Category: International Trade

Blog author: dphelps
Wednesday, August 17, 2005
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In a FoxNews article, Jack Spencer of the Heritage Foundation reveals some interesting finds from their year-long study of the military industry: US Defense relies heavily on a global free market for its equipment. This may seem to fly in the face of the idea that if anyone ought to buy American, it is the American government. But as Spencer points out

Congress has tried repeatedly over the years to steer defense contracts in directions that would supposedly shore up or expand America’s military-industrial capacity. Yet these efforts have nearly always interrupted the natural tides of the market and led to unintended consequences, including inefficient practices, high prices and limited choices for the military. America’s war-fighting institutions have consistently achieved better results when they have relied on the free market to decide where and how products should be made.

Simply put, for good stuff, the free market delivers. This is a fact. For a concise case study of how and why free markets work (and why subsidies don’t), check out the rest of this article here.

From last week’s McLaughlin Group (July 30), an exchange between Pat Buchanan and Mort Zuckerman on the AFL-CIO split:

MR. BUCHANAN: There’s no doubt it is a blow to the Democrats. And what Eleanor said is very important earlier. The future of the labor movement is in service workers and it’s government workers, John, because the industrial unions are dying. We are exporting all of their jobs overseas, whether it’s textile or steel or (atomic?) workers or auto workers. All of that’s going overseas. Free trade is killing the labor movement.

MR. MCLAUGHLIN: Do you think that the timing —

MR. ZUCKERMAN: I’m sorry. It’s not just that it’s going overseas. Automation has changed those industries.

MR. BUCHANAN: Automation —

MR. ZUCKERMAN: They don’t need anywhere near — two-thirds of those workers are no longer needed to produce more cars and more steel. It’s automation.

MR. BUCHANAN: Globalization is killing them too.

MR. ZUCKERMAN: That’s another part of it. And automation doesn’t apply to the service workers.

MR. MCLAUGHLIN: I want to ask —

MR. ZUCKERMAN: That’s why the future is there. I agree with that.

A little earlier Mr. Zuckerman says, “There’s been a complete transformation of the nature of the workforce in America. Thirty-five years ago, if you look at the auto workers and the steel workers, for example, 78 percent of them did not have a high school education. Today everybody is educated. It’s much less attractive to join a union, both culturally and politically.”

In addition, the move to a post-industrial, servece and information-oriented economy in America, and the resulting lack of mobility and innovation in some places (like Michigan), has played a large part in driving down union membership.

Blog author: jballor
Thursday, July 28, 2005
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Here’s a great interview from the Marketplace Morning Report with Chris Farrell, in which he argues for the lifting of trade sanctions against dictatorial and oppressive regimes. He compares the cases of Cuba and China, in which two different strategies have been used, with vastly different results.

We need to “stop the policy of broad based sanctions against nations that we don’t like,” says Farrell. This is directly opposite of the view, for example, which primarily blames economic engagement and the concern that, in the words of Kai Ryssdal, “some of these governments will be propped up.”

This is something the Acton Institute has been talking about for years. Read Rev. Robert A. Sirico’s “It’s Time to Do Unto Cuba as We Do Unto China,” from The Wall Street Journal, July 5, 2000.

Blog author: dphelps
Thursday, July 28, 2005
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Close at Home

The House of Representatives voted early this morning (12:03 am) to approve the Central American Free Trade Agreement (CAFTA) after weeks of intense lobbying on both sides. The final vote was a close 217-215.

My predictions: somehow, any dip in employment (if there is one) in the next six months will somehow be linked to CAFTA by its detractors. Detractors will attempt to take the moral high ground in American politics in ’06 and ’08, and even if we experience greater prosperity as a result of CAFTA, the hills will be alive with the sounds of “Where are the jobs?” and “I told you so.”

But here’s the other side of it that detractors will not draw your attention to in coming months: Central Americans will have access to cheaper goods. Cheaper goods mean higher productivity. Higher productivity means more wealth creation. More wealth creation means more prosperity, less poverty, and friendlier neighbors. Why friendlier? Because now, Central American workers have greater access to something that is indespensible in the market, something that affirms their dignity as workers and as persons: freedom. Free trade is nothing more than individuals and bodies excercising the truth about themselves, that they are free beings and ought to come into agreements freely, without governmental impediments like tariffs.

