During the 1990s, no one in the U.S. cared about chicken feet. Used for animal feed, they were close to worthless.
Now though they are big business.
Chicken feet (called paws in China) are a perfect U.S. export. Plump because we grow big chickens and scarce since there are only two per chicken, U.S. chicken paws are a Chinese delicacy. Or, as one chicken executive explained, “Thankfully, paw exports are a win/win: The Chinese get more of what they love and we get the employment and profits from a part of the chicken that otherwise wouldn’t have much value.”
Where are we going? To the benefits of free trade.
Paw Wars
Last Tuesday, the U.S. filed a trade complaint.
We could say that the problems began when China said its chicken producers were being harmed by U.S. chicken subsidies. To remedy the situation, in 2010, they levied anti-dumping tariffs on chickens imported from the U.S.
Given the size of the tariffs, you can understand why they were successful.
The U.S. responded by taking China to the WTO (World Trade Organization). Agreeing with the U.S. that China was violating WTO rules, they told China to lift the levies. During July 2014, China said it had complied; the U.S. disagreed.
So now the U.S. and China are back in “court” again.
Our Bottom Line: Comparative Advantage
First explained by 19th century economist David Ricardo as the principle of comparative advantage, when nations do what they do best, specialization boosts worldwide productivity. How to decide what you do best? Comparing two items or tasks, just do whichever one requires the lesser sacrifice of land, labor and capital. As a result you will have the comparative advantage for producing that good or service and will optimize worldwide efficiency.
Because the U.S. appears to have a comparative advantage for chicken paws, they should export them to China while China can use its resources for other goods and services.
