Jagdish Bhagwati on Protectionism

With all the discussion of free trade, tariffs, and non-tariff barriers, I decided to pick up and quickly skim a short, delightful book by trade economist Jagdish Bhagwati. It’s his 1988 book, titled simply Protectionism. I wrote a short review of the book in the June 5, 1989 issue of Fortune.

One of the issues, then and now, is American companies’ objection to what they see as “dumping.”

Here’s a key paragraph of my review:

American companies often claim that foreign competitors are unfairly subsidized by their governments, and they petition the U.S. government to impose countervailing duties and antidumping measures on foreign suppliers. Bhagwati sees such measures as mainly harassment to discourage competition from foreigners. For example, he says, U.S. rice producers got a countervailing duty imposed on rice from Thailand by establishing that the Thai government was subsidizing rice exports by less than 1%–and ignoring the fact that Thailand also slapped a 5% tax on rice exports. We usually think a foreign firm is dumping when it sells at a lower price in our market than in its own. But the U.S. government took an antidumping measure against Poland’s exports of golf carts even though no golf carts were sold in Poland.

I didn’t have space to cover his humorous discussion of an argument by Stephen Cohen and John Zysman, in their 1987 book, which made a splash at the time, Manufacturing Matters. I have space here. Cohen and Zysman wrote, and Bhagwati quotes:

There are…other kinds of linkages in the economy, such as those which tie the crop duster to the cotton fields, the ketchup maker to the tomato patch, the wine press to the vineyards (to return to our focus on agriculture). Here the linkages are tight and quite concrete…the linkage is a bind, not a junction or substitution point. Offshore the tomato farm and you close or offshore the ketchup plant. No two ways about it.

Responds Bhagwati:

Now, as I read the profound assertion about the tomato farm and the ketchup plant, I was eating my favorite Crabtree & Evelyn vintage marmalade. It surely had not occurred to me that England grew its own oranges.

(Bhagwati, by the way, wrote the article “Protectionism” for David R. Henderson, ed. The Concise Encyclopedia of Economics.)