Protectionist "heresy"

DU,

Thanks for the kind words. For what it's worth, Amazing Grace was penned by a former slave trader but not by TJ. Here is the story:



http://www.snopes.com/religion/amazing.htm



(The Snopes site is highly recommended, by the way.)



HF,



Let me admit up front that I only took the time to give the Brandt piece a quick read. I'm going to respond in sort of a broad way to the basic problem I think he raises and sort of go off on my own.



I will say at first that I'm extremely skeptical that Mexican and Central American workers would be better off without NAFTA. It's not the kind of thing one can answer definitively; we have no parallel universe where Mexico exists without NAFTA to make a comparison. I don't find Brandt persuasive on this issue. I do think he makes the case that the benefits to Mexican and Central American workers would have been greater had their rights and protections been written into the agreement more stringently and with better enforcement provisions. I think it is quite a leap to interpret his case study as a compelling argument for protectionism.



That is not to say, however, that both in the case of NAFTA and of trade pacts in general that there shouldn't be better efforts to protect labor rights. I'm extremely disturbed in particular by reports of virtual slavery in China and other nations.



The crux of the matter is the severity of poverty around the world...the fact that so many hundreds of millions are in such dire straits that they pretty much take any deal offered to them, making them open to exploitation. It would be nice if either the governments of the world directly could provide them "decent jobs at decent wages" or mandate that private corporations do it. But of course if the problem could be easily solved it would have.



It's a tricky problem, and the devil is in the details. Suppose a man is starving. A corporation comes along and says "come work 100 hours a week in my sweatshop and I'll give you just enough money to stay alive (say $10/week). On the one hand, it beats starving. On the other hand, it is hardly something to be hailed as great progress. (Some of my right wing brethren might make arguments that it is indeed progress and that no government or trade agreement should interfere in wage bargaining. I don't agree, and see this as the kind of blind application of economic theory that gives the profession a bad name)



Suppose we mandate that the corporation must pay the man $25/week for 80 hours a week. This might indeed work fine, making the man better off and enabling him to live a life of some dignity. But if we tell the corporation they have to pay him $100/week for 50 hours they may just say no thanks, we'll pass...and the man starves. We may flog the corporation, but it really isn't fair to do so; it is not their responsibility more than anyone else's to sacrifice their own resources to eradicate poverty.



The other practical problem is that of enforcement. My intuition is that one of the fundamental problems in labor markets of the developing world is that too often the worker is unable to take advantage of the legal rights he does have (and of course corporations have every incentive to keep the worker either unaware of his rights or unable to take advantage of them. I don't doubt that in many cases they use nefarious means to achieve this.) I would be very concerned that even to the extent the U.S. might be able to get labor rights written in to trade agreements the success would be undermined by lack of incentives, resources, and mechanisms for enforcement. Brandt seems to make a pretty good case that such has happened in Mexico.



So what do we do? Well, I don't know. But I would make the point to the anti-globalists that none of the grave problems in international capitalism they correctly point out would seem to be solved by protectionist trade policies on anyone's part. Our starving worker would be worse off, not better off, if it didn't benefit the corporation to employ him since they could only export the fruits of his labor with high tariffs.



Obviously the ideal is to create a global economy with human dignity and basic labor rights protected everywhere but that is not achieved with protectionism or simple minded demonization of corporations.



I am in favor of a stronger U.S. effort to protect labor rights internationally and in particular to achieve better protections in future trade agreements. One problem, however, is that this position is insincerely co-opted by those who seek to derail trade agreements in general. Domestic manufacturers threatened by trade make these arguments not out of a sincere desire to get better trade deals and protect workers in underdeveloped countries, but in hopes of preventing new trade agreements from happening at all.



My basic premises:



-Global poverty is frustrating.

-Globalization doesn't seem to be easing global poverty as much as we would like it to, and seems to create some unsavory and disappointing results.

-It does not follow from this that slowing or stopping globalization would improve global poverty. Indeed I believe that efforts in a protectionist vain, well intentioned or not, will only be futile and result in less economic growth, and more poverty and human misery.

-The beginning of a solution is people of goodwill and expertise working to tilt the rules under which globalization is occurring towards more humane and decent outcomes, but under realistic assumptions.

-I don't claim to know the details how we actually make this come about.

 

Not necessarily. Poor blacks suffered in the short run from economic sanctions on South Africa, but most of them believed that ending Apartheid was worth it. Why shouldn’t similar economic pressure be applied to other governments that oppress the poor? At the very least, companies shouldn’t be rewarded for exporting jobs to such countries.

Unfortunately, trade agreements tend to undermine labor and environmental protections, often classifying them as "non-tariff trade barriers." In other words, they penalize countries with higher standards.

 

HF,

That's a fair point in theory. If we could say to a country "shape up or we won't trade with you" and they shaped up and then we traded with them, I'm all for it. In practice I don't think it's likely to actually work this way very often. For one thing, many of the governments in question may lack the stability and power necessary to put in place real protection for labor and human rights. In other cases the fundamental problem is that trade sanctions hurt the masses while the people in power may be a small elite group whose power isn't derived from the masses and who don't care about the masses (this would describe several situations in Africa, probably a few in Asia). So sanctions create great suffering without really being much of a lever for change.

There is also a chicken-and-egg question...it is hard to define fair wages, working conditions, institutional rules, etc. for jobs that don't yet exist. Seems to me more realistic to use trade to bring a nation into the international economic community and as the country develops a real economy we exert pressure for improvement.

I have no doubt that in some case that is true, but:
-In some cases the real purpose of some environmental "protections" is indeed to act as a trade barrier rather than protect the environment.
-In any event this is an argument for better trade agreements rather than protectionism.
-While we all want to protect the environment, there is often an economic sacrifice and it isn't always fair or wise to expect desperately poor nations to choose high levels of environmental protection at the exepnse of needed development.

 

They certainly have the power to stop violently suppressing these rights, as they've done for decades in Latin America, often with our direct support.

I think the effectiveness of sanctions varies by country. My point is that they shouldn't be ruled out altogether, as the South Africa example shows.

How else do we exert this pressure?

Examples?

Fair enough. However, I think there are some valid arguments for protectionism, such as retaining national sovereignty and diversified local economies. If a country's economy is entirely dependent on a few export commodities, its capacity for self-government is virtually nonexistent.

The mulitnational corporations operating in these countries can certainly afford to meet reasonable standards. Instead, they use poor countries' lack of standards to weaken those in industrialized countries.