Tag: free trade

Allow More Latin American Students into the U.S.

As expected, President Obama’s speech on Latin America, given on Monday in Santiago, Chile, was full of rhetoric but short of substance. He briefly mentioned the willingness of his administration to “move forward” with the pending free trade agreements with Colombia and Panama, but didn’t say when he’s submitting them for a vote in Congress. He recognized (again) that drug consumption in the U.S. is fueling drug violence in Mexico and Central America, but stayed away from saying how his more-of-the-same policies will change anything.

Obama’s only tangible pledge was the announcement that his administration will work to increase the number of Latin American students in the U.S. to 100,000. This is laudable, but still unambitious. According to the Institute of International Education (IIE), last year there were already over 65,000 Latin Americans studying in this country. This poorly compares to other regions and countries. For example, South Korea alone has over 72,000 students in the U.S. Increasing the number of Latin Americans studying here to 100,000 would still leave the region behind China (127,628) and India (104,897). These countries each may have populations greater than that of Latin America, but, as President Obama said yesterday, Latin America and the U.S. share a common history, heritage and values. One would thus expect that the U.S. would be especially open to students from the region.

Of course, the number of Latin Americans studying here doesn’t depend exclusively on the United States. It depends mostly on the ability of people in the region to afford pursuing a degree in a U.S. college or university. However, it’s telling that, despite Latin America’s growing incomes, fewer people from the region come to the United States to study than a decade ago. The IIE shows that in the school year 2001/02 there were over 68,000 Latin Americans studying in the U.S. After 9/11, new visa requirements had a negative impact on the ability of Latino students to come to the United States.

President Obama should be commended for looking at an area where the U.S. can help Latin America. Still, the U.S. should be more welcoming to students from south of the border. The region is at an important stage in its road towards economic development, and having more U.S. educated Latin Americans can have a significant impact on the region’s fortunes. Just ask Chile’s Chicago Boys, for example.

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.