As free traders appear to be winning the argument over trade v.
protectionism, I think that the protectionism of the future will look a lot more like this case, where the Australian Government has put the kibosh on Chinese mining firm Sinosteel's attempt to acquire a large portion of Australian Murchison Metals. I would imagine that, to the non-economist, there would not seem to be much similarity between restricting trade in goods and services and restricting corporate ownership. I would argue that the two are one and the same.
Why would one firm buy another one? The standard intuition is that the purchaser believes he can make a greater profit than the current owner can make, and the current owner will only sell if he is offered more than he believes he can earn in profit. How can the purchasing firm take the exact same set of resources and generate more profit? By having a better plan, or a better business model, or better corporate structure. So in the case of allowing a foreign firm to take over a domestic one, we should simply view this the domestic country importing a better plan or a better model, which is good for their economy. Increased profits will generally lead to some combination of increased output, lower consumer prices, and/or higher wages for workers in the firm.
So what is the upshot of all this? We should treat foreign investment in the exact same way as we treat international trade, meaning the less restrictions on it the better.
protectionism, I think that the protectionism of the future will look a lot more like this case, where the Australian Government has put the kibosh on Chinese mining firm Sinosteel's attempt to acquire a large portion of Australian Murchison Metals. I would imagine that, to the non-economist, there would not seem to be much similarity between restricting trade in goods and services and restricting corporate ownership. I would argue that the two are one and the same.
Why would one firm buy another one? The standard intuition is that the purchaser believes he can make a greater profit than the current owner can make, and the current owner will only sell if he is offered more than he believes he can earn in profit. How can the purchasing firm take the exact same set of resources and generate more profit? By having a better plan, or a better business model, or better corporate structure. So in the case of allowing a foreign firm to take over a domestic one, we should simply view this the domestic country importing a better plan or a better model, which is good for their economy. Increased profits will generally lead to some combination of increased output, lower consumer prices, and/or higher wages for workers in the firm.
So what is the upshot of all this? We should treat foreign investment in the exact same way as we treat international trade, meaning the less restrictions on it the better.
No comments:
Post a Comment