Based on free-market principles, President Trump’s proposal to increase Argentine beef imports to lower domestic prices is problematic for several reasons.
- Market Distortion and Unintended Consequences.
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- In the free market, prices are determined by the natural forces of supply and demand, which convey important information to producers and consumers about what the market will tolerate.
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- Government intervention to artificially suppress prices distorts market signals. Today’s high prices reflect factors like reduced domestic cattle herds due to drought and input costs, combined with strong consumer demand.
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- By interfering through expanding imports, the government sends a false signal to U.S. producers, and instead of being incentivized by high prices to expand their herds (which would be the market-driven solution to high prices, eventually lower prices when there is more supply than demand), producers may choose to liquidate or delay investment, fearing government will continue to interfere and artificially cap their returns…which ultimately hinders the solution of increasing domestic supply.
- There is potential harm to the Domestic Industry
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- Free-market principles hold that domestic producers succeed or fail based on their own merits, efficiency, and ability to meet consumer demand.
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- Flooding the market with government-backed imports could undercut American producers. If there is unequal competition in input costs between foreign and American producers, American producers could have trouble competing in the traditional consumer market and, again, may decide to liquidate or reduce domestic production.
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- This action threatens the economic viability of American family farms and ranches, prioritizing a short-term, artificial price fix over the well-being of the U.S. agriculture sector.
- As a General Rule, Free Market Principles oppose Government Overreach and Central Planning.
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- The late free-market economist Milton Friedman believed that government’s role should be limited to enforcing private rights, setting the rules of the game, and providing a means for resolving disputes, leaving private enterprise to handle the rest.
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- When the government attempts to set the “right” price for a product and then enacts a specific import plan to reach that price, it’s a form of “central planning.” The issue is, no government official (or economist) has perfect knowledge needed to determine the optimal price to keep supply and demand in balance. So, while the market fluctuates with supply and demand, central planning is working blindly, which can lead to surpluses (when prices are too high) or shortages (when prices are too low).
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- The market works better for producers and consumers in the long run than government central planning does.
