resurrectionsong

November 21, 2003

A Good Step...

Free trade in the Americas got a boost today--but when reading the fine print, it's easy to see that this is only a step toward the promised, sprawling free trade zone. And, unsurprisingly, the roadblock to free trade is American protectionism.

Brazil and the US drew up their "menu" approach to the FTAA as a way of overcoming their deep disagreements on how comprehensive the accord should be.

This went against what many of the other countries meeting in Miami wanted - that is, an all-embracing deal dropping tariffs and trade barriers across the twin continents.

However, America's farmers, not to mention powerful voices in the unions, wanted to limit the agreement's scope and US President George W Bush was reluctant to push the issue with an election due in less than a year.

The location of the talks, in the key electoral battleground of Florida, highlights the importance of the thousands of US citrus farmers whose livelihoods could be threatened if they lose their lucrative subsidies.

I understand the farmers' balking at true free trade and the end of the welfare system that is subsidization of farms. But if free trade is the goal, then these old protectionist reactions need to be overcome. There is a strong argument to be made that US protectionism inhibits economic growth in underdeveloped countries, and ultimately hurts consumers by acting as an agent for price controls.

Those price controls work negatively in two ways. First, subsidies require more taxation and that means that our cheap produce is actually more expensive than we might otherwise have noticed. Second, by not allowing less expensive equivalents, the consumer isn't buying from a free market, but an exclusionary market that doesn't include the lowest cost option.

Along with the steel tariffs and the move to block Chinese textiles, President Bush continues to show weak leadership in the move towards free trade. In another election year, this might be enough for me to vote against the man. This year, though, there is too much at stake in the areas where he shows the greatest leadership, so my vote still belongs to Bush.

That doesn't mean that it's good to remain silent on the issue. Free trade is good for America, although that doesn't mean that inefficient or overpriced industries won't feel the effects. Free trade is good because we are more than competitive in most markets and because an open market forces positive reforms in surviving business interests.

Read the story.

Posted by zombyboy at November 21, 2003 10:52 AM | TrackBack

Comments

I'm not big on trade issues, to tell you the truth, I generally consider it an insomnia antidote.
However, in the case of the Chinese textiles issue, our "protectionism" stems, in part, from attempting to head off aggressive subsidies from the Chinese govt.
The main reason why Japanese cars got such a large market share so quickly is that the Japanese govt underwrote much of their costs to help them undersell US cars.
(a sidenote to that explains why the 280Z and 300Z went away from Nissan, and why Isuzu stopped selling cars: they didn't pay down their debt to the Japanese govt as quickly as Toyota and Honda, and got caught when the Japanese economic bubble burst...)
So if we look deeper, might we find that Brazil, Mexico, and other nations asking us to all 100% free trade in our markets while maintaining protectionism in theirs?

And, don't forget, one of the reasons Chinese goods are so cheap is because the Chinese govt is deliberately keeping their currency grossly undervalued. Isn't that a sort of protectionism, too?

Posted by: nathan at November 21, 2003 11:08 AM

Absolutely, that's a form of protectionism--but it's also self-correcting because it isn't sustainable. I admit that I don't see the textile issue as being nearly as large as the steel issue, but it seems to be becoming a bit of a habit for President Bush to protect markets in ways that I don't think are acceptable. Especially considering his talk about using free trade as a carrot for political reform in certain parts of the world--he talks free trade, but he hasn't done terribly much to back up that talk.

As for the cars and trucks--we've got a history of being amazingly protectionist when it comes to that market. The UAW has been such a powerful union that politicians court them actively. I can't get too worked up when other nations retaliate against our (what I consider) overzealous protecting of our markets.

As for the Americas free trade zone, the other nations were demanding that, in return for opening up markets where we have distinct advantages (IT, for instance), they would gain access to, specifically, farm markets. That's oversimplification, of course, but it really does seem to be an American roadblock to free trade in this instance.

As I said, though, this isn't enough to dissuade me from voting for Bush in the next election--just something that I'd like to see changed during a potential second term.

Posted by: zombyboy at November 21, 2003 11:28 AM

I'm not saying I like protectionism...just that "whose protectionism is in retaliations for whose" is a restatement of "which came first? the chicken or the egg?" Especially since the world grew out of mercantilism, a major feature of which was protectionist tariffs.
But I will agree with you when you say Bush has been too protectionist; one of the things that spurred a great deal of support for the revolution against Great Britain was its tariffs against our goods in the New World.

Posted by: nathan at November 21, 2003 02:59 PM

Then of course we have some REAL protectionism. The investigation into that killer hepatitis (sp?) outbreak finally tracked down the cause, Mexican green onions and now we're stopping truckloads at the border.
I like the idea of free trade, I'd be a helluva lot more comfortable with the reality when our citizens aren't dropping dead.

Posted by: Peter at November 21, 2003 09:02 PM

Peter makes a very good point. Very good indeed.

Posted by: zombyboy at November 23, 2003 12:21 PM