A story in Reuters today offers a good reminder of why the focus of trade negotiators is so often at odds with what really matters when it comes to opening markets at home and abroad.
The proposed U.S.-EU preferential trade agreement (called the Trans Atlantic Trade and Investment Partnership) is being subject to two days of hearings from various groups with an interest in the negotiations. The article implies that most of the witnesses (at least, those who have testified so far) are wary of the deal, on the grounds that various “protections” offered to consumers will be undermined by opening markets to trade and investment:
Since tariffs between the United States and the EU are relatively low, the most difficult part of the upcoming talks will be reducing regulatory and other “behind‐the‐border” barriers that impede trade in sectors ranging from agriculture to chemicals to autos to finance.
That worries consumer groups such as Public Citizen, which says the United States and the EU have different regulations because the concerns of their citizens are not the same. For example, EU consumers have voiced stronger objections to genetically modified food than their U.S. counterparts.
“Trying to eliminate a big swath of regulatory differences via a trade deal would have a democratic cost because you’re taking away a power from the electorate,” said Ben Beachy, research director at Public Citizen’s Global Trade Watch.
The reason why we have protectionism, when the case for free trade is clear and relatively uncontroversial among economists, is that the powers who gain from closed markets are organised and those, like consumers, who would gain from open markets are diffuse, hard to organise, and have little individual incentive to lobby.
But this article shows us that even those who think of themselves as consumers’ advocates, and are organized ostensibly to argue their case, often agitate against freer trade. Rarely do I hear of a “consumer group” giving support to the lower prices and greater variety that international trade brings; they’re too busy fighting the agreements based on some warped sense of “democracy” or because they want to limit consumers’ choices. It’s no wonder that trade liberalization is such a hard slog.
Speaking of consumer protections, and how they can be abused by more self‐interested lobby groups, a reminder to read the paper written by Bill Watson and me on the rise of regulatory protectionism.