Thursday, July 8, 2004

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It's a protectionist, protectionist, protectionist protectionist world

One could argue that, since John Edwards leaned more protectionist than John Kerry during the primaries, that Kerry's selection for veep shows how illiberal a Kerry administration would be towards trade. It's a thought that certainly gives me qualms.

Until I contemplate the Bush administration. Back in September 2003, I wrote:

The most likely outcome [for trade policy] for the next 18 months is a policy of "hypocritical liberalization." The Doha round will proceed, as will the Middle East Free Trade Area. But the administration will take advantage of every exception, escape clause, and loophole at its disposal to protect vital constituencies from the vicissitudes of the global market. This will hurt the broad majority of American consumers and a healthy share of producers that rely on imported raw materials.

Last month I said why I didn't think this would change. Today, Steve Chapman's column in the Chicago Tribune unfortunately provides further confirmation of this hypothesis:

Do you like shrimp but wish it cost more? Need some bedroom furniture but hate getting a good deal on it? If so, you're very different from most Americans. You are, however, one of the few people who can rejoice in our national trade policies.

Politicians know that consumers in this country are more than happy to buy foreign goods if the quality is sufficient and the price is right. They also know that explicit efforts to shut out imports are usually political fool's gold, more likely to bring defeat than victory at the polls.

So how can our leaders cater to corporate executives and workers who resent competition, without looking like hidebound protectionists? Simple: They don't attack trade--they attack "dumping."

When it comes to trade, many Americans cherish the notion that we are victims of our innocent good-heartedness. In this picture, we're always being cynically exploited by underhanded foreigners while our own companies play by the rules. The laws against dumping are supposed to correct the problem by banning any imports that are sold below "fair value," a baffling concept understood by bureaucrats but not economists.

The Bush administration made use of the law this week when it proposed slapping shrimp producers from China and Vietnam with special import duties of up to 113 percent. Earlier, it had imposed such tariffs on wooden bedroom furniture from China. It's also taken steps toward similar action on all sorts of foreign items, including lumber from Canada, aluminum from South Africa and steel wire strand from South Korea.

A spokeswoman for the Commerce Department's International Trade Administration, when asked how many anti-dumping orders are currently in effect, responds as though I've invited her to count all the cactuses in Arizona. She can't come up with a tally on short notice but says the number is "in the hundreds, maybe more than hundreds." And that's not including all the ones that are pending.

For an administration that boasts of its devotion to tax cuts, these efforts represent an unnoticed and unwarranted tax increase, which will come out of the pockets of American manufacturers, retailers and consumers. It's also a violation of President Bush's supposed faith in free trade, which he touts as a contrast to Democrats who believe that, in his words, "the solution to jobs uncertainty is to isolate America from the world."

Read the whole thing.

UPDATE: On the other hand, here's a story where mercantilists and free-traders can be pleased at the outcome.

posted by Dan on 07.08.04 at 10:54 AM




Comments:

The Bush way is politically smart, and isn't going to change under Kerry. (Frankly, it's likely to get worse.)

If Bush takes a free trade approach on shrimp, it's a drip in the ocean, and not a single vote will change his way. On the other hand, he does what he did on shrimp, a group of highly motivated people are made happy, and may change their votes or give money to express their gratitude.

Can anyone demonstrate that Bush is any worse about this than his father, or even Reagan,for that matter? If so, I'll work on getting outraged.

posted by: Appalled Moderate on 07.08.04 at 10:54 AM [permalink]



Bush is one of the most protectionist presidents in decades, even more protectionist than Reagan.

How anyone who calls himself a freetrader can pretend Bush represents him in this area is something I can't understand.

posted by: GT on 07.08.04 at 10:54 AM [permalink]



I agree with the first comment, if I have to chose between the 2 I will keep President Bush. No system is perfect, but I think the alternative will hurt the country even worse.

posted by: mm on 07.08.04 at 10:54 AM [permalink]



Mangroves, mangroves, mangroves.

posted by: praktike on 07.08.04 at 10:54 AM [permalink]



Free trade is a two way street. China and Vietnam are not opening up their markets to us - why should we open up ours to them?

posted by: Don on 07.08.04 at 10:54 AM [permalink]



Don:

Free trade need not be two way. It's better if it is, but it need not be.

