all the energy consumed in this subsidized manufacturing economy will ultimately be siphoned away from other places. Yes, the symbols of jobs and smokestacks and busyness may create illusions of economic health, and a few troublemakers may be scooped off the streets into factory jobs as a partial stopgap alternative to jails and welfare. But is this the best which the U.S. economy can promise to its restless natives? babysitting slots ("jobs") to put them into to keep them out of mischief? At the very most, that is all Batra's new protected manufacturing economy offers to Americans.

But what about that unlevel playing field?

There is yet another argument offered why foreign competition is bad even though domestic competition is good. A common phrase used is "level playing field," and it is said that U.S. companies must be protected because one way or another they are at an unfair disadvantage to their foreign competitors, and to compensate them, to "level the playing field," tariffs must be imposed on the foreign imports, and they must be set high enough to put U.S. companies back on an even footing with those foreign competitors.

Gus Stelzer identifies the high cost of government in the U.S. as the greatest disadvantage to U.S. business, putting U.S. producers on an unlevel playing field with their foreign competitors. On p. 276 he lists several costly government programs which cause taxes (and business costs) in this country to be much higher: labor laws, civil rights laws, mandated health and safety laws, malpractice and liability lawsuits, social security, public education, national defense, price supports for farmers, welfare programs, health care programs, building codes, endangered species protection.

Stelzer also declares as a fundamental premise to his argument that "all these political actions caused the cost of U.S. products and services to be higher than in other countries." And ". . . government actions in the last 60 years are responsible for over 80% of the cost of U.S. products and services." (p. 275)

Nearly 50% of this cost is taxes. In his case for "equalizing tariffs," he demands: "We must stop subsidizing foreign producers and countries by giving them exemption from U.S. laws and their cost consequences while allowing them to share in our markets in competition against U.S. producers who are not granted similar exemptions and privileges." (p. 321)

So the foreign producers are gaining an advantage over U.S. companies, in effect being subsidized, because they don't have to pay all the high costs of government which U.S. companies must pay. And that high cost is passed on to consumers in the form of higher prices. And without this disadvantage, U.S. companies would easily outcompete all the foreign producers.

So here is an argument which accepts domestic competition as a good thing while condemning competition with foreign producers on the grounds of an unfair disadvantage or an unlevel playing field. On the surface it may seem impressive, but something here does not pass the smell test.

Let's take another look at that list of government costs. That is, let's consider exactly what it is we're paying for. What are we getting for our tax dollars? Also, what are we gaining from all the government regulations which are costly to business? Are we gaining any benefit from all these regulations and tax-funded programs?

Some critics of big government denounce all of it as wasteful and destructive to the country. If that's true, then it should all be abolished, and the problem (the unlevel playing field) will immediately vanish. But let's assume that, whatever the shortcomings, these programs and regulations provide a net benefit to the country. Certain particular programs are probably wasteful and not worth the cost. But let's assume that all the programs collectively produce a total net benefit to the citizens.

Now who gains all this benefit? Who is made better off because of these programs? The answer is: All of us. Everyone benefits. Everyone in this country, including every business, every business owner, every company employee, every corporate director, every shareholder, every entrepreneur, every investor. (As examples, businesses gain an immense benefit from the court system, from police and fire protection, and from all infrastructure programs.)

Stelzer's argument overlooks the fact that all the U.S. companies which pay the cost of government also reap the benefits of the government programs. And their foreign competitors, who do not pay, also do not benefit! And thus his claim that U.S. companies are at a disadvantage is false. If you pay from your right hand, but receive a benefit of equal value into your left hand, you do not suffer a net loss.

The benefits from government have a dollar value to those who receive them. These benefits offset the costs in higher taxes (and also the costs of regulations). Therefore, it is not true that businesses pass on a cost of government to consumers in the form of higher prices than those of foreign competitors. True, if you subtract only the cost of government from the prices of products, these prices would be much lower. But you cannot subtract the price only without also subtracting the benefits, if you want to calculate the net cost of government contained in the prices of products. If you subtract the benefits also, the prices of the products would go right back up.

Businesses gain benefits from government which carry a dollar value as well as a price tag. Subtract those benefits and businesses would have to make up for this loss by raising their prices. Costs drive up the price, but benefits drive it down. The net result: U.S. products do not cost more than foreign imports because of an alleged cost of government hidden in the prices of those products. And thus, the alleged unfairness to U.S. companies is nonexistent, and there is no excuse here for imposing tariffs to make up for the alleged disadvantage they are said to suffer.

