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Trade talks collapse amid accusations
July 24, 2006 (Bangkok Post)
World trade talks faced a bleak future after collapsing in acrimony Monday, with the European Union singling out United States for blame for refusing deeper cuts in farm supports.
World Trade Organization chief Pascal Lamy suspended the so-called Doha round indefinitely and said a year-end target for a global market-opening deal - set in December by WTO nations - was now out of reach.
"No beating about the bush. We are in dire straits," Lamy told reporters in Geneva after a group of six key trade partners failed to unblock the 5-year-old talks in 14 hours of negotiations.
AntiSpin: Excerpt from Who Really Benefits from Protectionism? by Stephen Spruiell, graduate student in public policy at the University of Texas.
When protectionist policies are enacted, certain domestic industries are protected at the expense of others. So in the end, it comes down to which industries can exert the most influence over domestic politics.
In the United States, the powerful steel, textile and agribusiness lobbies have kept those industries protected from foreign competition in ways that hundreds of other industries have not; and while unprotected industries have faced stiff foreign competition, they have also faced higher prices on steel, textiles and agriculture. One might look at the situation and decide that steel jobs are more important than other jobs, but to deny the connection between the two is to ignore evident economic principles.
Each argument for protectionism has merits: protectionism does save jobs in protected industries, can sometimes save those industries from financial catastrophe, and can be useful sometimes when it comes to negotiating trade agreements with other countries.
But in each argument, the government is placed in the role of making arbitrary decisions between which industries deserve protection, and which must inadvertently bear the costs of protection. The alternative is a government that does not pick winners but instead stands by principles and treats each industry the same, regardless of its political clout or well-connectedness.
The important thing to remember is that economic costs are unavoidable. The question is not whether an economy can avoid a cost, but who will bear it. Some believe the government is capable of deciding this question, and some believe that free individuals should decide it by their actions in the marketplace.
But economic costs must fall somewhere. Even if a wide array of protectionist policies could somehow protect every industry in the United States from the costs of foreign competition, then those costs would accrue to foreign countries, many in various states of destitution and, as previously mentioned, needing export markets as doorways out of poverty.
The conflict over protectionism, when all the rhetoric is boiled away, pits parochial interests against international ones. Picture the conflict as a factory laborer in a steel town in West Virginia arguing for tariffs to save his job and his community, versus thousands of workers all over the world who all have a small but important stake in being able to sell and buy steel at the lowest possible price: the consumer who will have to pay higher prices for anything made of steel; the autoworker in Michigan whose plant will lay him off due to higher steel prices; and finally, the Brazilian steel worker who will lose his job if the steel he makes is shut out of the United States.
In this case, it is important not to forget the pain of the steel worker who, because his industry has been mismanaged from the top, is facing the prospect of unemployment. But it is still important to ask, what about the average American? What about the autoworker?
What about the Brazilian whose only alternative might be a sort of poverty that has been largely unknown for decades in the United States? None of them really deserve to bear the cost. But protectionism almost always places the burden on those who deserve it the least.
July 24, 2006 (Bangkok Post)
World trade talks faced a bleak future after collapsing in acrimony Monday, with the European Union singling out United States for blame for refusing deeper cuts in farm supports.
World Trade Organization chief Pascal Lamy suspended the so-called Doha round indefinitely and said a year-end target for a global market-opening deal - set in December by WTO nations - was now out of reach.
"No beating about the bush. We are in dire straits," Lamy told reporters in Geneva after a group of six key trade partners failed to unblock the 5-year-old talks in 14 hours of negotiations.
AntiSpin: Excerpt from Who Really Benefits from Protectionism? by Stephen Spruiell, graduate student in public policy at the University of Texas.
When protectionist policies are enacted, certain domestic industries are protected at the expense of others. So in the end, it comes down to which industries can exert the most influence over domestic politics.
In the United States, the powerful steel, textile and agribusiness lobbies have kept those industries protected from foreign competition in ways that hundreds of other industries have not; and while unprotected industries have faced stiff foreign competition, they have also faced higher prices on steel, textiles and agriculture. One might look at the situation and decide that steel jobs are more important than other jobs, but to deny the connection between the two is to ignore evident economic principles.
Each argument for protectionism has merits: protectionism does save jobs in protected industries, can sometimes save those industries from financial catastrophe, and can be useful sometimes when it comes to negotiating trade agreements with other countries.
But in each argument, the government is placed in the role of making arbitrary decisions between which industries deserve protection, and which must inadvertently bear the costs of protection. The alternative is a government that does not pick winners but instead stands by principles and treats each industry the same, regardless of its political clout or well-connectedness.
The important thing to remember is that economic costs are unavoidable. The question is not whether an economy can avoid a cost, but who will bear it. Some believe the government is capable of deciding this question, and some believe that free individuals should decide it by their actions in the marketplace.
But economic costs must fall somewhere. Even if a wide array of protectionist policies could somehow protect every industry in the United States from the costs of foreign competition, then those costs would accrue to foreign countries, many in various states of destitution and, as previously mentioned, needing export markets as doorways out of poverty.
The conflict over protectionism, when all the rhetoric is boiled away, pits parochial interests against international ones. Picture the conflict as a factory laborer in a steel town in West Virginia arguing for tariffs to save his job and his community, versus thousands of workers all over the world who all have a small but important stake in being able to sell and buy steel at the lowest possible price: the consumer who will have to pay higher prices for anything made of steel; the autoworker in Michigan whose plant will lay him off due to higher steel prices; and finally, the Brazilian steel worker who will lose his job if the steel he makes is shut out of the United States.
In this case, it is important not to forget the pain of the steel worker who, because his industry has been mismanaged from the top, is facing the prospect of unemployment. But it is still important to ask, what about the average American? What about the autoworker?
What about the Brazilian whose only alternative might be a sort of poverty that has been largely unknown for decades in the United States? None of them really deserve to bear the cost. But protectionism almost always places the burden on those who deserve it the least.
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