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Seizing The Straw

Man...I'm shifting to a position to the right of Ed Kilgore's:

Nobody's a pure free trader, and I hope no Democrat really believes that the United States should refuse to trade with anybody. We're all opposed to “unfair trade deals,” and we all understand that the kind of economic growth we need to resume the growth of the 1990s -- and, for that matter, to defend our values and interests around the world -- depends on continued U.S. global economic leadership. We can agree to disagree about the specifics, but as Marshall and Kuttner wrote in their joint Prospect piece, the broader mission of Democrats is to do everything possible to equip Americans -- through everything from lifelong learning to health insurance to strengthened collective bargaining rights -- to obtain economic opportunity and security in the face of global competition that will not go away no matter how many or how few trade agreements are signed.
I'm a pure free trader. An "unfair trade deal" certainly sounds like a bad thing (unfairness usually does), but operationally this tends to mean opposing deals which provide more benefits for foreign export-oriented companies than they do for American export-oriented countries. I, personally, have no problem with deals like that. Indeed, I think our trade policy could probably stand for more of the old school trade unilateralism where you just lower barriers to entry and don't worry so much about making "deals" of any sort. The quintessential "unfair" trade practice -- so-called "dumping" where people sell us stuff that's very cheap -- is, to my way of thinking, an excellent thing to be a "victim" of -- you get cheap stuff. That said, I agree about the whole "broader mission of Democrats" and what follows business.

See also on the Prospect website, Bob Kuttner gives George Will the finger.

December 20, 2004 | Permalink

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» 'Free Trade' from Left Oblique
Matt Yglesias says he's a free trade advocate. At first glance, his arguments are good - low prices at home and increased standards of living abroad - but there are some problems. Here are a few: Eventually, other countries' standards of living ... [Read More]

Tracked on Dec 21, 2004 5:04:12 AM

» Point of Distinction, Take Two from GregsOpinion.com
Damn ... Everyone is disagreeing with Ed Kilgore now ... even the liberal Matt Yglesias. Gotta admit, I ran across the same quote Matt did in Ed's post and had pretty much the same reaction. I allow for the incompleteness... [Read More]

Tracked on Dec 21, 2004 11:11:19 AM

Comments

The quintessential "unfair" trade practice -- so-called "dumping" where people sell us stuff that's very cheap -- is, to my way of thinking, an excellent thing to be a "victim" of -- you get cheap stuff.

I wish BMW would commence dumping. I've longed to be a victim of them all my adult life.

Posted by: P.B. Almeida | Dec 20, 2004 5:24:37 PM

From the context, I think he might have meant that no Democrat is a pure free trader. Democrats were the intended audience and he was talking about disuptes over policy within the Democratic party, not within the United States as a whole. He's still wrong to think that no Democrats are pure free traders, but he's absurdly wrong if he thinks that no Americans are pure free traders. Pure free trade may not be the majority position, but I wouldn't say that it's outside the mainstream of political opinion.

Posted by: Xavier | Dec 20, 2004 5:25:53 PM

than they do for American export-oriented countries.
I think you meant to write "companies."

Posted by: Minor Corrector | Dec 20, 2004 5:28:47 PM

Hmmm... Yes, "dumping" gets us cheap stuff. But as I recall, the US used to be the major manufacturer of televisions, then Japan "dumped" TVs into our market until most US manufacturers went broke, then prices went back up to provide a profit. Was that really a good deal in the long run?

Posted by: Tom | Dec 20, 2004 5:29:44 PM

I would suggest taking a long, hard, careful look at Airbus, its history, practices, and current industry situation - before taking an absolutist free-trade position.

Cranky

Posted by: Cranky Observer | Dec 20, 2004 5:33:45 PM

Matthew, your stance on this issue is shallow and ignorant. What you mean to say is that you are perfectly happy supporting slavery because of the benefits of cheap cotton. Your policy encourages sweat shop labor in Central America and forced servitude in Asia. You are a prime example of a sheltered and spoiled brat making foolish pronouncements that will harm the American people. How dare you call yourself a progressive! Anyone who advances increased employment costs for American business (health care) while at the same time reducing the barriers for foreign competition which bears none of the same costs (including compliance with environmental regulations)is plainly obtuse and it puts Americans at a disadvantage in their own country. Education has done nothing to bring India out of the third world and it's not the answer to America's trade problems. Stop being stupid.

