All hail Government Motors

As this Register editorial notes, they don't have to change the logo. GM can stand for "Government Motors" quite nicely, thank you. We also mentioned briefly what has been since teased out in more detail by others -- that the agreement will present a major trade problem, in that forcing GM to build more cars in the U.S. and preventing it from importing European models it already makes is a protectionist measure and probably in violation of WTO treaty obligations.

The administration says it just wants to nurture GM back to profitability, but as I also pointed out yesterday, decisions will inevitably be politicized in ways that undermine much hope of profitability. Ah, what wonders there are in this Brave New World.

End of free trade? Maybe not

The World Trade Organization's Doha Round of trade talks ended in failure last week, the first time since the establishment of the generally trade-promoting GATT regime after WWII that a round of talks -- these started in 2001 -- failed to produce some kind of liberalization agreement. This time they couldn't even come up with a token move. Editorials lamenting this failure rang out across the land. I think, however, that the Cato Institute's Dan Ikenson has convinced me that the death of moves toward freer trade has been exaggerated. As this Register editorial explains, while political leaders may denounce globalization and free trade in public, the record of recent years has shown that the countries that trade the most tend to enjoy the most economic growth -- so even as India undermined the WTO talks to popular acclaim in India, India has liberalized both its internal and external business and trade policies and begun to enjoy growth and some measure of affluence.

I still don't understand why free trade, which anyone who has ever taken Econ 101 or thought for more than a moment understands is long-term beneficial to the society that adopts it (though there may be short-term disruptions and losers, as always happens in a dynamic economy), is so easy to denounce in the political realm. Dan says, however, that some of same politicians who demagogue against free trade and globalization privately understand that the stance is stupid populism (maybe Barack Obama?) and in action take steps to increase trade. (Count on politicians to be hypocrites.) Dan sees a good deal of progress in the area of reducing bureaucratic impediments -- overlapping agencies demanding forms and doing inspections, sometimes soliciting bribes, consuming valuable time -- which can be more significant than outright tariffs at impeding trade flows.

US-Vietnam relations almost normal

President Bush met last week with Vietnamese prime minister Nguyen Tan Dung (no, I didn't make that name up). A bunch of protesters beggd to differ with the Bushlet's assessment that the Vietnamese are making progress on human rights, especially when it comes to religious freedom. The protesters were right, but it's still the wisest policy to have as open a relationship with Vietnam as possible -- tariffs and other trade barriers down to zero, etc. Here's the Register's editorial to that effect. After a long period of trying to abide by communist orthodoxy, Vietnam has grudgingly moved toward a market-type economy and is starting to see economic improvement and some foreign investment. Can't give you a timetable, but free trade is the best way to create pressure in a politically rigid society toward more effective freedom.

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