But what about all the waste? What if the benefits don't equal the cost or are even nonexistent? Shouldn't we calculate at least the total waste in government which U.S. producers must pay for and then impose a tariff on foreign imports to make up for this extra cost of business?

No. If the net benefit is less than the net cost of a particular program, then the solution is to abolish the program, or correct it. If the net benefit outweighs the net cost, including the waste, then there is no net cost to business and thus no disadvantage or unlevel playing field caused by the government program. Imposing a still further cost (onto consumers) is no solution. Two wrongs don't make a right.

If the U.S. government persists in placing needless burden after needless burden onto business, then, if need be, a company might rightly move its operation abroad in order to avoid those costs. Whatever the solution, it must be one which eliminates waste and needless cost, never one which sanctions it or perpetuates it.

The protectionist solution of "equalizing tariffs" is preposterous: Because we are imposing an undue cost onto these businesses here, let's be fair about it and impose the same undue costs on those other businesses over there. What nonsense! This now violates our basic principle that the purpose of competition is to serve consumers, not to make them the playthings of producers.

Higher cost of production, and thus higher price, is not in the interest of consumers. If you propose a course which means higher cost, then you are thrown back to the earlier question: What is the purpose of competition? Not just foreign competition, but domestic competition also. Any kind of competition. What purpose does it serve? If you understand that its purpose is to serve consumers, then you cannot fail to understand that unnecessary cost must always be reduced, eliminated, and you can never propose a remedy which raises cost and institutionalizes waste and forces consumers to pay more.

When you read Stelzer's book, you should keep in mind this one general question: What is the purpose of competition? Or more broadly: What is the basic function of business in our society? And you should keep in mind the answer: The function of business is to serve consumers by providing products and services. And to perform their best at this, businesses should compete with each other.

Armed with this simple principle, you can easily refute half of the entire book, if not 80-90% of it. He totally ignores this principle on page after page. He writes an entire chapter on competition and asks such questions as "Why must we compete!" and "Who says so?" There are simple answers to such questions, but the protectionist mentality is oblivious to them.

Stelzer and other denouncers of free trade use terms like "fair play" and "level playing field" and complain how it is "unfair" to U.S. workers and companies to compete with foreigners who play by "a different set of rules." Ignoring that the function of business is to serve consumers, they imagine that the competitive trade game is some kind of abstract battle among producers using markets as their playing board and consumers as their poker chips. When any of these players get hurt in some way, they complain loudly about the "rules," but they don't seem to understand that the whole game, including the rules, is designed for just one purpose: to make them serve the consumers better. This one rule -- serve the consumers -- preempts all the others.

Yes, rules are necessary. But how can you choose good rules unless you first establish what the purpose of the game is? It is not purely a sporting event. Yes, we want to attract many players, and so leveling the playing field has its usefulness. But it is not in the interest of consumers to postpone the game or disqualify 80 or 90 percent of the players because the "rules" are not all uniform. We are better off if the game goes forth and the rules are developed as we go along, if they can be. As it is right now, the only real shortage of players is caused by an excess of rules, not the absence of rules.

So let the game begin! Or rather, let it continue, and let more players join who want to, and let them quit whining and complaining about how the cards were dealt; let them just play their best, using every advantage they may have. Even if the game is not perfect, it will serve well if the fundamental rule to serve consumers is upheld; there's no need to make all the players equal and to create an absolutely fair system.

The rules of another country are not necessarily "wrong" because they are different than our rules in this country. The trade "game" can still be played and will serve its purpose despite such differences. That country's standards may be lower or higher than ours, but either way, the people of that country probably know better than we do what's right for them. In a third-world country, the cost of business may be lower, because of lower environmental standards, for example. But no matter what standard is chosen, you could always choose a tougher standard. Even U.S. standards are too low by some accounts.

When a U.S. company relocates its factories to a third-world country in order to save on costs, it is doing the right thing, not the wrong thing. Consumers are served by this. But free-trade bashers see something sinister and feel a need to place "blame" somewhere. The blame could be placed on any party. It may be the U.S. government which is blamed because its environmental laws were too strict and costly, thus driving the business away. Or the blame may go to the third-world country for its lack of strong environmental safeguards and its resultant dirty air and water. Or blame may be placed on the fleeing business for being unpatriotic.

But why does there have to be a villain? There's no foul play in this scenario. None of the three parties is necessarily wrong in its action.

The business is saving on cost, as it should always do.

The government of that third-world country puts a higher priority on development and jobs and a lower priority on the environment. The line between these must be drawn somewhere -- who are we to say that they drew the line at the wrong place? that their level of air quality or water quality is too low? It's their country -- if they decide later that the standards are too low, they can always raise them. They know what they're doing.

