Category: International Trade

Blog author: jballor
Friday, March 15, 2013
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Sam Gregg writes of Argentina, whence the new Pope Francis hails, “Over and over again, Argentina has been brought to its knees by the populist politics of Peronism, which dominates Argentina’s Right and Left. ‘Kirchnerism,’ as peddled by Argentina’s present and immediate past president, is simply the latest version of that.” For a bit of the current economic context in Argentina, here’s the latest on Kirchnerian political economy as related by John Teevan:

Cristinakirchnermensaje2010That’s the Argentine Way: In order to prevent the outflow of dollars from President Cristiana Kirchner’s silly-but-harmful economy, she created a new trade policy that permits only as much importing of foreign goods as can be paid for by equally matched by exports. So how is Newsan, an Argentine maker of Sanyo and JVC electronic equipment, going to create the exports necessary to buy the parts it needs to import? Easy, they added a seafood business that now exports shrimp and is paid in dollars. Similarly, Argentine BMW exports rice. Better to partner with Argentina’s wineries which produced $865m in wine exports. The words to describe this urgent economic inefficiency are not ‘free market’ nor even ‘social economic planning’ but ‘a Byzantine labyrinth.’ Why is it necessary? Because Ms. Kirchner also has currency rules or controls that ration how much foreign currency people can hold. Why? Because her policies have made the Argentine currency worth less threatening her dollar reserves. All this is to help ‘manage trade’ as she says so that Argentine jobs can be protected from ‘cheap imports’. President Cristiana is contorting herself to put many fingers in her leaky dike. She’s running out of fingers and looks ridiculous.

The above is from John’s monthly email, “Economic Prospect.” Send John a message if you’d like to be added to his list.

Trade and Mutual AidIn the forthcoming issue of Comment magazine, I examine how free trade orients us towards the good of others. In doing so, I argue against the value of pious banalities and cheap slogans. I include examples like, “Go in peace; keep warm and well fed,” or, “When goods do not cross borders, armies will.” The latter is often attributed to Bastiat, and while it captures the spirit, if not the letter of Bastiat’s views, the closest analogue is actually found in Otto Tod Mallery: “If soldiers are not to cross international boundaries on missions of war,” wrote Mallery in 1943, then “goods must cross them on missions of peace.”

I was struck by the disconnect between ideology and reality, or between idealism and realism, in an anecdote from a recent foreign policy speech from Sen. Rand Paul. As Paul notes,

In George Kennan’s biography, John Gaddis describes President Clinton asking Strobe Talbot “why don’t we have a concept as succinct as ‘containment.'” Talbot’s response [was] “that ‘containment’ had been a misleading oversimplification; strategy could not be made to fit a bumper sticker. The president laughed… “that’s why Kennan’s a great diplomat and scholar and not a politician.”

I guess that’s also the reason that I’ll never be a politician, either. As Lord Acton observed, “Every doctrine to become popular, must be made superficial, exaggerated, untrue. We must always distinguish the real essence from the conveyance, especially in political economy.” The key for responsible governance is not to lose sight of the complexity that lies behind popular exaggerations and conveyances.

As I argue in “Trade and Mutual Aid,” the temptation to rest easy with simple formulas to complex problems is common, but must be resisted: “Divorced
from a more comprehensive conception of the human person and social flourishing, an uncritical reliance on free trade to solve the world’s problems can well become destructive.” Even so, I conclude, “Free trade is a system that imperfectly, and yet with some measure of success—as Bono and countless others are beginning to recognize anew—orients us toward the good of others.” In the course of this piece, I draw on a variety of sources, including Frédéric Bastiat, Adam Smith, John Calvin, Johannes Althusius, Abraham Kuyper, Herman Bavinck, Pope Paul VI, and Friedrich Hayek.

To get your copy of the Comment issue on the topic of persuasion, including my piece on the fundamental persuasive nature of exchange, “Trade and Mutual Aid,” subscribe by March 1. You’ll also find content from new editor James K.A. Smith, Anne Snyder, Jim Belcher, Ashley Berner, Jonathan Chaplin, Marilyn McEntyre, Janet Epp Buckingham, D. Bruce Lockerbie, Calvin Seerveld, Natalie Race Whitaker, and Nicholas Wolterstorff.

This morning at Ethika Politika, I argue that “acting primarily for the sake of national interest in international affairs runs contrary to a nation’s highest ideals.” In particular, I draw on the thought of Vladimir Solovyov, who argued that, morally speaking, national interest alone cannot be the supreme standard of international action since the highest aspirations of each nation (e.g. “Life, Liberty and the pursuit of Happiness”) are claimed to be universal goods. I would here like to explore his critique with reference to the subject of international trade. (more…)

Blog author: jcarter
Thursday, August 9, 2012
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If you want to work in international development, says Charles Kenny, go work for a big, bad multinational company:

Kids today — they just want to save the world.

