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Politicians and free trade

Political demagoguery threatens pending free trade pacts with South Korea, Colombia, Peru and Panama, as The Detroit News notes:

Democrats in Congress, along with some Republicans, are promoting protectionism again, ramping up efforts to kill four proposed free trade agreements because they say open markets abroad hurt workers here.

But that doesn't play out in logic or in practice when you look at the facts.

* * * * *

Additionally, more than half of all farm exports will become duty-free immediately, including corn and soybeans. And pharmaceuticals and medical devices will get fairer treatment under the agreement. Despite the rhetoric against such opportunities, those are good things for Michigan.

Politics, however, stands in the way. It appears congressional Democrats carrying the water of the AFL-CIO labor group are fighting these expanded opportunities.

They balked at the lack of labor and environmental provisions in the original South Korea free trade agreement and said they wouldn't budge until those issues were addressed. South Korea complied, but that didn't soften the opposition.

Read it all at the above link. Also, read Helene Cooper in The New York Times:

Writ large, that argument falls back on a principle that has fueled the free trade argument for more than a century: nations flourish by focusing on their comparative advantage -- the things that they do best -- and trading with other countries for the things that those countries are more efficient at producing.

But this argument has zero resonance when presidential candidates are facing an audience of union members in Chicago who are worried that their jobs are being outsourced to India. So, with the exception of Representative Dennis Kucinich, who announced Tuesday night, to ringing applause, that during his first week in office as president he would withdraw from Nafta and the World Trade Organization, the rest of the Democrats at the A.F.L.-C.I.O. forum were more cautious. When asked whether, for all of their Nafta-bashing, they would pull the United States out of the trade pact, they quickly veered to vague talk about stronger worker protections.

The rest is at the preceding link. Even most of the Democratic candidates realize they are merely mouthing political pablum, repeating by rote the noxious nostrums favored by Big Labor - and threatening actions which would disrupt our economy and that of the entire world.


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Comments (6)

Hi, Jim. I like business pe... (Below threshold)

Hi, Jim. I like business personally, and would like to discuss trade from that viewpoint. I'm a businessman who offers for sale thousands of Chinese made and other imported goods on my company website. But I remain sensitive to both the business as well as labor and consumer end of international trade. In reality no "free trade" treaty or agreement really is "free", but a long and complicated set of new rules that regulate all parties involved. NAFTA for example was 800 pages of trade regulations and rules in which the U.S., Canada and Mexico all lost some powers over their own trade regulatory ability to this new international trade agreement.

A major problem with NAFTA, often unknown to most Americans was that a small number of American corporate farms that could produce corn or wheat very cheaply due to high technology, dumped huge amounts of this low cost corn and wheat on the local Mexican markets due to NAFTA, and the local Mexican economy could not withstand this major market change and it lowered many Mexican farm wages or income by about 1/3 and helped to create the waves of millions of illegal immigrants to the U.S. seeking to find work as family wage farm jobs evaporated in Mexico as a direct result of this trade agreement.

In South Korea, it is also local workers who are most concerned about the impact of a complex "free trade" deal with the U.S. that could also alter the standard of living of some South Korean workers if large U.S. corporations could dump some foodstuffs or other goods on their local market and alter the local wage structure.

Some basic foodstuffs such as rice, wheat and corn sustain both life and viable incomes in some nations. "Free trade" agreements create fundamental local market wage and price changes that tend to destroy the economy of many persons associated with these vital foodstuffs.

On one hand, in business I offer for sale thousands of Chinese made goods including bigger items such as motor scoooters because I like international trade and business personally. But on the other hand formalized "free trade" agreements often come at a very high local cost with market price and wage structure changes that are very difficult for local wage earners to adjust to such as the example of farmworkers in Mexico who now come to the U.S. in illegal immigration waves due to the local impact of NAFTA on their economy. It seems that the largest import from Mexico due to NAFTA has been waves of economic refugees. This is the negative side of international trade agreements such as NAFTA.

