Mercantilism
Posted at 1:24am on Apr. 11, 2008 Another One From The "Prosperity Is Overrated" Department
By Pejman Yousefzadeh
The House voted to effectively kill the pending U.S.-Colombia free trade deal today. This was expected but no less appalling.
As mentioned before, Speaker Nancy Pelosi was the prime mover behind the killing of the deal. And she did so at the behest of unions. One trusts that those unions know they are responsible for the opportunity cost in prosperity terms when it comes to their own members.
Meanwhile, Dan Drezner goes through the reasons why the trade deal was a good idea. One quibble: Contra the good Professor, NAFTA has been quite beneficial for the American economy. And in response to Kevin Drum's point concerning agricultural subsidies and the need to decry them, he is quite right. But even if free traders fail to make this point, that doesn't mean that free trade ought to be held hostage. My doctor can tell me that I need to lower my bad cholesterol by changing my diet. I will listen to that advice even if my doctor fails to mention the need for me to get as much exercise as possible in addition to changing my diet.
Posted in Democrats | Economy | Free Trade | Mercantilism | Protectionism — Comments (0)/ Email this page » / Read More »
Posted at 10:05pm on Mar. 16, 2008 The Know-Nothings Of The 21st Century--And How To Fight Them
By Pejman Yousefzadeh
I realize that I beat up on neo-protectionists and neo-mercantilists a great deal. But here's the thing: They deserve it. Their arguments have no valuable intellectual content whatsoever, are wholly devoid of facts and indeed, are allergic to any attempt to introduce a dose of reality. Greg Mankiw explains why:
Economists are, overwhelmingly, free traders. A 2006 poll of Ph.D. members of the American Economic Association found that 87.5 percent agreed that "the U.S. should eliminate remaining tariffs and other barriers to trade."
The benefits from an open world trading system are standard fare in introductory economics courses. In my freshman course at Harvard, we start studying the topic in the second week, and we return to issues of globalization throughout the year. The basic lessons can be traced back to Adam Smith of the 18th century and David Ricardo of the 19th century: Trade between two countries creates winners and losers, but it leaves both nations with greater overall prosperity.
[. . .]
Today, Nafta could be hailed as a successful example of the bipartisanship that Mr. Obama promises. Most economists agree with Lawrence H. Summers, a Treasury secretary in the Clinton administration, who has said that Nafta "was really a watershed as to whether America was going to stand for larger markets, was going to stand for forward defense of our interests by trying to have a more integrated global economy."
"It contributed to the strength of our economy," he added, "both because of more exports and because imports helped to reduce inflation."
These are all facts. They are facts that smart people, intimately familiar with the details surrounding trade policy take as givens--much as they take the revolution of the Earth around the Sun as a given. They are also facts that by and large are kept away from the public by demagogues like Lou Dobbs and by the Democratic candidates for President of the United States--and what appears to be the great majority of their fellow Democrats. This attempt to deprive the general debate of valuable and needed facts will, if unchecked, lead to bad policymaking. And that will lead to a reversal in the many extremely considerable prosperity gains that we have achieved thanks to free trade.
I write all of this so that hopefully, readers understand the origins and nature of my passion on the issue of free trade. Free trade is too important an issue to leave to populist demagogues to monopolize. The only way the neo-protectionists and neo-mercantilists can win the debate on trade is if free traders do not make a genuine effort to give the public the facts on the issue of trade. Absent those facts, the forces of economic ignorance stand a very good chance of causing the policymaking process to go awry. But if the general public is in the know when it comes to the facts, the Know-Nothings of the 21st Century won't stand a chance.
Posted in Economic Antediluvianism | Economy | Free Trade | Mercantilism | Protectionism — Comments (63)/ Email this page » / Read More »
Posted at 3:21pm on Feb. 17, 2008 In Praise Of Getting Substance Right
By Pejman Yousefzadeh
We are informed that Barack Obama intends to be more wonky in his speechmaking. This is good to know. It would be even better if in addition to being wonky, Senator Obama would bother to ensure that he is correct about the details of the issues he discusses.
Alas, this is not the case when it comes to issues like trade. As the Washington Post points out, both Obama and Hillary Clinton have been decidedly unenlightened when it comes to the issue of free trade:
. . . there are moments like last Wednesday, when Mr. Obama struck some unusually sour notes in what was billed as a major economic policy address. Yes, there were the trademark invocations of "shared sacrifice and shared prosperity." But Mr. Obama's remarks were also tinged with an angrier, and intellectually sloppier, message. We thought we'd heard the last of class warfare and populism when former North Carolina senator John Edwards finally bowed out of the race. In his speech, Mr. Obama quoted Mr. Edwards approvingly; he then echoed him in implying that he could pay for new domestic programs with an immediate U.S. withdrawal from Iraq and in exaggerating the "millions" of job losses attributable to trade agreements. Mr. Obama even seemed to draw a line connecting the current subprime mortgage crunch to "decades of trade deals like NAFTA and China."
These simplifications might help Mr. Obama beat out Sen. Hillary Rodham Clinton for the dubious prize of an Edwards endorsement. They might play well in Ohio, where foreclosures are rampant, some plants have shut because of international competition -- and the Democrats hold a crucial primary on March 4. But they are not worthy of a candidate whose past speeches and writings demonstrate that he understands the benefits of free trade. "I won't stand here and tell you that we can -- or should -- stop free trade," Mr. Obama declared, candidly, then quickly promised that "I will not sign another trade agreement unless it has protections for our environment and protections for American workers." It's not clear what he means by this. Mr. Obama supported the Peru Free Trade Agreement, which contained such protections, but he opposes the proposed pact with Colombia, which has labor and environmental provisions similar to those in the Peru deal. To account for the seeming contradiction, Mr. Obama echoes organized labor's exaggerated complaints about human rights violations in Colombia. He doesn't support the Korea Free Trade Agreement, which promises the greatest benefits of all the pending trade deals to the U.S. economy -- but is fiercely opposed by a narrow slice of the auto industry and the auto workers union.
Read on . . .
Posted in Barack Obama | Economy | Free Trade | Hillary Clinton | Mercantilism | Protectionism | The Populist Right — Comments (3)/ Email this page » / Read More »