Here’s to free trade and our success together as neighbors.

John Paul II gave us all a tremendous gift by endorsing the terms Culture of Life and Culture of Death. But as with all great gifts, we must guard these terms carefully so as not to wear them out with misuse, robbing them of their relvence. Unfortunately, this is precisely what is happening in the current debate over CAFTA. A group called Catholics for Faithful Citizenship claims the following: “Clearly, supporting CAFTA is inconsistent with upholding a culture of life.” They provide a list of vague quotes by a Colorado bishop and conlcude (somehow–I cannot quite follow their reasoning) that free markets are “clearly” inconsistent with a culture of life.

To jump immediately to rhetoric like this–and what’s more, to do so without an actual reasoned argument behind it!–is not only irresponsible, but smacks of trite political lobbying. If this group is truly concerned with a better society, they will consider the freedom inherent in the people for which they claim to advocate and allow them fair access to greater markets. They ought to use some economic prudence here instead of resorting to sound-bite politics, throwing around “culture of life” as if it were the latest political buzzword.

Instead, they have slapped this powerful term onto their half-reasoned view of CAFTA, capitalizing on the term’s moral connotative power, using it to advance a half-truth. It is crucial that sound economic thought is employed by Christians before tossing out irresponsible rhetoric involving our most powerfully relevent terminology. Otherwise, we appear to be no different than other flapping mouths blasting the landscape with an irrelevent wind.

The Interfaith Working Group on Trade and Investment, a Washington-based amalgam of left-liberal religious activists, has asked the U.S. Congress to reject ratification of the Central American Free Trade Agreement. Here’s a representative statement: “Religious leaders boldly stood with impoverished people and called today for sustainable development in Central America and respect for the integrity of Creation.” Some of our best friends are impoverished?

In this group’s statements, there’s scarcely an intelligible economic thought to be found or, for that matter, a practical understanding of what makes business part a functioning society that creates wealth not only for owners, but for workers, too.

Let’s turn the tables. How would these religious leaders respond to theological platitudes tossed at them from people who make their living in finance and industry? Imagine an economist trying to pass a graduate seminary exam with statements such as, “God loves us, that’s why” or, “We should all be nice to people.”

So, imagine a business person sitting in the pews on Sunday and the pastor hauls out the Interfaith Trade Group’s Statement on International Trade and Investment in lieu of a real sermon. This business person learns that the free economy has brought about “mounting global inequities” and “growing disparities and injustices” and we should be working for “distributive justice.” And so on.

A better way to prepare a sermon on the justice of trade would be to first absorb some real understanding. Maybe start by reading this analysis from the Dallas Fed which informs us that:

Entering into regional trade agreements has well-documented positive effects on participating nations, rich or poor, even though the impact on the United States would be lessened by the small market sizes of the DR-CAFTA countries. From the DR-CAFTA countries’ perspective, the agreement’s impact would be large. Even the most populous of these nations, Guatemala, has less than half as many people as the state of Texas. Moreover, despite what the habitual detractors of trade liberalization claim, there is much evidence that trade openings typically have positive effects on income per capita — generally including that of the poorest fifth of the population, even in developing countries.

Increasing the opportunities for trade is precisely what people of faith should be demanding for the impoverished. Unless we want the impoverished to stay that way.

Read Rev. Robert Sirico’s analysis of the Religious Left’s drive to derail CAFTA in “Unholy Opposition: A Moral Case for CAFTA” on National Review Online.

Blog author: dphelps
Thursday, July 21, 2005
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Move over, sir. The Bishop is in town.

Have you noticed the most recent television ad against CAFTA, the Central American Free Trade Agreement? In it, detractors very wittily capitalize on the rhyme with NAFTA and present it as another ‘sucking sound’ of jobs leaving America. It seems to me a little sad these folks cannot think of actual arguments against this policy and must resort to 13-year-old Ross Perot witticisms to make their point.
Or do they? To bring in a moral perspective, Democrats in Congress asked Bishop Alvaro Ramazzini of San Marcos, Guatemala to testify on CAFTA. Read here for Fr. Robert Sirico’s answer to the Bishop’s questionable advice.