It is certainly to the advantage of anyone in business to find a new low cost product to market that will sell well. I added some new Chinese made electric scooters yesterday for example because the price and quality were too good for me to pass up on. But it should also be noted that huge complicated trade deals do come at a huge local cost to local markets sometimes and can displace jobs or wages and create serious local economy problems. International trade is a very complex set of balances.

Currently in NASCAR racing only the recent entry Toyota models are built in the U.S. All the other car brands, Chevy, Ford,etc. are built in either Canada or Mexico.

In reality anyone in a importing business advocating in favor of a free trade agreement is probably advancing their own economic interests. And labor or anyone opposing such agreements are probably representing their own economic concerns as well. Both sides have a strong economic incentive on either side of this issue, and for good reason given the history of NAFTA for example.

This is a much bigger issue... (Below threshold)

This is a much bigger issue than most realize.

It is pissing off Latin American nations which have stood in line for free trade legislation, only to have the Dim leadership double cross them and cave to the Unions.

The impact is it allows more space for Chavez and his type to operate, and claim the "Yanqui Imperialists" don't care about Latam.

He's right, to a degree, on that point.

Hooson:I added... (Below threshold)


I added some new Chinese made electric scooters yesterday for example because the price and quality were too good for me to pass up on.

Didn't we hear the same old refrain about petrol powered scooters from you?

Presumably you've checked the wheel bearings on the electric ones.

due to NAFTA, and the local Mexican economy could not withstand this major market change and it lowered many Mexican farm wages or income by about 1/3 and helped to create the waves of millions of illegal immigrants to the U.S.

Horse hockey, that "wave" has been going on for decades. A more honest statement would be it increased that "wave" NOT create it.

An even MORE HONEST statement is the Mexican Gov is corrupt from top to bottom and it's population growth far outstrips it's job growth and has for decades.

Time has come to REPEAL NAF... (Below threshold)
spurwing plover:

Time has come to REPEAL NAFTA and stop this ruination of america

The nature of Mexican polit... (Below threshold)
Robert the Original:

The nature of Mexican politics is such that in most cases they don't even try for efficient production.

I have watched many Mexican crews and they are all the same - lots of people are used, as many as they can.

To pound a post into the ground, a crew of twelve were used, teams of four would be rotated to lift a large block up on hoists, then let it go. Repeat step one.

If you have to do a large number of posts it would always be cheaper (and faster) to use a machine - they are not that expensive - no matter what the hourly rate is.

But that is just it, they want to employ. As long as this continues their economy will not grow very fast and folks will want to come here.

Repealing NAFTA as a method of border control does not make sense then, since Mexicans will still want to come here, and making the US market less available will take their economy in the wrong direction.

Canadians buy lots of stuff from us, more than anyone. You want to be careful when you take down NAFTA - we will lose all sorts of trade, too much to justify the benefits to those few uncompetitive industries you want to protect.

It is indeed a misnomer to ... (Below threshold)

It is indeed a misnomer to refer to these trade agreements as "free trade." More accurate would be "freER trade."

The simple fact is that in every single trade agreement we have joined since the first GATT meetings in 1947 or so have favored the US disproportionately.

We have, and have nearly always had, far lower barriers to trade and imports, and lower tariffs where we have used them, than any of our major trading partners. Therefore, whenever we move towards fewer restrictions, the other countries are giving up more protectionism against us than we are against them.

It should be noted that our agricultural sales to Mexico cannot be called "dumping" in the strict sense that term applies to trade, where it means selling goods at or below the cost of production. In fact, our sales to Mexico reflect the removal of precisely those barriers we sought to remove in the first place.

Mexico's troubles aren't due to NAFTA. They have a corrupt economy with protected oligarchies in various industries. Vincente Fox promised reforms which, if implemented, would have put Mexico on the road to prosperity (they are a country with fabulous resources, great climate, perfect location for trade, and should be growing at a brisk pace). Unfortunately, he failed to wring any reforms at all, and ended up co-opted by the system.

We won't solve our immigration problems until the problem of the Mexican economy is solved, but it must begin with Mexico.






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