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> This is really simple if you stop and look at the individual pieces: if you have free trade, but your trading partner uses the money they get from taxation to subsidize weak parts of their economy that you would normally have an advantage in, then you're going to lose that advantage when businesses in that area go bankrupt as they can no longer compete. Your trading partner can then move the subsidy to other businesses and repeat the process until they have destroyed all of your local business

I think this is one of those fearful arguments that doesnt really represent reality.

In argentina we export a lot to Brasil, and one thing we export is cars. Lets suppose that Brasil takes a protective policy and then uses heavy subsidizing to make car factories and then outcompete argentinian automotors, lets say the subsidy is so large that cars in Brazil cost half in every single aspect, in every niche and ever smaller car element(something impossible to cover in reality).

Yes, the car industry in argentina is toast, but now argentinians can get cars at half the price thanks to the generosity of the brazilian taxpayer. The argentinians have become enormously wealthier by such a measure at large.

Not only that but now argentinians as a whole have half a car extra in money to spend in other services and products, which means that a bunch of other industries will grow! Argentinians would become much richer.

Lets say that Brasil loved that result (i dont know why, because they hemorraged money like hell) and repeat that with every single product argentina builds. IF every single product in argentina ,imported from brasil costed half, and it effectly replaces everything, it really means that Brasil is now giving argentina half the PBI of Argentina in subsidy. That is so unreasonable that it will never happen.

Theres another thought around this topic: that you can destroy an industry, and then increase your profits later on as a sort of monopoly power to recoupe the initial investment. IT would never happen that way: the moment prices rise up, investors would flock again to the argentinian automotive industry and take those profits away.

What is clear is that brasil would be using its tax payers to give products to other countries!

>Yes, the car industry in argentina is toast, but now argentinians can get cars at half the price thanks to the generosity of the brazilian taxpayer. The argentinians have become enormously wealthier by such a measure at large.

Temporarily they do. Once the Argentinian car industry is gone, however, they can safely jack up prices again knowing that bringing it back will be very, very hard. That money will leak out of the country, driving down the Argentine peso, making Argentines poorer overall.

>Theres another thought around this topic: that you can destroy an industry, and then increase your profits later on as a sort of monopoly power to recoupe the initial investment. IT would never happen that way: the moment prices rise up, investors would flock again to the argentinian automotive industry and take those profits away.

The flagrant gaping hole in your argument is the presumption that you can build a car industry overnight. It takes decades and requires a lot of investment. The Japanese government threw a not insignificant portion of its GDP at its car industry before it even started showing promise.

Do you have real life examples of a country subsidizing an export to a country damaging is industry, and then jacking up the prices and get that so called monopoly profits?

I dont think you will find a subsidy that ended up being a net monetary gain for the tax payers, let alone a good investment option.

US subsidized grain flooded into Mexico after NAFTA driving farmers out of business. Later the price of grain skyrocketed.

Grain has international prices, there are lots of grain producing countries. I doubt it Mexico farming less grain affects prices.

Pretty much all of Africa, unfortunately. Dumping from both the west and the far east has destroyed large parts of the economy.

To add as well, the free subsidy is definitely a short term thing. If you look at it as an 'education fee' for the subsidized business, it's not really that unexpected. Eg, a student may be paid nothing while he works as an intern and learns skills, but he does it anyway because once he has done so he can earn far more for the rest of his life. Same with subsides.

Also another way to look at it: the people buying the cars for less could probably already afford the cars. So instead of that money going to new workers in your own country, they're going to those in other countries. So the rich benefit in paying cheaper prices, but the poor who needed that income more than they needed a cheaper car suffer. In properly working free trade, this would be a two way street of comparative advantage, but because of numerous 'cheats' it's no longer a two way street.

>If everyone is free trade, and nobody tries to cheat, then free trade is better for everyone.

...is precisely the justification the British made for exporting food from Ireland during the potato famine.

Well, they didn't exactly claim it was better for everybody but they claimed that it was a good pretext for letting the Irish starve while Ireland exported food.

Except that those exports of high-price-per-calorie food (meats, dairy, wheat) were what paid for large imports of low-price-per-calorie food (rye, corn). If they'd shut down exports, those imports would not have come and the famine would have been worse.

Ireland was perfectly capable of farming all the rye & corn it needed. It was just more profitable to farm meat/dairy/etc for export to England.

Those profits were not used to feed the starving, either. They largely went to rich landowners.

Amazing that even today people defend this.

Here's some citations for you: https://pseudoerasmus.files.wordpress.com/2015/06/irish-fami... https://pseudoerasmus.files.wordpress.com/2015/06/ograda-fig...

As you can see, domestic Irish production of all foods, in calories, just about halved. Food production absolutely cratered, due to weather and blight. They eminently were not able to farm "all the rye and corn they needed", and such imports were also in shorter supply than usual, because famine/scarcity conditions were occurring all across Europe (helping to spark the 1848 Revolutions, notably.) But these imports still had to be paid for somehow, and in an era of largely subsistence farming and thus small savings, this had to be paid for in large part by exports - of what? Of highest-value agricultural goods. You see from the graph that Ireland, during the depths of the famine, was a net importer of every grain except oats, where their exports had also fallen from normal levels. And, you see from the chart that, in total calories, Ireland had gone from being a net exporter to a net importer - bringing in over one-quarter of their total food supply in the Famine years, and going from typically exporting around 240,000 tons of grain a year, to importing up to 750,000 tons. Stopping exports from Ireland would have meant more dairy, oats, meat in Ireland, true - and less of the cheap imported grains that people really needed. It's true that the landowners were part of the overall problem, but no export limits would have caused new food supply to spring into existence or be imported.

I'm sure at least one of the down votes was due to the edit.

It was on -4 before I made the edit, now it is on +10. So I'd like to think that the edit at least helped some people try to be a bit more objective which is always beneficial. Or it could be a coincidence.

I think it's just that people get caught up in tribal thinking very easily, and while the commentators on this site would usually be interested in discussion on the comparative advantages and disadvantages of free trade, Trump's message on protectionism have driven some people into a corner of having to be anti-protectionism to remain true to their 'tribe'. It's pretty unfortunate how quickly we as humans can fall into a trap like that: "I hate person X, person X believes Y, therefore I don't support Y".