Monday, November 19, 2007

Free Trade in Trouble

Here's a link to the Register's editorial today on House approval of the Peru free(er) trade agreement, which we applauded. I haven't seen evidence that the Senate will reject it, so it could well come into effect. However, similar pacts with Panama, Colombia and South Korea are in trouble, and if the Washington pundits are right, unlikely to pass. That's a shame. The most consistent (and over even the medium haul, I believe) most effective way to reduce trade barriers around the world would be for the United States to set a proper example by simply eliminating all tariffs or other trade restrictions unilaterally, and inviting other countries to observe the benefits and do likewise. These negotiated trade treaties with single countries or regions (the Peru agreement is virtually a carbon copy of the Caribbean-area agreement, which in turn is almost the same as NAFTA), don't bring about unbridled free trade, but trade managed with a lighter touch.

Almost everyone with a scintilla of economic knowledge recognizes that free trade is beneficial (though it can cause temporary dislocations, as can other developments in a dynamic economy, like the invention of the transistor or the development of a mass-market automobile), but they're pinioned by the conviction that eliminating a trade barrier is a concession to the other party rather than lifting a restriction that harms American interests, and it has to be met by a concession of equal value. The whole process of bartering and negotiation employs a lot of people, some of whom are convinced free traders, who would have to find other, probably less interesting employment if we moved to free trade in one fell swoop. Whether maintaining full employment for trade negotiators is the reason trade negotiations operate on the assumption that only gradualism is politically feasible or not, that's the modus operandi.

The regulations governing genuinely free trade wouldn't require more than a single stamp on a #10 envelope to mail, but these bilateral agreements are hundreds of pages long, filled with tedious minutiae, the interpretation of which requires armies of bureaucrats and lawyers. It's almost counterproductive that such agreements are routinely described as free trade -- really free trade is much simpler -- but not quite. I view these agreements, however imperfect, as having the potential to increase trade, which is the best way to increase and spread prosperity, and so, short of the ideal as they are, they're worth supporting.

But Bill Clinton may have been the last prominent Democrat who went for what used to be a liberal (even the modern American version) mainstay, belief in freer trade, generally viewed as part-and-parcel of enlightened internationalism. Today's Democrats seem convinced (or are propagandized into; it's hard to believe it was a process that convinced anyone intellectually) that the only impact of freer trade is exporting American jobs and setting off a "race to the bottom" that will sooner rather than later impoverish us all except for a few corporate malefactors. Many of the new Democrats in Congress ran on an explicitly anti-free-trade platform.

I confess (even after that valuable IHS seminar in September) that I don't understand the hostility to trade, not only among "progressives" and "liberals," but "conservatives" who claim to believe in free markets and limited government. By definition a trade doesn't occur unless both parties think they will be better off as a result, so each transaction is a classic "win-win" situation. You would think most people would prefer a world in which the number of win-win situations was maximized, or at least increased

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