Tag: free trade

American Manufacturing Continues to Thrive in a Global Economy

University of Michigan economist and American Enterprise Institute scholar Mark Perry has an excellent oped in today’s Wall Street Journal [$] about how U.S. manufacturing is thriving.  It can’t be emphasized enough how important it is to present such illuminating, factual, compelling analyses to a public that is starved for the truth and routinely subject to lies, half-baked assertions, and irresponsibly outlandish claims about the state of American manufacturing.

The truth matters because U.S. trade and economic policies—your pocketbook—hang in the balance.

For more data, facts, and background about the true state of U.S. manufacturing, please see this Cato policy analysis and these opeds (one, two, three).

Krugman (Both of Them) on Competitiveness

When it became clear that President Obama would make “competitiveness” a theme of his SOTU address, I looked forward to seeing Paul Krugman’s statement pointing out how much nonsense that is. Here he is, after all, in his excellent 1997 book, Pop Internationalism (MIT Press):

…International trade, unlike competition among businesses for a limited market, is not a zero-sum game in which one nation’s gain is another’s loss. It is [a] positive-sum game, which is why the word “competitiveness” can be dangerously misleading when applied to international trade.

Sure enough, President Obama’s speech last night was peppered with references to “the competition for jobs,” “new jobs and industries take root in this country, or somewhere else, “the competion for jobs is real,” etc. And of course there was a healthy dose of the usual mercantalist obsession with exports.

Although written before the President’s address was delivered, what would Paul Krugman 2.0 think of this sort of talk? The title of his column Sunday was certainly encouraging: “The Competition Myth.” But the substance of the column went in a … er… different direction from that which I had anticipated/hoped:

…talking about “competitiveness” as a goal is fundamentally misleading. At best, it’s a misdiagnosis of our problems. At worst, it could lead to policies based on the false idea that what’s good for corporations is good for America

So what does the administration’s embrace of the rhetoric of competitiveness mean for economic policy?

The favorable interpretation, as I said, is that it’s just packaging for an economic strategy centered on public investment, investment that’s actually about creating jobs now while promoting longer-term growth. The unfavorable interpretation is that Mr. Obama and his advisers really believe that the economy is ailing because they’ve been too tough on business, and that what America needs now is corporate tax cuts and across-the-board deregulation. [emphasis mine]

In other words, Krugman’s objections to the “competitiveness” rhetoric are based on his fear that it will lead to policies favorable to corporations, not that the whole concept is flawed.

[Disclaimer: the above is by no means an exhaustive analysis of the problematic parts of the column]

I yield to no-one in my admiration for Paul Krugman, trade economist. He made a real contribution to the discipline I’ve loved since I was a teenager. But Paul Krugman, columnist…not so much.

Free Trade’s “Peace Dividend”

“Peace on earth, good will toward men” is a phrase we associate with the Christmas season. One bit of good news that you will probably not see in the newspaper or on cable TV over the holiday is that the world in recent decades has actually been moving closer to that ideal, and free trade and globalization have played a role.

In its latest “Trade Fact of the Week,” the pro-trade Democratic Leadership Council reminds us that “The world has become more peaceful.”

Citing a recent report from the Human Security Center in British Colombia, the DLC memo notes that wars are less frequent and less bloody than in decades past. The average annual death toll from armed conflicts has been declining since the 1950s, from an average of 155,000 down to 17,000 in 2002-2008. None of the world’s “great powers” have clashed since the 1969 border conflict between Russia and China, and none of the major European powers have exchanged fire for 65 years—-the longest intervals of peace for centuries.

In Chapter 8 of my 2009 Cato book, Mad about Trade: Why Main Street America Should Embrace Globalization, I describe this phenomenon as “Free Trade’s ‘Peace Dividend’” (pp. 140-143). There are two main ways that globalization promotes peace: The growing network of global trade and investment has raised the cost of war, so that now if two nations go to war, they not only lose soldiers and tax dollars, they also lose markets and cause lasting damage to their economies. Globalization has also reduced the spoils of war by allowing people to acquire resources through peaceful exchange rather than conquest.

The DLC Trade Fact memo shares the credit with decolonization, the end of the Cold War, the spread of democracy, and peacekeeping missions, while also recognizing the contribution of economic openness:

[L]ower trade barriers, more open economic policies, more efficient logistics industries and better communications technology speed up and deepen integration across borders through trade and investment, strengthening mutual interests and reducing reasons for conflict. The [Human Security Center] report suggests that a 10 percent increase in FDI reduces a nation’s chance of international or civil war by about 3 percent, and that globalization reduces the reasons a country might want to fight:

“[T]he most effective path to prosperity in modern economies is through increasing productivity and international trade, not through seizing land and raw materials. In addition, the existence of an open global trading regime means it is nearly always cheaper to buy resources from overseas than to use force to acquire them.”

