by Sheldon Richman
Sheldon Richman is the editor of The Freeman and In brief.
The collapse late last month of world trade talks, known as the Doha Round (after the capital of Qatar), was overshadowed by continuing bad news from Iraq and Afghanistan and the outbreak of war between Israel and Hezbollah in Lebanon. While the bloodletting there is unlikely to be the golden opportunity some think it is, the breakdown of the WTO talks could be — if we seize it.
Doha ran aground on agricultural trade barriers and subsidies. Farmers in the developing world want a chance to sell their crops in the West. Traditionally they have been thwarted by American and European trade barriers and farm subsidies, giving the lie to pious Western claims of wanting to help the world’s poor. The hang-up is that Europe won’t reduce its barriers unless the United States reduces it subsidies. Neither side is budging. So bye-bye Doha. Special interests cling fast to their privileges, and the politicians need them to stay in power.
One problem with trade negotiations, as opposed to unconditional free trade, is that they portray benefits as costs and costs as benefits. So politicians say silly things such as, We’ll do X [open one of our markets, which is good for us anyway] if and only if you do Y [open one of their markets, which is good for them anyway]. In this case it’s: We’ll lower our trade barriers if you end your subsidies.
According to this privilege-driven thinking, something beneficial is presented as a concession one must make — distasteful as it is — to get others to do something beneficial for themselves. This stance promotes the mercantilist fallacy demolished by Adam Smith that exports are good and imports are bad. But that can be true only if we can eat paper money. Money is worth having because it gives one command over goods and services. Looking at it from the standpoint of a household, all exports and few or no imports would be a fairly miserable existence. We produce in order to consume. What changes when we focus on groups of households called countries?
Put another way, exports are the payments for imports. So import barriers make us poorer. Henry George said, What protection teaches us, is to do to ourselves in time of peace what enemies seek to do to us in time of war.
Someone tell Lou Dobbs.
Beware of Us
True, I’ve over simplified. And I’ve used the most hazardous words in discussions of world trade: us and we. Getting rid of farm subsidies would be good for nearly all Americans (including all the farmers who don’t have such protection). But, admittedly, a much smaller group — the wealthy farmers who bank the subsidies — would be unhappy, at least in the short run. (In the longer run an economy with no subsidies and an ever-lighter tax burden would be better for everyone.)
The same can be said for trade barriers. Eliminating them would be costly for the beneficiaries at first, while everyone else — consumers, workers, and exporters — would profit. But if the government were to get out of the way the entire economy would be in better shape.
Many Americans think that everyone in the country wins with import barriers. They anticipate increased sales and jobs in the domestic industries. But they overlook the unseen factors that Freacute;deacute;ric Bastiat warned about. If foreigners sell fewer goods here, they will have fewer dollars with which to buy American-made products and services and to invest in American businesses. That would be a loss for countless unseen Americans (and foreigners) whom the television commentators would never interview because they couldn’t be identified. No U.S. trade restriction can help all Americans — only a small group and at the expense of the rest. Trade barriers are always special-interest privileges. No exceptions. This is why the nineteenth-century British free-trade movement of Cobden and Bright was a populist movement, in the best sense of the word.
It’s Not All About Trade
These days trade talks are only partly about trade. Earlier rounds reduced tariffs and quotas on some goods but always within a context of special-interest jockeying designed to protect powerful constituencies from real free trade and competition. Concessions were grudgingly made in return for more subtle forms of protection. Trade agreements are always thick volumes full of technical formulas that amount to exceptions to the freedom principle. Free trade doesn’t need to hide behind reams of opaque jargon.
In recent talks, bilateral and multilateral, it’s become more and more evident that the American negotiators’ real purpose is to impose U.S. patent and copyright laws on the developing world as the price of access to U.S. markets. No inexpensive foreign goods for American consumers until Disney and other advocates of stringent intellectual-property rules are satisfied. Trade economists Jagdish Bhagwati and Arvind Panagariya write: The process of trade liberalisation is becoming a sham, the ultimate objective being the capture, reshaping and distortion of the WTO in the image of American lobbying interests. The protection of intellectual property provides a good example of US tactics. . . . [D]uring the Uruguay round of trade liberalisation, the US was able to insert the trade-related intellectual property regime (TRIPs) into the WTO, even though no intellectual case had ever been made that TRIPs, which is about royalty collection and not trade, should be included (Bilateral Trade Treaties Are a Sham, Financial Times).
It’s the New Mercantilism, another way for the rich countries to hold the struggling countries economically subordinate. This is the international component of the domestic corporatist economy. (For more see Jesse Walker’s illuminating article and this one by Declan McCullagh.)
Look, if there must be trade talks, let them be about trade — free not managed. And let’s stop putting off what we should be doing under any circumstances. We should dump the farm subsidies no matter what the Europeans do. And the Europeans should junk their trade barriers no matter what we Americans do. Let’s use the Doha breakdown as an occasion to change gears on how we think about trade. The farmers in the poor countries and American consumers are waiting.