But there is more than one way to make the planet a better place. Here’s another option: Get an MBA and go work for a big, bad multinational company. Consider this: Over the past decade, foreign direct investment in Africa topped foreign aid — and in 2011 alone, by $7 billion. And unlike food handouts or free latrines, this kind of investment built factories, financed banks, and opened mines and oil fields, creating tens of thousands of jobs and transferring invaluable knowledge to the countries that need it most. That’s good news, because it is increasingly clear that new technologies are what’s driving improved quality of life in Africa, and new ways of doing business are vital to sustaining economic growth on the continent.

Yet there’s still a widespread feeling that multinationals are the rapacious, profit-obsessed spawn of globalization and free markets, running amok across the developing world. Some surely are. But think about how hard U.S. states compete to attract a Toyota factory. Or how happy Britain was when the Indian firm Tata bailed out its ailing steel industry. If multinationals can make that kind of difference in job creation and productivity in the rich world, consider the even greater role they play in poorer countries.

Read more . . .

When it comes to Swiss bank accounts, pop culture brings to mind wealthy people who hide assets from various groups, such as the IRS or their jilted family members. Our sympathies do not align with the type of people we imagine hold Swiss accounts. In fact, it is easy to get quite envious of the idea of holding a Swiss bank account, or possibly resentful that others can that are well off can avoid paying as much in taxes as possible.

Sadly, our perceptions lead us astray and throw up barriers to peaceful trade. Last year, a measure to go after tax avoiders who used Swiss (and other foreign) accounts was included in the jobs bill. Now, that law (known as FATCA) is harming Americans and Swiss workers alike. The New York Times has the story.

“Congress came in with a sledgehammer,” said H. David Rosenbloom, a lawyer at Caplin and Drysdale in Washington and a former international tax policy adviser for the Treasury Department. “The Fatca story is really kind of insane.”

Essentially, the law is so onerous to foreign banks that many say they do not want American business at all.  In fact, the law affects more than just Swiss banking. It actually imposes costs on virtually all foreign banking that deals with Americans. From the NYT:

“The Fatca legislation treats all Americans with overseas bank accounts as criminals, even though most of them are honest, hard-working individuals who happen to be living and working or retired abroad,” said Jacqueline Bugnion, a director of American Citizens Abroad.

This is incredibly inconvenient to Americans abroad, who may earn income in foreign denominations which would normally be easier to deposit in foreign banks. On the flip side, we have foreign based firms who operate in the United States. A Swiss firm is set to bring 150 jobs to Youngstown, Ohio in September. Do you think a Swiss firm might have Swiss bank accounts? Thankfully, the law does not seem to have scared off this investment, but it’s possible this was planned long before FATCA came to be.

We should be very wary of policy that is born of the rhetoric of envy. According to the NYT article, the treasury expects to take in about $8 billion from the new law, which may be much lower than the costs that foreign banking institutions face in complying with the new rules. As Jordan Ballor wrote last year, taxation should be primarily be about raising revenues. Can a law that causes more economic harm than it raises in revenue be a good law for revenue? The politics of envy and resentment seem to have clouded our judgement so badly that we are going to create a greater economic harm than the fiscal benefit to our country. Envy and resentment are natural, but we should recognize them for what they are: vices. It’s not surprising that vices lead to bad law.

H/T to Matt Welch

In this week’s Acton Commentary, “Contagious Community,” I look at the positive as well as the negative aspects of coordination and cooperation between human beings on a global scale. The film Contagion provided the occasion for these reflections, and I argue that

while the film is clear about the dangers of globalized human relationships, it also teaches a more subtle lesson. Even as disease represents a danger that can have worldwide impact, such dangers remain the exception rather than the rule. Indeed, the film portrays quite well how global networks of information and exchange are absolutely foundational for our contemporary world.

Abraham Kuyper on Common Grace in Science & ArtI was reminded of this uniquely human social characteristic again while reading through Abraham Kuyper’s Wisdom & Wonder: Common Grace in Science & Art this week. Kuyper makes the point that human pursuit of scientific knowledge is a communal endeavor. In fact, he writes,

Science is thus constructed not on the basis of what one person observes, discovers, imagines, and organizes into one system in his or her thinking. Rather, science arises from the fruit of the thinking, imagining, and reflecting of successive generations in the course of centuries, and by means of the cooperation of everyone.

What we have in the case of the development of human knowledge, then, is a communal endeavor defined not just in spatial terms (i.e. globally) but also temporally, including the successive ages of human beings from the past and their discoveries as they have been built upon and communicated to us today.

When discussing the idea of the invisible church, theologians include both the living and dead (who now enjoy the revelation of the blessed in the intermediate state) as making up “the communion of saints.” But similarly with respect to science as a common grace enterprise, we have a communion of common grace that likewise includes the living as well as the dead.

No single person can comprehend science in an “exalted sense,” which for Kuyper “originates only through the cooperation of many people,” the living as well as the dead. In the same way, no single person knows how to manufacture a pencil or build a chair, in part because none of us who are alive today got where we are on our own. We (and our civilization) are the products of those who have come before.

Recognition of this should instill in us a pretty healthy sense of humility and gratefulness for the graces of human community.