Posted by: Just Karl | Dec 20, 2004 5:39:39 PM

Tom,

TVs are very cheap. And, more likely to come from from China and Korea than Japan now. Dumping and then effectively raising prices after competition goes away almost never happens.

Posted by: joe o | Dec 20, 2004 5:42:10 PM

It's a very slippery position to be a 'pure' anything - an 'ist' - on policy, isn't it? I mean, I see the beauty of the idea of absolute free trade, but...

Posted by: jonnybutter | Dec 20, 2004 5:42:24 PM

joe,

talk to me about steel. Why does a Toyota Tundra (manufactured in Japan) cost less than a Ford F-150?

Posted by: Just Karl | Dec 20, 2004 5:50:58 PM

There's no such thing as "pure free trade." Once you get past the obvious things - tariffs/quotas - it gets very fuzzy very fast.

Posted by: Atrios | Dec 20, 2004 6:04:05 PM

I guess I am with MY. It really never crosses my mind to restrict imports. Retraining etc can be important, but should probably be justified on grounds other than trade disadvantage and consequences.

Actually trying to marshall the evidence and arguments to mathematically justify free trade can get so complicated that I just prefer to state it as a deontological rule, with no exceptions allowed.

Posted by: bob mcmanus | Dec 20, 2004 6:04:11 PM

I have a lot of problems with pure "free trade". The inevitable consequence of that is to equalize standards of living around the world, which is great for those at the bottom, but pure Hell for those at the top, where we have been. Being able to buy a cheap car from Korea, means that US auto workers can no longer afford the product my business produces, so that business has to outsource in order to be competitive too. And, there goes my job.

Posted by: Vaughn Hopkins | Dec 20, 2004 6:13:17 PM

Just Karl:
Matthew, your stance on this issue is shallow and ignorant. ... Your policy encourages sweat shop labor in Central America and forced servitude in Asia.
The likely alternative to sweatshop labor in Central America is generally far worse.

Guy

Posted by: Guy | Dec 20, 2004 6:14:11 PM

Actually trying to marshall the evidence and arguments to mathematically justify free trade can get so complicated that I just prefer to state it as a deontological rule, with no exceptions allowed.

"Its hard to justify my position, so I prefer to treat it as a dogma taken on faith alone."

Right. Good approach.

Actually, I'm a really pure free trader, which means I believe that the ideal situation is really free movement of good, services, and economic inputs including capital and labor.

I'm also a person who believes that the ideal situation involves equal and vigorous protection of human rights, including those that manifest as workplace protections.

However, I think that using "pure free trade" as a description of the position of people who support a complete absence of import restrictions on goods and minimal regulation of capital flows, while not supporting substantial improvements in the freedom of movement of people, or vigorous protection of human rights as a component of trade policy, etc., as inappropriate. The proper name for such a position is "pure pro-slavery".

Posted by: cmdicely | Dec 20, 2004 6:19:39 PM

The quintessential "unfair" trade practice -- so-called "dumping" where people sell us stuff that's very cheap -- is, to my way of thinking, an excellent thing to be a "victim" of -- you get cheap stuff.

Sure, if there are no barriers to entry in the market. Otherwise, you end up eating monopoly prices later on once your industrial base has been broken.

Posted by: Kimmitt | Dec 20, 2004 6:35:40 PM

Guy, I don't understand what you mean.

cmdicely, excellent point.

Posted by: Just Karl | Dec 20, 2004 6:53:00 PM

The problem with free trade is that for high income economies, like the US, it increases income disparity by dropping low skilled workers to world price levels. All the advantage the US gets goes to the top third or so of the population - the high skill sevice professional jobs like law and b2b sales etc.

It makes it much easier for rich to say they "deserve" their high incomes becuase the "market says i am worth this much."

But globally, free trade is one of the most benefitial things the first world does to help the people of the underdeveloped countries.

Posted by: yoyo | Dec 20, 2004 7:50:48 PM

Xavier: Outside of intellectuals (and presumably people who benefit from it directly), I think you'll find support for the free-trade position is approximately zero.

