Tag: Mexico

Sign the Petition against Protectionism

You only have to glance at the headlines to know that protectionist pressures are rising around the world – from the “Buy American” provision in the stimulus bill to the unnecessary trade war with Mexico to the World Bank’s report last week that 17 members of the G-20 have recently implemented restrictive trade measures.

And you only have to read a history of the 1930s to know that a worldwide turn to protectionism deepened and lengthened the global depression.

So some people are starting an international campaign to protect and expand free trade. The Atlas Economic Research Foundation, the International Policy Network, and the Atlas Global Initiative for Free Trade, Peace, and Prosperity are sponsoring a global Freedom to Trade Petition to be released just before the upcoming G-20 meeting in London. To help head off another Smoot-Hawley-type spiral, please sign the petition. Academic economists, business and labor leaders, authors, and all concerned citizens are encouraged to sign.

And click on ShareThis below to tell your friends!

The Price of the Drug War

Critics of the drug war long have pointed out how criminalizing drug use creates crime.  America has been through this experience before, with Prohibition.  Just look at Prohibition-era Chicago with pervasive corruption and mob warfare.

Unfortunately, the experience is being repeated in Mexico.  And the violence is spilling over the border into the U.S.  Reports the New York Times:

Sgt. David Azuelo stepped gingerly over the specks of blood on the floor, took note of the bullet hole through the bedroom skylight, raised an eyebrow at the lack of furniture in the ranch-style house and turned to his squad of detectives investigating one of the latest home invasions in this southern Arizona city.

A 21-year-old man had been pistol-whipped throughout the house, the gun discharging at one point, as the attackers demanded money, the victim reported. His wife had been bathing their 3-month-old son when the intruders arrived.

“At least they didn’t put the gun in the baby’s mouth like we’ve seen before,” Sergeant Azuelo said. That same afternoon this month, his squad was called to the scene of another home invasion, one involving the abduction of a 14-year-old boy.

This city, an hour’s drive north of the Mexican border, is coping with a wave of drug crime the police suspect is tied to the bloody battles between Mexico’s drug cartels and the efforts to stamp them out.

Since officials here formed a special squad last year to deal with home invasions, they have counted more than 200 of them, with more than three-quarters linked to the drug trade. In one case, the intruders burst into the wrong house, shooting and injuring a woman watching television on her couch. In another, in a nearby suburb, a man the police described as a drug dealer was taken from his home at gunpoint and is still missing.

Tucson is hardly alone in feeling the impact of Mexico’s drug cartels and their trade. In the past few years, the cartels and other drug trafficking organizations have extended their reach across the United States and into Canada. Law enforcement authorities say they believe traffickers distributing the cartels’ marijuana, cocaine, heroin, methamphetamine and other drugs are responsible for a rash of shootings in Vancouver, British Columbia, kidnappings in Phoenix, brutal assaults in Birmingham, Ala., and much more.

United States law enforcement officials have identified 230 cities, including Anchorage, Atlanta, Boston and Billings, Mont., where Mexican cartels and their affiliates “maintain drug distribution networks or supply drugs to distributors,” as a Justice Department report put it in December. The figure rose from 100 cities reported three years earlier, though Justice Department officials said that may be because of better data collection methods as well as the spread of the organizations.

Washington officials want to believe that throwing more money at the Mexican government will solve the problem.  But there’s nothing in the experience of Afghanistan, Colombia, or many other drug production and smuggling centers to suggest that more enforcement, especially by a government as weak as that in Mexico City, will end the drug trade.

Only taking money out of drug production and sales will end the violence.  And that means no longer treating what is fundamentally a health and moral problem as a criminal problem.  Legalizing adult drug use may not be a great solution, but it would be a vast improvement over drug prohibition, which promotes violent crime while tens of millions of Americans still use illicit substances.

Too Much Hysteria about Trade

The World Bank issued a press release on Tuesday announcing the results of a study published March 2, which concludes that 17 of the 20 so-called G-20 countries have invoked at least some protectionist measures since pledging last November to avoid protectionism for at least one year.

Of course the Washington Post—which now specializes in printing run-of-the-mill stories about trade that rarely come close to justifying the sensational headlines, provocative subheads, or gripping leads — jumped all over the report as evidence that: “Trade Barriers Could Threaten Global Economy: World Bank Finds Protectionist Trend.”