If the US moves more towards free trade with a protectionist country, then people in both countries benefit. If the other country liberalizes trade, the aggregate economies of both countries benefit. But if the US erects barriers, then people on both sides lose. What's free trade about: improving your own quality of life, or punishing the other guy?

A large part of America's ascendancy to the top of the economic pecking order is that it ws one of the more free trading nations in the world, even when it was a very mercantilist world. Other countries' rulers aren't dumb: they see that reducing trade barriers makes them wealthier. Which is why the rest of the world is slowly, sometimes tenatively and perhaps reluctantly, lowering those barriers. The US erecting barriers is not helpful to anybody, because it simply spurs a bunch of wealth-destroying tit-for-tat moves that help absolutely nobody except the protected industries and the politicians they fund.

posted by: Barry Posner on 07.08.04 at 10:54 AM [permalink]



Free trade is outdated concept as one of several fallacious theories perpetuated. Those theories are giving the U.S. tidal waves of trade deficits and account deficits internationally. Thing must be turned around or else ...

posted by: Alex on 07.08.04 at 10:54 AM [permalink]



Dan, maybe you can relax a little re: Kerry/Edwards. Ryan Lizza, in the New Republic (subscription only):

The one major policy difference between Kerry and Edwards during the primaries was over free trade. Edwards attacked Kerry's vote for nafta, but, notably, he never called for its repeal and his criticism always smacked more of opportunism than of conviction. He didn't raise the issue strenuously until after Richard Gephardt was gone from the race, when he saw an opening with organized labor and working-class voters on Kerry's left. These attacks on free trade were an awkward fit with the rest of Edwards's middle-class, New Democrat agenda, and they will clearly not be a major feature of the Kerry-Edwards rhetoric.

Hear that? He said "clearly."

posted by: Anno-nymous on 07.08.04 at 10:54 AM [permalink]



“These attacks on free trade were an awkward fit with the rest of Edwards's middle-class, New Democrat agenda, and they will clearly not be a major feature of the Kerry-Edwards rhetoric.”

I think I’m going to laugh until I cry. Both John Kerry and John Edwards have ceaselessly attacked free-trade since their coming together. Kerry, after the selection of Edwards, immediately attacked President Bush for allegedly shipping off American jobs to foreign shores. Is Bush a free trade purist? Of course not. The president is simply the lesser of evils.

posted by: David Thomson on 07.08.04 at 10:54 AM [permalink]



“When it comes to trade, many Americans cherish the notion that we are victims of our innocent good-heartedness. In this picture, we're always being cynically exploited by underhanded foreigners while our own companies play by the rules.”

I once had the responsibility of buying and importing around 20, 40,000 lbs. containers of merchandise annually from France (Greediness is closer to Godliness than cleanliness in France). Naturally, we had to pay full price for the ocean freight according to the Atlantic Convention tariff. The goods were purchased FOB at a French port. By the way, ocean freight common carriers are exempt from anti trust laws.

I discovered that if the French arranged the freight and the goods were shipped CIF Port of Houston the ocean freight carrier would rebate to the French shipper 10% of the Atlantic Convention ocean freight charge. Evidently, accepting this kick-back is a common practice in France. Consequently, I asked our French suppliers to arrange the freight and apply the 10% as a credit to the total charges. Unfortunately, our lawyers refused to allow us to proceed on this arrangement because accepting such kick-backs, in their opinion would be illegal in the U.S.

“we're always being cynically exploited by underhanded foreigners while our own companies play by the rules.”

posted by: Al Miller on 07.08.04 at 10:54 AM [permalink]



Alex wrote: "Free trade is outdated concept as one of several fallacious theories perpetuated."

Free trade, at its core, is the notion that every individual is free to willingly exchange the fruits of his labors for other goods and/or services, regardless of the geographical location of the other party in the transaction.

How is that concept outdated or fallacious? Because it precludes governmental entities telling where and how I can spend my money?

"Those theories are giving the U.S. tidal waves of trade deficits and account deficits internationally."

Yeah, damn all those selfish American bastards for spending some of their earnings overseas. Imagine how much more wealthy we'd all be if every nation was an autarky. And of course, if you extrapolate that argument to its logical extreme (every person an autarky), think of how wonderful everything would be.

posted by: Barry Posner on 07.08.04 at 10:54 AM [permalink]






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