Unilateral Disarmament Is Not a Thing

As the Export-Import Bank's charter nears expiration, supporters continue to argue that ending this government agency, which subsidizes loans to major U.S. exporters (mostly Boeing), is unwise because other countries also subsidize exports.  They’re especially eager to point to China, whose own export credit agency is very active in promoting Chinese manufacturers.  They then claim that allowing the bank charter to expire would be “unilateral disarmament.”

Claiming that the United States should pursue any economic policy on the grounds that China is doing it strikes me as bordering on insanity.  Market intervention by the Chinese government has resulted in large-scale misallocation and is a serious liability for the stability of the Chinese economy.  It’s true that Chinese subsidies to domestic industries reduce opportunities for U.S. businesses, and it’s perfectly alright for the U.S. government to condemn those policies.  But should we really seek to emulate them?

Competitive metaphors about trade are generally bad, and martial ones are especially unhelpful.  The United States is simply not engaged in a metaphorical war with its trading partners.  Thinking of trade as a contest inevitably leads to bad policy by giving governments an excuse to intervene in the market for the benefit of crony constituencies.  The fact that some U.S. businesses would make more money if foreign governments pursued better policies is not a legitimate excuse to intervene in the market on their behalf.

Regardless of the reasons offered to justify it, there are real consequences to the U.S. economy when the U.S. government picks winners and losers.

Supporters of the Ex-Im Bank make plenty of other bad arguments, all of which betray a fundamental distrust of free-market capitalism.  But “China does it” may be the worst one.