But meanwhile, higher standards for the environment in the U.S. are a luxury we can afford, and there's no reason to lower them just keep a few jobs here. If the factory is a polluter, let it leave if another country wants it. And let them ship their products back into the U.S. at low or zero tariffs; just because we don't want the pollution doesn't mean we don't want the products. There's nothing wrong here, just a few tough choices being made. Free trade has never promised to eliminate the need to make tough choices.

What about the existence of sweatshops and child labor in another country? The trouble with this complaint is that it assumes the people in that country don't know what they're doing, or worse, that they're rotten people, or that they're barbarians or savages. And it also assumes that once those sweatshops are eliminated, all those children and other exploited workers will be better off.

Will they be better off without the sweatshops? If so, why don't they get rid of them without our interference? Are we preventing them from closing down the sweatshops? Do U.S. companies have their armies surrounding the villages and the capital of the country, forcing the workers into the factories at gunpoint and shooting anyone who doesn't cooperate?

You must answer these questions first, and explain how the people of that country would be better off without those sweatshops and yet are helpless to close them down -- you must answer this first before you blame U.S. companies and consumers and punish them with trade barriers or high tariffs on those products.

Until then, we should assume the following: where poverty is widespread and people are desperate, the existing sweatshops and poor working conditions are preferable to the alternative of no job at all, or of the even worse working conditions which would take the place of the present ones; the sweatshops and child labor did not cause the poverty. The poverty was there first, and the desperate plight of the people will not be relieved at all by shutting down the sweatshops; rather, the shutdowns will only make them a little worse off than they are now, as well as making the buyers of the products worse off.

Shutting down sweatshops is a lose-lose proposition. It serves no legitimate purpose to make U.S. consumers worse off as well as the poor people of another country, just because we suffer under an illusion that it will make those people better off. In a country where wages are typically less than $1 an hour, you don't do anyone a favor by refusing to buy their products and causing their low-paying jobs to disappear and putting their children out on the street to beg. All the sensationalist stories we hear about sweatshops, all the emotionalism and sentimentality, and all the tears shed for the poor children making rugs and teddy bears will not put one crumb of bread into their mouths.

Until you prove that free trade is making people worse off, free trade must be presumed innocent. The differences between countries, in labor practices, pollution standards, taxes, etc., are no excuse to be imposing high tariffs onto another country's products. It doesn't make either them or us better off.

But what about those foreign subsidies to steel? and to airbus? etc.

Another form of the "unlevel playing field" is that of subsidies from governments to certain select industries. These subsidized industries or companies then compete with U.S. companies which are at a disadvantage because they receive no such subsidies.

U.S. steel companies recently went whining to Congress to protect them against Japan and other countries which were "dumping" subsidized steel onto the U.S. market. We continually hear complaints like this. Boeing complains because they have to compete against the European Airbus, which is subsidized.

An important point to keep in mind is that a subsidy to an industry is no different than a tariff against that industry's foreign competition. In both cases the consumers in the country with such protective policies are the ones who pay the price. And the price they pay is always higher than any benefit to that country. It is always a net loss to the country which protects or subsidizes. There is no way such protectionism can win or pay off for the country in question. Such practices continue only because of the power of vested interests which benefit from the protection at everyone else's expense.

But what about U.S. companies which are hurt by this "unfair" competition? Should they be protected? Even if we assume this problem really exists, we are faced with an impossible task at the outset, because it is impossible to judge which companies/industries are truly victims and which ones are not. As soon as the policy is adopted to correct this with protective measures, virtually every industry and company which has any foreign competition will come whining to the lawmakers claiming to be victims and demanding protection. Any procedure for making the determinations and assessing the amount of "damage" to be compensated for will require a vast complicated bureaucracy, and corruption and bribery will overwhelm the decision-makers and leave no hope of any legitimate correction.

So, just as a practical matter, nothing could ever be done about this kind of "unfairness" even if it is admitted to be a real problem which threatens the country's economy. The attempted cure would be worse than the original disease.

But, more importantly, there really is no net problem here for the country. There is a problem for this or that particular sector of the economy which faces the "unfair" foreign competition. However, for the country as a whole, this is not a net problem. Except in the sense that all countries, including the U.S., would be better off if they would all practice free trade and eliminate all trade barriers and all subsidies to business. But when certain countries blatantly engage in the "unfair" practices, a free-trade country can do nothing which will make the situation better, except possibly to threaten retaliation (without the intention of actually doing it) and hope the offending country will back down.