Posted by: Walt Pohl | Dec 20, 2004 8:15:35 PM

This fits in nicely with your hatred of the environment. Add in objectively pro-child labor & pro-cheap labor. Evidently, you are a misanthrope & not a progressive. But I am glad to hear you worship at the altar of David Ricardo. Of course 200 years have passed since then.

Since you admit to taking no econ at Harvard, why are you qualified to discuss free trade?

Posted by: jerry | Dec 20, 2004 8:35:17 PM

I'm with you, Matt. our tiny sliver of the electorate rules!

Posted by: belle waring | Dec 20, 2004 8:40:45 PM

Evidently free trade has been "so bad" for East Asia, that the number of people living there in absolute poverty (<$1/day) has dropped from 750 million to 250 million from 1981 to 2001.

And free trade has been "so bad" for the US that our GDP continues to grow (faster than Europe) unemployment is at a historically reasonably low level (nearly half the rate of Europe), and home ownership is at a historical high.

Furthermore, the kind of "dumping" scenarios we see today are pure BS. For example, today the U.S. Department of Commerce decided that Brazil, Ecuador, India and Thailand are "dumping" shrimp. That must have been some kind of amazing multi-cultural conspiracy! The truth is that they are actually selling shrimp in the US at prices above the price in their local country.

Through the use of "surrogate values", DOC investigators substitute actual sales or production costs of producers with estimated prices cherry-picked from other countries.

Then the DOC uses "zeroing" methodology, in which any negative dumping margins are ignored. So even if some shipments are priced higher than the "surrogate values," they are ignored. Only prices lower than the "surrogate values" are counted in determining dumping.

The DOC continues to use zeroing even though it has been ruled illegal by the WTO.

Posted by: Mr. Econotarian | Dec 20, 2004 9:18:36 PM

Evidently free trade has been "so bad" for East Asia, that the number of people living there in absolute poverty (

What does East Asia have to do with free trade?

Posted by: WillieStyle | Dec 20, 2004 9:31:55 PM

Mr. Eco, the shrimp farms in Thailand, Ecuador, Brazil, and India are a disaster. You should really find out what you are talking about. This industry has destroyed mangroves, flooded farmland, and depressed wages in these countries. Local communities find work for 2-3 weeks a year at harvest instead of year-round, as before. Many are forced to work for no wages and the women are routinely raped.

If you really want to educate yourself on this subject, here's a pdf that should help.

http://www.ejfoundation.org/pdfs/smash_and_grab.pdf

Posted by: Just Karl | Dec 20, 2004 9:50:48 PM

Oh....and is it coincidence that the two countries you failed to mention in the shrimp example(Vietnam and China) are both Communists? Should the US completely abandon all incentives for improving human rights? For more money?

Posted by: Just Karl | Dec 20, 2004 9:56:01 PM

Dumping is, indeed, a strange thing to be "victimized" by. Look at the extreme
case, in which country X manufactures
massive amounts of some kind of widget
and gives them away to country Y. How can
Y complain about being the beneficiary of
such generosity?

The problem is two-fold. First, distribution
of wealth and job dislocation in country Y.
With a sudden influx of free widgets, the
50% of the population who consume widgets
will be better off, but the 50% who manufacture widgets may be thrown into unemployment and thus be worse off. Of course, on the average, and over the long run, country Y may be absolutely
better off, but that's cold comfort to someone
who is currently unemployed.

The second problem is destruction of
manufacturing infrastructure. It takes
time and money to get an industry going,
to train workers, to build factories. The
sudden influx of free widgets into country
Y will discourage people from training in
widget engineering. The widget factories
will fall into disrepair. Eventually,
country Y will become unable to manufacture
widgets on its own. At that point, country
X can jack up the prices, and country Y
will have no option but to pay it. Yes,
country Y can then start building up its
own widget manufacturing, but that takes
time and financing that country Y may no
longer have.

Interestingly, both these disadvantages to
dumping could be alleviated by government
intervention. The government could
redistribute wealth to compensate the
unemployed widget workers. The government
could subsidize "strategic widget
infrastructure" to make sure that widget
manufacturing technology does not become
lost. But both of these responses are
violations of the spirit of free trade.

So dumping can benefit the recipient only
if the recipient is not purist about
free trade.

Posted by: Daryl McCullough | Dec 20, 2004 10:06:12 PM

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