[FOUNTAIN]A fable tells the essence of free trade

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[FOUNTAIN]A fable tells the essence of free trade

Whom does free trade benefit and whom does it harm? How about protectionism? The questions would make good college entrance exam essay topic or be worthy of a test for a first-year economics major. The American economist James Ingram answered the basic questions of economics with a fable.
When protectionist public opinion prevailed in the American automobile industry, a company invented an astonishing machine that produced cars out of corn. The company constructed a plant on the seaside and began manufacturing. Of course, the inside workings of the factory was kept confidential.
The cars produced there were cheaper and better than other carmakers’ products. Consumers went crazy for the cars and the company’s market share grew rapidly. The farmers supplying the agricultural goods to the company were also happy. But the existing carmakers were frustrated by the emergence of the newcomer. Because of the formidable competitor, they had to lower prices and work on restructuring and developing new technology.
One day, a discontented employee of the company tipped off a newspaperman, sneaked him into the factory and showed him the true nature of the company. Inside, the corn was being loaded on ships for export, and imported automobiles were rolling off other ships. The public howled, the plant closed, carmakers raised their prices and farmers lost a market for their goods.
The fable illustrates that protectionism is essentially the elimination of the most effective factory in the nation. Moreover, it did not miss the fact that the consumers are the ones to suffer.
Originally, the fable addressed the protectionist tendency of the U.S. automobile industry. But if we reverse the goods, the story might apply to Korea as well. For example, how about a factory that made inexpensive, high-quality rice out of cars? If we shut down this factory, we would ruin the most efficient rice field in the country.
The government promised to guarantee rice farmers an income so they can continue producing rice even if the rice price falls. That would serve as a pain killer, mitigating the pain of opening the rice market. Then what other task remains for us? It is a painful yet necessary restructuring, not closing the factory in the fable.

by Nahm Yoon-ho

The writer is head of the family affairs team at the JoongAng Ilbo.
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