Protectionist "heresy"

This is an interesting article on the evolution of today's "free trade" orthodoxy:

http://www.theatlantic.com/unbound/polipro/pp2004-02-25.htm

 

good article..i recomend reading it

 

cool. I love articles like that. Intelligent, historical, and well written. I hate articles that just insult others. More should be written like this.

 

The issue of free trade is a problem, no doubt about that. But what's the solution? The author of this article seems to think that forcing companies to keep jobs in the U.S. is the way to go, but that would only cause the price of the goods to skyrocket (the price of something that a Thai girl makes for $.30 a day will end up costing the consumer a lot more when produced by a union worker for $8.50 an hour plus benefits), causing inflation and whatnot.

On the other hand, the article makes a point. Jobs leaving the U.S. is definitely bad for the economy. I'm no economist, but it seems to me that the solution is to have more educated workers (the radiologists, programmers, and stock analysts that this article points out) to make up for the higher wages that it will cost to hire them. But looking at our education system now compared to the education systems of countries like Japan and China, that won't be happening anytime soon.

 

We could also impose tarriffs (heresy!) on items produced in countries without any meaningful labor or environmental standards, to offset their artificially low prices and to prevent downward pressure on our own standards.

 

The problem with buying goods from some company that employs Thai children for 30 cents a day is that although it is cheap for us, it costs dearly for them. The children never get an education, healthcare or anything. Then they have kids and the cycle repeats. I think we who have so much have a responsibility to those who have so little. I would be willing to give up many of my cheap-ass products, buy fewer clothes at a higher price, ect., to provide a better life for those in poverty.

 

Not many average Joe's and Jane's can see past a price tag, much less share your sentiment. It's a big problem, and the only solution for international problems like child labor is for the UN to grow a pair of fucking balls and actually enforce half the fucking declarations they make. I don't want to go off on a rant, so I'll just leave it at that.

 

And I'm one of those Jane's. While I certainly share the sentiment, I cannot see past the price tag. I'm a single mom, I work for a living (with no assistance from the government, besides tax breaks-not even free lunch for my kid at school) and I am on a VERY limited budget. In order for me to make rent, bills and food, if my kid needs new shoes, he gets the cheapest ones I can afford. If it's a choice between a $15 pair from Thailand and a $30 pair from the US of A, guess what he gets? But truly, the $15 ones might be from USA, I honestly don't look at where they're made. I only look at how they will impact my food shopping, next week. I wish it were different. I wish I could make enough money to shop politically, but I can't. Where I do spend a bit more than I should, is on enviro-friendly cleaning products and laundry supplies. But, that's about all I can do, financially, at this point...

 

Of course, sweatshop labor is no guarantee of a lower price. Nike contractors in Southeast Asia pay virtual slave wages to their workers, yet their shoes sell for over $100 a pair. The obscene profit margins just go to people like Phil Knight and Michael Jordan instead of the people making the shoes.

 

I see nothing new here. If this scaremongereing had any basis in fact, then places like switzerland, hong kong, singapore, and slovenia would be the poorest countries in the world. they are so small that they need to import nearly every single product they use. yet the are among the wealthiest places in their regions.


just another excuse to prevent poor countries from being allowed to trade.

 

Uh, who said that all trade was inherently bad? The issue is what sort of standards are in place. Try actually reading the report I cited.

 

I read the report, and responded to it. You, however, didn't address my point.

Most anti-globalisation activists follow the same line as your article, which is "Free trade is good, AS LONG AS WE CAN REGULATE IT" or "Free trade is good, but this is a new, dangerous version of it".

But these are the same arguments that have been used for centuries by protectionists. There is nothing new about having to compete with countries that have lower wages. There is nothing about the law of comparative advantage that makes it less relevant today.

Free trade is good. Offshoring is good. Attemtping to arbitrarily decide correct prices for goods and services is nothing more than an attempt to lock developing countries out of world markets.

 

I see. Corporate globalists are champions of the Third World poor, huh? Your 19th century forebears were much more candid about their motives:

"We must find new lands from which we can easily obtain raw materials and at the same time exploit the cheap slave labor that is available from the natives of the colonies. The colonies would also provide a dumping ground for the surplus goods produced in our factories."

- British industrialist, Cecil Rhodes

 

You quote is way off topic. Thanks for sharing anyway.

Sadly for you, third world countries do want investment and they do want trade, in fact they blocked the last WTO round because they didn't get enough free trade in the products they sell.

