It's actually a case for free trade. CVDs are meant to balance out the advantages of foreign subsidies (protectionism) and provide a level playing field for domestic (US) industries. As far as I'm aware there aren't any such laws about free trade between states, so when Louisiana passes subsidies and takes work from California, I don't think there's anything you can do about it. But once it goes international, various treaties come into effect. Of course they were designed around things like cotton and steel but there's no reason they can't be applied to high tech industries.
so when Louisiana passes subsidies and takes work from California, I don't think there's anything you can do about it.
Sorry for straying off topic, but doesn't this send up any flags?
I mean, on one hand, we can see that states can compete against each other (so long as they don't interfere with trade). And on the other hand, the economy of the USA is the most prosperous in the world, ever.
Could it be that protectionism isn't really helping anything in the big picture, and in fact introduces inefficiencies into the system?
Protectionism and free trade are loaded terms. The real issue is the balance of power between the public and private sectors. For several decades the power has shifted more and more toward the private sector. Is it a coincidence that inequality has grown in lockstep? Probably not.
Perhaps we have different ideas in mind with the terms "public" and "private". The power of both the government (i.e., "public") and corporations (i.e., the business part of the "private" sector) are interdependent, and they wax and wane together.
When we citizens complain about a problem, asking the government to stop it, the legislature makes laws intended (if we're feeling charitable) to rein in the actions of industry. This is done by creating regulatory agencies. But who to staff those agencies with? We need regulators who actually understand what the industry does. Thus, the regulators wind up being staffed by people from the industry, or at least people having a mental paradigm matching that of the status quo. This is called "regulatory capture", and the effect is that over time, the forces intended to bind industry winds up reinforcing the industry.
So what we see is that giving the government more power, intentioned to protect us, winds up subverted and perverted to protecting the industries that were in the crosshairs. This necessarily happens, despite best intentions; see "public choice economics". The more you empower government with the intention of controlling corporations, the more power eventually winds up being wielded by those captured regulatory agencies, helping the corporations.
And the result is that our system today is frequently referred to as "corporatist", meaning that the power of government serves to keep industry afloat.
Corporations wield much more power today, yes. But that's only because we've been suckered into giving more power to the government (ostensibly to control industry). So the power increases in lockstep, and if you want to decrease the power of industry, you need to strip the government power that they've captured. Weaken the corporations by weakening the government, in other words.
When we citizens complain about a problem, asking the government to stop it, the legislature makes laws intended (if we're feeling charitable) to rein in the actions of industry.
This is at the very heart of what I'm trying to explain. The basic idea that the government is a separate entity to which ordinary citizens make appeals is a symptom of the waning power of the public. In FDR's day the public organized itself and forced him to levy large taxes against wealthy corporations and individuals. Since then, corporations have waged a successful PR battle to destroy the public's confidence in their own organizations and rob them of political power.
Protectionism doesn't help overall wealth in the big picture, but it does help relative wealth in the local picture. Free-trade works super efficiently (note, Efficiency != Good for all), as long as the world economy operates as one cooperating system. It effectively acts like wealth diffusion while providing low cost goods and services in kind. In a perfectly competing system, with no tariffs, no non-tariff barriers to trade, no subsidies, no wage controls / limitations / support, no trade bans, and no exchange rate / currency manipulation.
Unfortunately, a) all those things not only exist, but are extremely common, b) the local effect of free trade often looks like a reduction in wealth / wages / living standards, if wealth is diffusing faster than the cost reductions and buying power are keeping up, c) humans as nationalistic / tribal groups often view the world in terms of Us and Them and want to WIN, (human psychology is defined in terms of deltas, my wealth means nothing if you're also wealthy) and d) it has the unfortunate side-effect of heavily rewarding entrenched players and accelerating wealth consolidation due to reduced negotiation ability for workers.
That depends on how you interpret it. Free trade, even unilaterally, delivers better efficiency for the entire society as a whole.
However, it's true that in the short run there are individuals who will be affected negatively.
Economic conclusions do not lead directly to policy decisions. We also need to consult our values as a society. I think it's likely that we'll decide that it's not fair to simply sacrifice those few for the rest of us to benefit. But I also don't think it's right to throw the baby out with the bathwater by calling off the whole project.
Surely there's some middle ground, where we can take the overall benefits, and use some of that to mitigate the localized negatives (perhaps through job training or career rehabilitation programs, for example).
Purely IMO, I think the consideration isn't when only a few are affected negatively within a society. Those people are already ignored due to the tyranny of the majority, and the consolidation aspects which occur as a natural outgrowth of free trade.
The issue is when large social groups, or even entire nation states are affected (in their perception) negatively by free trade. With America, this is a drastic problem, as after the period of the 50's to 80's, perceptually, there is little room to go, except down. Compared to other nations, our relative delta was larger than anywhere else, and compared favourably to the deltas of the British Empire, Rome, ect...
This is exacerbated by the fact that America is a nation populated by people with a strong streak of individualism, to the point where even national identity can be difficult. When folks are in Texas (example only for oil) and actively resist trade benefits for folks in say, North Dakota, then talking about the benefits of free trade for society as a whole is a non-starter. Head, meet wall.
I agree that policy should not be purely economic, and I wish policy in general verged far more towards the social side of the spectrum. Unfortunately, our values in America are quite often, "screw that guy, I want mine."
I think that US States have a more limited ability to actually implement trade barriers because they don't have complete legislative freedom. Anything covered by an international treaty is off limits. Tarrifs are off limits and they generally don't have the funds to do massive subsidies.
Subsidies generally are pretty hard to implement because they're 'out of pocket' trade barriers which means the funds need to be raised via tax as opposed to tarrifs which are "in to pocket." Tax breaks are "leaky pocket," but a lot easier then actually paying out.
That's why treaties tend to be more lenient on subsidies.
Poor countries can barely do them. Poor countries/states can't afford them. Rich countires can only really afford them for small artisanal industries with the potential to grow into big, important tech industries. Like Film production and corn farming.
