Saturday, May 21, 2022

How to BTFO Mercantilists, E.g. Grapes

Let's say France heavily subsidizes her grape producers. She uses tax money so they can afford to sell all the way down at half price. If you let her export to England, it will wipe out all English grape production.

Step 1: tariffs to put French grapes at exactly English prices at the English docks, effectively anti-subsidizing them. Throw all this money into the treasury. "Thanks for giving us your tax money, France. We appreciate it!" 

Step 2: release the tariffs entirely. When your own domestic vineyards threaten to go out of business, use the tariff money to buy them out so they personally suffer ~0 losses. Functionally, forcing France to buy all your vineyards out with her own tax money. "You can put them out of business if you like, but only if you pay for it."

Step 3: France is paying for England to eat grapes. Thanks France! What a nice country. So generous. The more French grapes they sell in England, the more French tax dollars effectively end up in England.

Maybe you keep a small tariff so as to pay for the mothballed vineyards? Grapes aren't a terribly critical good, so maybe the government just re-sells the land and lets the chips fall where they may; the land was paid for by France, so anything you can get for it is pure profit. With something more important, like meat or steel, you would want to preserve them against the inevitable time when the "protectionist" economy falls to its own inept policies. Mothballing isn't free, so a small tariff could be used to cover that - again, making France pay for it. "Steel supply shock, huh? Oh yeah we have those strategic steel mill reserves."


Anonymous said...


What would the *benefit* be to the french economy of subsidising grape prices, unless they specifically wanted to tank the UK grape market?

1) France aware of tarriffs and therefore can choose to stop selling to your market or further adjust price
2) Market can choose between French and British grapes at any time.
3) No, then your government owns vineyards that it will not be able to manage.

Tarriffs are really the most effectively used to punish companies for offshoring labour. "It's cheaper to make it overseas" oh, really?

Although, in the situation that a foreign country tries to destroy your local market with cheaper goods, your idea works well and is hilarious.

1) Apply tarrif to foreign goods such that the market price of the foreign good ends up halfway between the intended price and the market price of the local goods
(eg - if French grapes come into market at 50 cents and local grapes cost 1 dollar, apply a 25 cent tarriff.)
2) Give the tarriff money directly to local producers.
3) Advertise this fact to the foreign producers as loudly as possible. May as well pay your workers more, hey?

Alrenous said...

Read the part about "mothball" again.

Well yes, what is the benefit? China currently subsidizes its steel. The thing to do is to agree to take China's money.

The government cannot safely meddle with the economy long-term. It will always destroy the economy if it's allowed to. The thing to do is encourage the other guy to destroy theirs, if they start doing so.

Subsidies are addictive. Ref: corn laws and farm bills. China can't stop subsidizing its steel. It also can't stop exporting its steel, for exactly the same reason. Unless you're a rabid dog like USG which simply can't help itself - and is thus fucked anyway - your industry is safe even if it's their industry.