Well, we all know that trade barriers do threaten the global economy — in times of economic expansion and contraction. But most of the measures cited in the report are not particularly spectacular or unusual from a trade perspective. For better or worse, most WTO member countries do have some latitude to raise trade barriers — sometimes unconditionally. But also, in any given year, governments institute policies that happen to have adverse affects on trade (even if the measure wasn’t intended to be protectionist).

Sometimes aggrieved interests in affected countries prevail upon their governments to protest or otherwise seek resolution. And more often than not, under those circumstances, resolution is achieved. But sometimes, a protectionist measure doesn’t even provoke any kind of protest. So, quantifying protectionist measures is one thing, but qualifying them is quite another, more important exercise, if one is interested in making judgments about protectionist trends.

The by-line of the WP story belongs to Anthony Faiola, who last week wrote story titled: “U.S. to Toughen Its Stance on Trade: New Policy Reflects Growing Dissatisfaction With Global Markets.” The lead paragraph of the story read:

The Obama administration is aggressively reworking U.S. trade policy to more strongly emphasize domestic and social issues, from the displacement of American workers to climate change.

But nothing in the story supports the assertion that anyone is “aggressively reworking U.S. trade policy.” Nothing supports the subhead that there is a growing dissatisfaction with global markets. Trade policy may be in for some changes simply because there’s a new sheriff in town, who is beholden (to what extent we shall see) to interests that oppose competition, but not because of dissatisfaction with global markets.

Certainly there is no evidence of dissatisfaction with global markets in the story, which was occasioned by Ron Kirk’s confirmation hearing as U.S. Trade Representative. Kirk testified—before a Senate that already has before it legislation to make enforcement, rather than negotiation, the priority of trade policy for the next couple years—that he intends to focus on enforcement, rather than negotiation. Well, duh! What else is a nominee whose fate depends on the blessing of the people who want more enforcement going to say? For the record, it’s been known for quite some time that the administration would focus on systematizing enforcement efforts, so that’s not really news.

What is newsworthy, however, are the parts of Ron Kirk’s testimony that went unrevealed in Faiola’s reporting. For example, Kirk said that “at an appropriate time and with proper congressional input and concerns addressed,” the administration would ask Congress to grant the president fast-track trade negotiating authority, which is a tool required only by presidents interested in negotiating and expanding trade.

Kirk also said that “We are mindful that the benefits of trade are diffuse, while its pain is often concentrated. It is within that context that we seek to restore and build new bipartisan support for a progressive trade agenda for America.”  Where, then, is the reporting that the Obama administration does not reject trade? Where is the headline that Obama seeks support for a progressive trade agenda? (Cato is publishing a paper next month by Scott Lincicome and me that explains how President Obama can help restore the pro-trade consensus, which includes a large section on the role the media has played in perpetuating destructive myths about trade and globalization).

Where is the reporting that Democrats in Congress are not all opposed to trade liberalization? Senate Finance Committee chairman Max Baucus told Kirk during the hearing: “I also want to find a way to begin consideration of the three pending trade agreements. We should start with Panama. That’s the agreement that’s most ready for action. And it’s the agreement that will win the greatest level of support.” Reporting on these matters would be newsworthy and constructive since so few in the media seem to be willing to publish stories that contravene conventional wisdom about trade.

The fact of the matter is that there isn’t any discernible trend toward protectionism in the United States or in the world right now. World leaders issue warnings about the consequences of protectionism, but there are not trends. There are incidences, but no trends. The ballyhooed World Bank paper cites 78 trade measures “proposed and/or implemented,” 66 of which involved trade restrictions, 47 of which eventually took effect. The long footnote associated with the presentation of these numbers (footnote 1) includes the following sentence: “It is important to note that it is difficult to distinguish the trade policy measures that are taken in response to the current crisis from measures that might have been taken anyway.”

Most of the 47 measures cited in the report happened in November and December of 2008, and Faiola already ranted about them in the WP on December 22, 2008:

Moving to shield battered domestic manufacturers from foreign imports, Indonesia is slapping restrictions on at least 500 products this month, demanding special licenses and new fees on imports. Russia is hiking tariffs on imported cars, poultry and pork. France is launching a state fund to protect French companies from foreign takeovers. Officials in Argentina and Brazil are seeking to raise tariffs on products from imported wine and textiles to leather goods and peaches, according to the World Trade Organization.