Actual retaliation, in the form of counter-subsidies or -tariffs can only make the retaliating country worse off. The harm it does to itself is the same kind of harm which the original country inflicts upon itself with its original "unfair" practices.

Who pays the price of protection? Anyone who is not protected. In other words, all those industries or companies which are not protected are the ones who pay the price for those which are protected. So if a country protects its steel industry, this can come only at the expense of its auto industry, or its farmers, or shoemakers, or someone who is not protected. A subsidy has to be paid by someone. That someone is whoever is not subsidized. Ultimately, it is all the other companies or industries. Those industries which pay this cost are then put at a competitive disadvantage.

No matter what scenario you imagine, both the original protecting or subsidizing country and the retaliating country make themselves worse off. They only inflict a cost onto that part of the economy which is not protected, or which is less "protected" than the rest. If the country tries somehow to "protect" all sectors equally, then they all pay the cost for each other's "protection" and there is no net protection for any sectors. All are then made worse off. The protection game is a losing game no matter how it is played. It can never succeed, neither for the country which initiates the protection, or for the one which retaliates.

In order to subsidize Airbus, the Europeans must make other sectors pay, and these sectors are then put at a competitive disadvantage, which benefits U.S. companies competing with them. Similarly, when countries like Japan or Brazil subsidize steel, this subsidy comes at the expense of other sectors of those economies, making it easier for U.S. companies competing with them.

The U.S. does not suffer a net loss, though U.S. steel companies and aerospace companies are hurt. But other U.S. companies are made better off by gaining a competitive advantage over their counterparts in those countries which have to bear the cost of the subsidies there.

Suppose the Europeans try to protect those sectors which are forced to subsidize Airbus. By imposing high tariffs in those sectors, for example. Who's going to pay for that? European wage-earners who work in the Airbus factories, among others. They will have to pay higher prices as consumers. If a comprehensive system is enacted to protect all those and only those who pay for the Airbus subsidies, it will have to be paid for by . . . by . . . Airbus, and thus, the original purpose, to protect Airbus, is cancelled by the effort to protect those who pay the cost for the earlier protection. And so the supposed protection is nullified and Airbus ends up with no net subsidy after all. To subsidize Airbus from the right hand, but then from the left hand to make Airbus compensate those who must pay for this subsidy necessarily results in no net subsidy, and thus no competitive advantage over U.S. companies after all.

Thus, it is impossible to subsidize or protect one sector without imposing a net cost onto other sectors, and there is no way to correct this to produce a net subsidy or a net competitive advantage over another country. The only country which can win is the one which protects nothing and subsidizes nothing. Regardless of what any other countries do.

So be careful when you hear free-trade bashers start out saying, "Sure, competition's a good thing, BUT . . . ." Their excuses for prohibiting competition with foreigners show that they fundamentally reject the real purpose of competition, and if they thought they could make any headway, they would come up with similar excuses to do away with domestic competition also. Or worse, they are pure xenophobes.

Competition reduces the incomes of producers/workers as producers/workers, but increases their real incomes as consumers. Only the less competitive suffer a NET decrease in income. Batra's fundamental argument about the wage decline for nonsupervisory workers can just as well be an argument against DOMESTIC competition -- any competition, foreign or domestic, drives down incomes of the less competitive.

Similarly, most arguments against trade across national boundaries would also apply to trade across state boundaries, even county and city boundaries. Saving jobs, for example. The environment. The multiplier effect.

Likewise, Stelzer's complaints about the unlevel playing field are also arguments against domestic competition, because the reality is that there is no level playing field even within the country, not even within a state or within a city.

An obvious unlevel playing field is the disparity of environmental laws between states, which drives businesses out of one state into another in order to save on costs. Another is the disparity in labor laws from state to state. And between cities, what about differences in the licensing laws and zoning laws? And of course there are differing tax rates at both the state and local levels. The unfairness list is endless. The rules could never be made equitable. We could never satisfy complainers like Stelzer -- Hell, let's just cancel the whole game!

If you remember nothing else from this, remember this one point: Virtually every argument against free trade ultimately ends up being an argument against competitive capitalism. Those who hate free trade imagine they are arguing against foreign trade only. But what they are really arguing against is the competitive free market economy in any form. In their heart of hearts these are people who have not yet made their peace with the free market competitive system of economics.

End of Part 5. Proceed to Part 6: Lower Cost vs. Higher Income

Return to:

Free Trade Forever front page

The Sucking Sound and You Introduction

Part 1: What about those declining wages?

Part 2: What about those high tariffs in the 19th century?

Part 3: What about that deindustrialization?

Part 3: What about that deindustrialization? cont'd

Part 4: What about that multiplier effect?

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