Foreign trade subsidies are vilified by politicos and their associated economic rent seekers [special interests] and result in protectionist measures such as the recent U.S. Senate China currency bill. Arguments over free trade vs. protectionism are many and varied. Without getting into the tall weeds of the free trade vs. protectionism debate, one might want to examine one very narrow topic which is the gain position of particular consumers/taxpayers due to foreign subsidies.
Contemplate the following:
(1) consider groups which are made up of the foreign and home economic rent seekers, foreign and home politicos, and the foreign and home taxpayers/consumers,
(2) foreign subsidies mean the foreign taxpayer/consumer is bearing a cost of a foreign economic rent seeker, a foreign politico, or a combination of a foreign economic renter seeker and foreign politico,
(3) the home taxpayer/consumer [diffused unrepresented group] , which is constantly under attack by the well organized home economic rent seekers and the home rent seeker’s relationship with the home politico, is in a unique position,
(4) the first component of the unique position is that the home tax payer is not being called upon to fund a home renter seeker/politico scheme,
(4a) the next component of the unique position also allows the home taxpayer/consumer to enjoy a gain in the form of the foreign subsidy in that foreign goods are artificially reduced in price equivalent to the foreign taxpayer/consumer bearing a cost of a foreign economic rent seeker, a foreign politico, or a combination of a foreign economic renter seeker and foreign politico.
Therefore, home consumer C buys product Y. Product Y is purchased at price P minus the foreign taxpayer/consumer subsidy. The home consumer is receiving price relief via a foreign taxpayer. The foreign taxpayer is coerced into subsidizing home consumer C’s purchases of product Y by a foreign economic rent seeker, a foreign politico, or a combination of a foreign economic renter seeker and foreign politico.
This unique gain position of the home taxpayer/consumer spawns a unique argument. The unique argument is one in which home politicos and home interested rent seeker frame the home taxpayer/consumer in a non-gain position. Stated alternatively, the home rent seeker and home politico purposely create a false argument that the home taxpayer/consumer is in a loss position. The unique gain position of the home consumer C buying product Y at price P minus the foreign taxpayer/consumer subsidy is framed as a loss not a gain. That is, rational consumer C should irrationally reject lower prices produced by foreign taxpayers/consumers.
Why in the world should rational consumer C irrationally reject lower prices produced by foreign taxpayers/consumers? The home taxpayer/consumer is urged to erase his gain and act irrationally as an exogenous party wants to capture the gain. Politicos and their associated rent seekers want consumer C to transfer the gain, through differing methods, to home rent seekers and their associated home politico.
That is, the taxpayer/consumer gain, in fact, becomes yet another target of the rent seeker and politico. The gain is merely viewed as an additional revenue source for the rent seeker/politico. That by fashioning a false argument the gain can be extracted from the taxpayer/consumer.
An excellent essay one might want to examine is Do Subsidies Justify Retaliatory Protectionism, Donald Boudreaux, department of economics, George Mason University, Link appears below: