There are two schools of thought in international trade theory. One holds that removal of trade barriers and regulations on trade is everywhere and always a good thing. That it brings benefits to all concerned. This school is not generally bothered by sophisticated models or complex algebra. All one needs to do to prove its results is to assume that the trading nations are all competitive economies. The perfection of trade naturally follows.

Which is just grand except that most economies are to a greater or lesser extent not competitive. Mainly this is a quibble except for certain economic systems. No one, for example would have asserted that Stalin's Soviet Union was a free competitive economy.

Which brings us to the sole surviving Stalinist nation on earth - That would be our good friends in the Peoples Republic of China.

David Barboza reports on China's steel industry in today's Times:

One of the tricks is widely discussed. Big government-owned steel makers used their import licenses to buy more iron ore than they needed. Then they profited by illegally selling excess ore to small producers that lacked licenses to import iron ore, a critical ingredient to make steel.

This practice, described in detail this week by analysts, traders and industry experts, was part of a system that they say violated industry regulations and bred a culture of corruption.

Small steel producers are not supposed to buy supplies from big steel makers that have signed long-term contracts with volume discounts. They are supposed to buy on the iron-ore market, where prices can be volatile. Small producers have long complained that the system favors big state-owned companies.

The incentive was there, the small producers said, to cheat by what people in the industry here call “rent seeking,” or bribing larger competitors and buying their excess iron ore.

Now this may well have no efficiency implications for the US, although Wonks Anonymous would like to pose this question to Paul Krugman who has done extensive work on trade when competition is imperfect. It does, however, indicate that the Chinese economy is rife with state interference and state sponsored monopoly.

We may well be better off, in a material sense, with cheap Chinese steel but our purchases of this steel may only serve to reinforce the monopoly power of China's Communist/Industrial complex. Which complex may well be retarding the advancement of the Chinese people by siphoning off excessive rents. This complex may also be skewing Chinese development along lines that are not conducive to the long term welfare of these people.

Consider, for one moment, the development of another slave economy. The American South was a strong proponent of free trade.  This trade benefited the world with large supplies of cheap industrial material. Slaves saw none of this prosperity and, in fact, development of industry and agriculture were retarded until real emancipation came in the 1960's.

The blatant manipulation of China's steel industry is only one example of the economic and social control exercised by the Stalinist elites of that nation. We should remember it in our dealings.