How to Give U.S. Car Buyers, Environmentalists, Free Traders, and U.S. Auto Workers Much of What They Want

One of the first things you learn about in an economics course is the concept of trade-offs: You can’t have everything you want. This is relevant in the debate about electric vehicles. U.S. auto workers want to keep their jobs. Most U.S. drivers still prefer cars with internal combustion engines. Environmentalists want Americans to buy EVs. And free traders want, well, free trade. Something’s got to give.
Or does it? There’s a path that would enable each party to achieve many of its objectives. First, end mandates and subsidies for EVs. Second, eliminate President Biden’s 100% tariff on EVs from China and allow duty-free imports. Free trade would give lower- and middle-income Americans the chance to buy relatively cheap imported EVs. More people driving EVs would make environmentalists happy. And ending mandates and subsidies would allow U.S. automakers to do what they do best: make cars with internal combustion engines. That in turn would keep U.S. auto workers employed and able to continue using their specific skills.
This is from David R. Henderson, “How Electric Vehicles Can Make Everyone Happy,” Wall Street Journal, June 6, 2024.
I’ll post the whole thing when 30 days are up.
READER COMMENTS
steve
Jun 7 2024 at 11:20am
If people buy more TVs because they are cheaper and US automakers make only ICE cars then wouldn’t the end result be fewer jobs in the US auto sector? I am not sure you can really make a happy ending for everyone.
Steve
vince
Jun 7 2024 at 1:14pm
Especially if China deeply subsidizes EVs. Sure, sure, if China subsidizes EVs, then we should celebrate and take advantage of China for being such a fool. For our autoworkers who lose jobs–they can just find better ones!
Jose Pablo
Jun 9 2024 at 6:33pm
f we had applied the same reasoning 100 years ago, most of us would still be working on farms.
Jose Pablo
Jun 10 2024 at 8:10am
https://www.wsj.com/business/airlines/airlines-keep-trying-to-cut-out-the-middleman-heres-why-it-backfires-108c2694?page=1
Or as travel agents …
New jobs are, indeed, found. It is not good having the same job as an assistant to the Gosplan for life
Jon Murphy
Jun 9 2024 at 2:53pm
Only if EVs and ICEs are virtually perfect subsitutes for each other. They’re not in this case; they’re impect subsitutues (and, along some margins, complements). So, their are gains from trade to be had:
When American auto manufacturers focus on their comparative advantages (ICE) while foreign auto manufacturers focus on their comparative advantages (EV), both can produce more and sell more at lower prices. When people are forced to focus on their comparative disadvantages, then they can produce and consume less.
So, along some margins:
-Some people who wouldn’t buy a car now do
-Some people who would have bought an ICE but had to buy an EV now buy ICE
Richard W Fulmer
Jun 7 2024 at 1:40pm
So, your idea is to allow Americans freedom of choice. Freedom. Interesting concept. Who knows? It might actually work.
Scott Sumner
Jun 7 2024 at 1:57pm
Excellent post. BTW, Chinese cost advantage in EVs is not due to subsidies—their firms are far more efficient than ours.
Jeremy Goodridge
Jun 7 2024 at 3:30pm
Scott — What data do you have to prove that “their firms are far more efficient than ours.”
vince
Jun 7 2024 at 3:50pm
And if so, it would be ironic that they would be so efficient at production yet inefficient at trade policy.
David Henderson
Jun 7 2024 at 6:40pm
Thanks, Scott.
Jose Pablo
Jun 9 2024 at 6:39pm
And, in any case, American EVs are also (heavily) subsidized.
So, if I get it right, Chinese EVs can’t be sold in the US because they are subsidized by Chinese taxpayers, but American EVs can because they are subsidized by American taxpayers.
Frankly, as an American taxpayer, I prefer the Chinese subsidizing the EVs bought in the US than subsidizing them with my own money.
Herb
Jun 10 2024 at 7:53pm
Is it efficiency, or non-union wages?
steve
Jun 8 2024 at 5:35pm
Subsidy or efficiency, I think it’s probably both, CATL (a Chinese company) just announced its introducing a battery for TVs with a million mile warranty. Probably intended for commercial vehicle market.
https://chargedevs.com/newswire/catl-warrants-its-new-ev-battery-to-last-for-a-million-miles-or-15-years/#:~:text=Chinese%20battery%20supplier%20CATL%20and,such%20as%20buses%20and%20trucks.
Steve
Jon Murphy
Jun 9 2024 at 1:26pm
Good stuff David. What I really like is this article demonstrates liberal virtue, namely cooperation. You seek out compromise and means to try and accomplish everyone’s goals.
Liberal politics is about fostering these sorts of compromises. It’s unfortunate that American politics has become more about domination.
Jose Pablo
Jun 9 2024 at 6:43pm
Yes, the realm of politics should be restricted to Pareto-efficient policies.
But then, what would we do with so many unemployed politicians?
I am afraid there is not any alternative use to them.
Comments are closed.