Eliminating all remaining trade barriers would be one of the best Christmas presents our politicians could give us.

Commercial Ties with India Are An Opportunity, Mr. President—Not A Problem

During his visit to India, President Obama should bury once and for all his divisive rhetoric about American companies shipping jobs overseas. Our growing commercial ties with India are a great opportunity, not a problem. U.S. exports to India have doubled in the past four years. American companies that have set up shop in India have helped to fuel demand in that country for U.S. products and services. The president should be celebrating rather than demonizing our deeper economic ties with India.

Victory for Free Trade - At Least Within the Country

In July, I blogged about the case of Minnesota farmers who were facing criminal sanctions for engaging in interstate trade.  Now I am happy to report that the city of Lake Elmo has torn down its onerous and unconstitutional trade barriers:

The change was made in response to a federal judge’s opinion in August that Lake Elmo’s protectionist law likely violated the U.S. Constitution because it discriminated against interstate commerce.  Magistrate Judge Franklin L. Noel stated that the law “squelche[d] competition … altogether, leaving no room for investment from outside,” and would likely have “obliterate[ed] … the Lake Elmo markets in pumpkins and Christmas trees… . In fact, Plaintiffs have shown that the markets will be wiped out.”

Congrats to our friends at the Institute for Justice who spearheaded this case!  You can read more here.  And you can find Judge Noel’s opinion here.

Hat tip to Baylen Linnekin at Crispy on the Outside.

Free Trade Consensus Remains Intact in Australia

As many of you may know, Australia had a federal election on August 21 that yielded an at-time-of-blogging inconclusive result. As a consequence, the Liberal-National coalition (currently in opposition) and the Australian Labor Party are both wooing the Green and Independent members in the hope of securing their support. A Canberra-based friend sent me a link to an article in today’s (or, strictly speaking given the time difference, yesterday’s) Australian about the trade-related aspects of the current negotiations to form a minority government.

I’ll admit, the story had me worried. I’ve bragged before about Australia’s bipartisan political consensus on free trade, and it looked as though that was under threat. According to the article, Labor – the party responsible for much of the unilateral trade liberalization undertaken in the 1980s – was considering “re-erecting tariff walls”:

Yes, modern Labor has degenerated to the point where the Treasurer allows the prospect of protectionist horse-trading to be part of the equation for forming Australia’s next government. And so Australia’s political deadlock threatens to encourage the rise of a new industry protectionism driven by the anti-capitalist Greens in cahoots with left-wing trade unions and rural populism…

A few hours later, a new, happier story was filed on the Australian’s website:

…Ms Gillard used her press club speech to offer continuity and certainty, but made clear she would not seek [Independent] Mr Katter’s vote by pandering to his passionate rejection of free trade, which he believes has ravaged sectors such as the sugar industry in his north Queensland seat of Kennedy.

“You’re talking to the leader of the political party that literally went to hell and back to modernise the Australian economy, including reducing tariff barriers,” Ms Gillard said.

“That is our heritage, that is our belief, that is in us.

“We would not have the modern resilient Australian economy we have now if Labor had not built it.

I’ll ignore that last preposterous statement about a political party building an economy, and instead focus on the main thrust of Ms. Gillard’s comments, which should come as a relief to free-traders everywhere, especially in Australia.

Free Trade Begins at Home

When pundits discuss “free trade,” most people think of international trade, eliminating tariffs, import quotas, and the like. That’s because the Constitution’s Commerce Clause – the one Congress has been using and abusing for decades – grants the government the power to “make regular” trade between the several states.  For example, Oklahoma can’t ban imports of beef from coming across the Red River and New York can’t have a different licensing regime for long-haul tracks entering from New Jersey rather than Pennsylvania.

While this commerce- (and liberty-) enhancing feature of our federal system has required a Supreme Court reminder for traditional wine retailers in recent years, Americans have generally taken for granted that buying and selling products between American jurisdictions is perfectly normal.

It may surprise you to learn, then, that in Lake Elmo, Minnesota, proprietors of a 40-year-old family farm that yields flowers, pumpkins and Christmas trees, are facing fines and 90-day jail sentences for attempting to sell their products in that town.  The reason?  Part of their farm lies outside city limits, and in Lake Elmo it’s illegal for farmers to sell products – even from their own land – unless they were grown within the city.  You can view a short video about their story here:

Thankfully, our friends at the Institute for Justice are stepping up to defend these folks for making a living by engaging in domestic free trade.  This blatant protectionism is harmful and foolish when practiced with foreign trading partners, and is all the more repugnant when practiced against one’s own neighbors who provide the community with valuable goods and services.  That these law-abiding entrepreneurs face potential jail time for the crime of “selling produce across city lines” is anathema to the Constitution.

You can read Cato’s work on agricultural free trade here