Unfortunately the activist community is too insular to realise they are the only ones calling for protectionism and subsidies. Most developing countries abandoned failed socialist economics long ago.

Stop fighting yesterdays battles. What matters now is WTO agreements that stop protectionism and subsidies in developed countires and force them to open their markets so that poorer countries can compete. Kick AAS!

http://kickaas.typepad.com/

 

I agree that developed countries are hypocritical on the issue of subsidies. At the same time, developing countries shouldn't be rewarded with a "comparative advantage" for violently suppressing labor rights and flouting even the most basic environmental safeguards. The report I cited on the "Benefits of Globalization" thread deals extensively with this issue. Did you read that one, or just the Atlantic Monthly article? Just in case you didn't, I'll post another link here:

http://www.global-poverty.org/PolicyAdvocacy/pahome2.5.nsf/allarticleshome/A4FC678BA27E35BB88256E46008361F4/$file/Maquilas4.pdf

 

True, I only read the Atlantic article.

Of course I am not in favor of competition by unsafe working conditions and so on, but there is always going to be a question of degree - how much environmental harm is allowable? How high do labor standards have to be? Many labour groups campaign for high standards precisely because they want to make developing countries uncompetitive.

I don't see the point or the benefit of international organisation going into countries and dictating/verifying/enforcing labour or environmental standards. If the country does not have the determination to raise these standards itself, nobody is going to force it to. It is just not going to happen. It is also too likely the system would be deliberately abused by competitors and is too likely to create huge bureaucratic obstacles to trade.

In the end higher standards mean higher costs. In general, imposing high labor / environmental standards on poor countries will only raise the cost of doing business there, and will ultimately drive down investment and trade.

 

As a professional economist and economic historian, I'm going to throw in my two cents here.

1. Beatty seems to imply that tariffs were of great quantitative importance in the development of American manufacturing. The evidence he provides for this is very slight and few economists would agree with the implication. The "infant industry" argument for protectionism is viewed with great skepticism by economists; protected industries rarely seem to blossom and the lack of competitive pressure would seem to retard incentives for effeciency and innovation. For an example, see the American auto industry, which entered a period of great quality improvement and innovation precisely as international competition dramatically increased.

2. The empirical evidence that, as a general rule, free trade promotes prosperity is almost so vast that one hardly knows where to begin. For starters virtually every economy that made the transformation from undeveloped to developed in the last 60 years did so under a regime of reduced protectionism and focus on specialization and exports.

3. In most cases, economists disagree on just about everything related to actual economic policy. There is no consensus in mainstream economics on tax policy of any sort, monetary policy, fiscal policy, you name it. Except for trade policy. A huge majority of economists of all political and ideolgical persuasions agree that, as a general rule, freer trade is preferable to less freer trade. Sure, you can find a handful that disagree but they are a tiny minority relative to the whole discipline. While I'm not going to try to teach an economics course here, the economic arguments that show the merits of free trade are pretty convincing (and are well supported by actual evidence).

4. Trade opponents typically ignore the main benefit of freer trade; lower prices that increase the real wealth of consumers. These lower prices come not just from cheaper international goods but from increased competitive pressures which keep domestic producers from charging ineffeciently high prices (and also provide incentives for quality improvement and innovation.) These benefits are not trivial or illusory. While no doubt some people in the U.S. have been hurt by textile jobs disappearing in the U.S. over the past few decades, tens of millions of Americans are a little bit better off because apparel prices are lower, probably much lower, than they would have been without increased apparel imports and competition.

5. The argument made against free trade that has the most merit goes something like this: Sure free trade may be good in the aggregate but the losses from free trade fall disproportionately on the less well off, particularly unskilled workers. Protectionism, then, becomes sort of equalizer, an indirect method of transferring some wealth to those at the bottom end of capitalism. I think this is a worthy goal but would argue that it is an extraordinarily inefficient method of doing so and other methods (a more progressive tax structure, direct payments and training to disadvantaged workers, even federal jobs programs) would be preferable.

I hope some of those of a liberal mindset (which includes myself, believe it or not) will consider these ideas and perhaps focus not on the evils of trade and globalization but on other ways to make capitalism work better and improve the lives of those who don't fare so well under the current American (and European, Austrailan, etc.) systems.

 

Great post, please stick around.

 

Well said! Did you know Thomas Jefferson wrote "Amazing Grace".
He was a slave trader and one day he saw the error of his ways.Maybe the rest of humanity will too and stop repressing the third world so much. Nah too much to ask.

 

sreed24,

I'd be interested in your thoughts on the "Maquilas" article I cited above.