From an interview on Zenit.org with Ettore Gotti Tedeschi, the president of the Italian division of Santander Central Hispanic Bank and a professor of the Catholic University of Milan, discussing African debt relief:

“What should have been done was to put these countries in a condition of being able to pay the debts, even if in 1,000 years, helping them to create the necessary wealth for their own survival, as well as for their own dignity as human beings, who do not want to feel incapable and failures, in need of non-repayable charity…the G-8 members should listen to the suggestions of Pope Benedict XVI, who shows himself to be the most concrete “statesman,” inviting them to take concrete measures to help Africa, appealing for the just distribution of the goods of the earth. And, in order to distribute them, it is necessary to make them bear fruit, ‘to plow, plant, water and harvest.'”

The worldwide Live 8 shows have come and gone, and are being hailed as perhaps the greatest collection of concerts ever. While moments like the introduction of Birhan Woldu or (to a lesser extent) the reunion of the estranged members of Pink Floyd certainly made for compelling television, only time will tell whether or not they will have a significant impact on Africa’s future.

One item of news that could have a significant impact seems to have been lost in the American media shuffle, however. Yesterday, in an interview on Britian’s ITV network, President George Bush indicated a willingness to end agricultural subsidies in the US if European leaders would do the same:

GEORGE BUSH: Let’s join hands as wealthy industrialised nations, and say to the world, we’re going to get rid of all our agricultural subsidies together. And so the position of the US Government is we’re willing to do so, and we will do so with the, uh, with our fine friends in the European Union.

TREVOR MCDONALD: So you would if they would? Because at the moment for example…

GEORGE BUSH: Absolutely…

TREVOR MCDONALD: …cotton farmers in this country get subsidised to the extent of US $230 per cotton acre. You’d get rid of those things if the EU does?

GEORGE BUSH: Absolutely. And I think we have an obligation to work together to do that and that’s why it’s very important that the Doha round of the WTO go forward.

Bush also noted the value of international trade: “The benefits that have come from opening up markets, our markets to them and their markets to us, far outweigh the benefits of aid.”

James Joyner notes that Bush’s challenge is unlikely to bear any fruit:

A bold rhetorical gesture, although ultimately an empty one. The president knows the EU, especially France, will never lift their subsidies. Further, even if they did, the U.S. Congress will not abolish them entirely, as too many congressional districts and states are heavily dependent on agriculture.

I tend to agree with that pessimistic analysis. However, I take some comfort in noting yet again an increased focus on the value of trade as a mechanism for lifting people out of poverty and building wealth in impoverished areas.

More: Writing in today’s Washington Times, Wes Pruden notes a clear-eyed assesment of the situation from a US diplomat:

William Bellamy, the U.S. ambassador to neighboring Kenya, startled the guests at his Fourth of July garden party yesterday with just the kind of bluntness needed to keep African aid in realistic perspective. “Turning on the fire hose of international compassion and asking Kenya and other African nations to drink from it is not a serious strategy for promoting growth or ending poverty.”

Making poverty history?

Much has been written in recent weeks about Live 8, a series of concerts that will take place on July 6 in London, Paris, Berlin, Rome and Philadelphia. The name refers not only to the original Live Aid concerts that took place in 1985, but is also a reference to the G8 meetings that will be taking place in Edinburgh, Scotland at the same time as the concerts. G8 organizers are planning for massive protests which have been urged on by concert organizer Sir Bob Geldof, who has called for one million people to show up in Edinburgh to call for increases in aid and trade reform for Africa.

Geldof’s goals are threefold: “By doubling aid, fully cancelling debt, and delivering trade justice for Africa, the G8 could change the future for millions of men, women and children.”

Yesterday, Geldof participated in a conference call with a number of bloggers spanning the political spectrum, all of whom came away impressed with his knowledge of and passion for the issue of African poverty. Most interesting to those of us concerned with free markets is the fact that Geldof is placing a heavy emphasis on trade as a potential solution to Africa’s problems.

As I noted in an earlier post, there is good reason to be skeptical of claims that increased government-to-government aid is the cure for what ails Africa, and Live 8, like many other well-intentioned efforts, suffers from too much emphasis on that same old "solution" that hasn’t worked in the past. But in the sense that Live 8 introduces a free-trade element into an advocacy mix that has, in the past, been totally leftist in outlook, it may be an event worth monitoring.

More blog reaction at Captain’s Quarters and The Indepundit.
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