"Protection" As Battery
30 October 2006
Editor, The Wall Street Journal
200 Liberty Street
New York, NY 10281
Dear Editor:
Asserting that foreign steel producers are subsidized by their governments, Andrew Sharkey argues that Uncle Sam must artificially raise the price that Americans pay for imported steel (Letters, October 30). This argument fails.
The only plausible case for preventing consumers from accepting a gift of low-cost steel from foreigners is if such subsidies threaten to oblige us to pay higher, monopoly prices in the future. But the likelihood of this outcome is minuscule. As Mr. Sharkey says, subsidies encourage excess capacity. So for as long as the subsidies continue, we enjoy steel on the cheap. And if and when the subsidies stop, the excess coke ovens, blast furnaces, and other steel-making equipment don't dissolve into thin air. They'll be around to ensure that steel is supplied competitively.
Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University
Editor, The Wall Street Journal
200 Liberty Street
New York, NY 10281
Dear Editor:
Asserting that foreign steel producers are subsidized by their governments, Andrew Sharkey argues that Uncle Sam must artificially raise the price that Americans pay for imported steel (Letters, October 30). This argument fails.
The only plausible case for preventing consumers from accepting a gift of low-cost steel from foreigners is if such subsidies threaten to oblige us to pay higher, monopoly prices in the future. But the likelihood of this outcome is minuscule. As Mr. Sharkey says, subsidies encourage excess capacity. So for as long as the subsidies continue, we enjoy steel on the cheap. And if and when the subsidies stop, the excess coke ovens, blast furnaces, and other steel-making equipment don't dissolve into thin air. They'll be around to ensure that steel is supplied competitively.
Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University
Posted by Don Boudreaux on
Sunday June 10, 2007 at 7:16am