There may be nothing necessarily incorrect about the facts reported. But the tone and implications are possibly misleading. It is hard to accept the otherwise marginally significant facts without also accepting the provocative metaphors and sense of impending doom. Those actions have less antagonistic explanations and more benign interpretations.

For example, the actions of Indonesia, Argentina, and Brazil are consistent with their rights under the WTO agreements and will have a negligible collective impact on world trade. Russia is not even a member of the WTO and frequently behaves outside of international norms, so its actions have very limited representative value. And France has intervened to block foreign takeovers of French companies on other occasions this decade, so its actions are not particularly noteworthy.

At least the World Bank study is careful enough to report some of the positive trade developments and reasons for optimism that I discuss in more detail in this paper that Cato published last week. The World Bank notes 10 instances of trade liberalization around the world, which presumably includes Mexico’s admirable decision to reduce tariff rates on 70 percent of the products listed in its tariff schedule; Brazil’s decision to scrap tariffs on certain raw materials, components, capital goods; China’s decision to forego inclusion of Buy China provisions in its own massive spending bill; and the signing of new free trade agreements between Australia, New Zealand, and the ASEAN countries.

The WB study, like my paper, points out that the sturdy legal and institutional infrastructure of the GATT/WTO system combined with the fact of growing interdependence between countries that are now linked by transnational supply chains will likely diminish prospects for more consequential protectionist indulgences.

Of course Anthony Faiola is not the only person at The Washington Post guilty of hyping protectionist rhetoric and war metaphors in trade stories (and the WP is not the only media outlet engaging in hype). But one of the more egregious disconnects between headline/subhead/lead and the body of the story is found in an article on U.S.-China trade relations by Faiola’s colleague, Ariana Eunjung Cha (which is dissected and analyzed here).

World policymakers and policy watchers do need to be vigilant about ensuring that the world doesn’t descend into a protectionist abyss. They will have plenty of help from their domestic constituencies who rely on open trade in both directions. But some vigilance must be reserved for a media that, if left unchallenged, could provoke a trade war on its own. The more reporting there is about protectionist measures—even if it is just more reporting about the same protectionist measures (as today’s WP article is)—the more justified or compelled policymakers will eventually feel in turning to that poison. If a Congressman’s aide can point to articles that cite rising protectionism, even if the measures cited don’t justify the label of protectionism, it becomes less taboo to propose or support protectionist policies. That kind of fear mongering needs to be identified as such.

Yes, some countries are likely to dabble in some degree of protectionism—either with border measures or the more camouflaged regulatory variety. But the costs of that protectionism will quickly become apparent in a world where capital and talent flow to the jurisdictions with the fewest physical and administrative frictions.

Maybe that story will be written as the economy is on its way back up.

Week in Review: A School Choice Victory, Earmark Reform, and Drug Violence in Mexico

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Obama Dips a Toe in the Educational Choice Pool

After Congress voted to let the Washington D.C. voucher program expire, stripping 1,700 low-income children of the opportunity to attend private schools, President Obama said he will keep the program afloat in subsequent legislation.

“It wouldn’t make sense to disrupt the education of those that are in that system,” said Robert Gibbs, the White House press secretary. “And I think we’ll work with Congress to ensure that a disruption like that doesn’t take place.”

Andrew J. Coulson, director of Cato’s Center for Educational Freedom, commented on Obama’s decision to continue to extend school choice benefits to underprivileged children in the nation’s capital:

This is a crucial milestone. There is finally a major national Democratic leader who is beginning to catch up to his state-level peers. Democrats all around the country have been supporting and signing small education tax credit programs because they realize that these programs are win-win: good for their constituents and good for their long-term political futures.

In an op-ed that ran the day Gibbs made the announcement, Coulson explained why those who oppose school choice will find themselves on the wrong side of history.

In 2006, Susan Aud and Leon Michos published a report on the fiscal impact of the D.C. voucher program, which documented the success of the District’s school choice pilot, the first federally funded voucher program in the United States.

