Tag: foreign investment

Bucking the Protectionist Trend

In September, the UK government gave the green light for the construction of the Hinkley Point power plant through a French-Chinese consortium. The project—which has received wide international attention after being very nearly relegated to the protectionist dustbin—has been agreed to after much hemming and hawing. It has been mired in controversy mainly over security concerns related to foreign ownership, viewed by some as smacking of protectionism.

It is no secret that there has been a worrying trend toward protectionism in the global markets. The appetite for international trade agreements and foreign investment has been consistently listless. In the United States, and globally, some politicians have been banking on this by flaunting protectionist rhetoric in an effort to garner support. But while protectionism may win votes in the short-term, domestic economic growth will lose out in the long-term. Ultimately, politicizing the global economic rut will only make matters worse.

21st Century U.S. Trade Policy Should be Pro-Market, not Pro-Business, Pro-Labor, or Pro-Lobbyist

The difference between the trade policy we have today and the trade policy we should have is like the difference between crony capitalism and free-market capitalism. The sausage grinder that is U.S. trade policy serves politicians and rewards lobbyists and gate-keeper bureaucrats, who have the gall to presume entitlement to limiting Americans’ options and picking winners and losers.

In a country that exalts freedom, the default trade policy should be free trade. But it’s not. Why?

The public has been trained to accept that special interests—companies seeking exemptions from competition; unions demanding that citizens ”Buy American”; investors and intellectual property holders demanding the U.S. public assume part of its business risks; enviros insisting on measures that punish developing countries for being poor—are rightly entitled to negotiate, abridge, impair, or sacrifice those freedoms in the name of Team USA.

So how are we free if decisions about how, with whom, and how much we transact with foreigners are decided by parties in Washington, who profit from denying us that freedom?

Trade policy should be about maximizing the freedom of Americans to choose, and distinctly not about bestowing certain advantages on particular companies, industries, or special interests. Trade policy should be about maximizing opportunities for Americans as consumers, workers, and investors, and not about impeding those opportunities.

In a globalized world where businesses are mobile and, ultimately, untethered to a homeland, what is the point of policymakers going to bat for U.S. producers? Usually, policies adopted to assist particular companies or industries handicap or subvert companies and industries upstream or downstream in the supply chain, or in other sectors. What even defines a U.S. producer anymore? GM builds more vehicles in China than it does in the United States.  Should Washington and Beijing both claim GM as national treasures and craft policy to serve its needs?

No. Policy should be neutral with respect to the goals of particular companies and industries, and designed to attract investment and human capital, and to maximize opportunities for Americans to partake of the global economy. Trade policy should be about ensuring certainty and eliminating policy-induced frictions in supply chains. As I wrote in this article (21st Century Economy Deserves Better Than 16th Century Trade Policies), which expounds upon the thoughts in this post:

This 21st century economic reality demands better than trade policies rooted in 16th century mercantilist dogma. It demands policies that are welcoming of imports and foreign investment, and that minimise regulations or administrative frictions that are based on misconceptions about some vague or ill-defined “national interest”.

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