Comment Articles

Adam Smith's lessons for IT

Declan McCullagh CNET News.com

Published: 27 Nov 2003 12:25 GMT

It's been 227 years since Adam Smith published a five-book epic titled The Wealth of Nations, which described how free trade and a division of labour were crucial to economic success.

Yet protectionists still refuse to acknowledge that obvious truth. Instead, we see them doggedly trying to choke off free trade by claiming that American manufacturers need to be protected from more efficient foreign competitors.

Micron Technology, the world's No. 2 maker of microchips, has recently been trying to do just that. The Idaho-based company is worried about Hynix Semiconductor, a South Korean company that's the third- or fourth-largest maker of microchips.

Micron claims that Hynix is competing unfairly by -- I am not making this up -- selling its dynamic random access memory (DRAM) chips at a lower price than US companies do. Micron CEO Steve Appleton insists that this is unlawful and that American consumers should be forced to pay higher prices when shopping for computer gear.

In pursuit of this high-minded objective, Micron has been complaining to politicians in Washington, D.C. Micron's home state senator, Republican Larry Craig, responded by inserting language in an appropriations bill railing against South Korea. Rep. Butch Otter, also an Idaho Republican, complained during a hearing in May that "only enforcement [against South Korea] can ensure trade is fair, open and free of injurious subsidies."

The Bush administration took a more dramatic step. This summer, it sided with Micron and slapped a 44.3 percent tariff on Hynix's DRAM chips. At about the same time, the European Union levied tariffs of 34.8 percent. Earlier this month, Hynix appealled the decision to the European Union court that arbitrates disputes between companies and governments.

Micron claims that Hynix illegally benefited from a multibillion-dollar debt restructuring its creditor banks arranged, which the Bush administration and the EU view as an unlawful government subsidy. Even if that is accurate, it won't last forever: South Korea eventually will find that other parts of its economy are ailing as a result and will stop. More to the point, South Korea's alleged profligacy is a great deal for US consumers, who get cheaper prices at Korean taxpayers' expense.