Obama Signs Earmark-Heavy $410 Billion Omnibus Bill

After signing a bill that had nearly $8 billion in earmarks, President Obama declared that from then on, his administration would work toward earmark reform.

Sounds a bit like St. Augustine’s famous prayer, “Lord, make me chaste but not just yet,” said Daniel Griswold, director of Cato’s Center for Trade Policy Studies:

Recall that as a candidate, Obama said he and Democratic leaders in Congress would change the “business as usual” practice of stuffing spending bills with pet projects. Those earmarks, submitted by individual members to fund obscure projects in their own districts and states, typically become law without any debate or transparency.

Saying he would sign the “imperfect bill,” President Obama offered guidelines to curb earmarks … in the future. “The future demands that we operate in a different way than we have in the past,” he said. “So let there be no doubt: this piece of legislation must mark an end to the old way of doing business and the beginning of a new era of responsibility and accountability.”

Lord, make us fiscally responsible, but not just yet.

Meanwhile, Republican leaders are condemning the president’s expansion of the federal government. But do they have any standing to judge? Senior Fellow Michael D. Tanner said no:

The Bush administration’s brand of big-government conservatism was, at the very least, the greatest expansion of government from Lyndon Johnson to, well, Barack Obama.

For Cato’s policy recommendations on earmarked spending, see the “Corporate Welfare and Earmark Reform” chapter in the 2009 Cato Handbook for Policymakers.

Violence Spills into the U.S. from Mexico’s Drug War

With daily reports of increased violence coming from Mexico, Cato Vice President for Defense and Foreign Policy Studies Ted Galen Carpenter said the brutality is an indicator of power and arrogance, not desperation, and asserts that gun restrictions in the U.S. will not subdue violence:

The notion that the violence in Mexico would subside if the United States had more restrictive laws on firearms is devoid of logic and evidence. Mexican drug gangs would have little trouble obtaining all the guns they desire from black market sources in Mexico and elsewhere…

… Even assuming that the Mexican government’s estimate that 97 percent of the weapons used by the cartels come from stores and gun shows in the United States-and Mexican officials are not exactly objective sources for such statistics-the traffickers rely on those outlets simply because they are easier and more convenient, not because there are no other options.

Carpenter spoke at a Cato policy forum last month, and explained why the war on drugs sparks such intense levels of violence.

In a Policy Analysis published in early February, Carpenter warned of the need to change our policy on the Mexican drug conflict, so as to prevent the violence from spreading across the border.

Debating the War on Drugs in Mexico

Yesterday I was invited to Pajamas TV to discuss the increasingly violent situation in Mexico, where the drug-related death toll continues to skyrocket. The other guest was journalist Matt Sanchez.

The discussion rapidly turned into a debate with Sanchez on the merits of drug legalization as an alternative to the current mayhem. If you’re interested in the topic, the video is available here, and the audio here.

John Walters on Drugs?

John Walters, former director of the White House Office of National Drug Control Policy, turns in a rambling and at times incoherent defense of the current war on drugs in today’s WSJ. There are many points worth picking apart, but this line of reasoning, loosely speaking, was my favorite:

What is the alternative to the progress we are making? We have made the kind of compromises with alcohol that some suggest making with illegal drugs…

Today there is terrible violence in Mexico…  The drug trade is a tool, not the cause of these violent criminal groups. Making it easier to produce and traffic drugs will strengthen, not weaken, these terrorists.

Right. Because we have all of these beer distributors and liquor-store owners running around the country kidnapping folks, killing judges, prosecutors, and journalist and generally terrorizing the populace.

I shudder to imagine the damage to our society were the illicit drug trade conducted in a strict regulatory framework reflective of our alcohol and medical supply distribution systems.

Drug Prohibition’s Role in Mexico’s Violence

Since January 2007 there have been more than 6,800 drug-war related deaths in Mexico, and Mexican drug cartels continue to expand their operations in American cities. Washington’s response has been to expand its prohibitionist efforts with the Mérida Initiative, a U.S.­Mexico anti-drug-trafficking program. Historically, however, prohibitionist policies have had little success in reducing the flow of drugs. Ted Galen Carpenter, Cato’s Vice President for Defense and Foreign Policy Studies, suggests a new strategy must be tried.

You can view the full event here.