Is ‘fair trade’ more fair or more just than free trade? While free trade has been increasingly maligned, The Fair Trade movement has become increasingly popular over the last several years. Many see this movement as a way to help people in the developing world and as a more just alternative to free trade. On the other hand, others argue that fair trade creates an unfair advantage that tends to harm the poor.
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Blog author: jcarter
Friday, April 20, 2012
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“Charity rejoices in our neighbor’s good,” said Thomas Aquinas, “while envy grieves over it.” Unfortunately, grieving over our neighbor’s good has become a dominant part of recent economic discussions (“income inequality,” the “Buffett rule,” the “99%”).

Journalist Matt Lewis recently talked to talked to Dr. Victor V. Claar about the rise of envy in economics. You can listen to the audio below.
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Thanks to George McGraw, Executive Director of DigDeep Right to Water Project, for his kind and thoughtful Counterpoint to my original post.  He and his organization are clearly dedicated to the noble cause of providing clean water and sanitation to all, a cause which everyone can and should support.  It is also a very sensible objective that would aid the world’s poor much more than trendier causes such as “climate change” and “population control” which tend to view the human person and his industriousness as fundamental problems to be solved through central planning, birth control, sterilization and abortion.

McGraw is certainly right to say that the Holy See does not believe that water should be free for all, despite the purposely provocative title of my post.  And the Pontifical Council for Justice and Peace document does indeed presuppose market mechanisms for the distribution of water resources.  My fear, however, is that while paying lip service to the validity of market economics and the role of profit, many religious-minded people still have a low opinion of business and fail to recognize that markets have been and remain the best way to allocate resources, especially absolutely necessary ones such as food and water.  The profit motive may not be the most high-minded way of caring for the poor, but it has proven to be the most reliable and effective one.  No one claims that markets are perfect; they are still more likely to meet human needs that the alternatives, whether these are government services or private charity.

I agree that there are circumstances in which food and water must be provided to those who cannot pay for them, but this does not make them “free” or without cost.  Someone else still has to produce and deliver them to the poor, and it will be the government who does the commanding at some level.  This is necessary in emergency situations, though still not always the best solution, as the relief efforts in the Hurricane Katrina aftermath proved.  My main concern is that introducing a legally-recognized “right to water” shifts the focus from the rights and duties of the private sector to those of the government, and away from the individual and toward the collective.  It should also be recognized that the public, subsidized provision of a good often displaces or “crowds out” private sector providers, to the detriment of the development of local businesses, a sine qua non if countries are to escape poverty.

Having worked for the Holy See at the United Nations, I witnessed all sorts of perverted thinking on the issue of human rights.  The UN was where, for instance, the Soviet Union and its satellites continually pushed for “economic, social and cultural rights” at the expense of the political and civil rights promoted by the West.  This was yet another cynical ploy to deny individual rights and collectivize society.  Since the end of communism, many of these “new” rights, also called “second- and third-generation” rights, have become less obviously ideological but remain problematic.  As the very notion of “generational” development makes clear, there is no clear standard by which to measure or order these rights.  This is the “progressive” rather than the truly liberal understanding of human rights and it ought to be rejected as such.  Two of my graduate-school professors, Clifford Orwin and Thomas Pangle, put it well in a 1982 essay on “The Philosophical Foundation of Human Rights”:

[Economic, social and cultural rights] are merely things that most people want, and that the poorer countries wish they could persuade the richer ones to give them. They are open-ended and hence often unreasonable.  There is no way, for example, that an underdeveloped country can provide adequate education or medical care for all its citizens.  By proclaiming these as universal human rights, however, such countries arm themselves with the most respectable of reasons for pressing for global redistribution of wealth.  No one can blame them for that; but we can question the status as “human rights” of what are, in a sense, letters to Santa Claus.

I have to admit to being a bit surprised by the Catholic World News report on my blog post that placed me in opposition to Popes John Paul II and Benedict XVI as well as the Compendium of the Social Doctrine of the Church.  It’s not every day that I have to prove my Catholic bona fides, so I should clarify my understanding of what the Church means by the “right to water.”  (The RealClearReligion website may have contributed to the problem by titling its link to my piece “There is No Right to Water.”)  All Catholics and indeed all people of good will should believe that human beings are entitled to the necessities of food and water as human beings; in no way do I support depriving anyone of these at any stage of life.  And the Church is not wrong to identify “rights” that are due to the person as a result of his ontological dignity.  My point was that calling for a legally-recognized international human right to water may not be the best way to ensure that everyone actually has access to it; results should matter just as much as putting some nice-sounding words on paper.  The difficulty results, in my opinion, from the long-standing abuse of the term “human rights” that I previously mentioned and a lot of subsequent incoherence, not least coming from academics looking for justification for their soft-left-wing policy preferences.

The Church is, nevertheless, a pre-modern institution that has a different understanding of human rights and human nature than liberals and progressives do, and the presuppositions of Church teaching on human dignity are crucial.  As the late Cardinal Avery Dulles once put it, “The Catholic doctrine of human rights is not based on Lockean empiricism or individualism.  It has a more ancient and distinguished pedigree.”  Without emphasizing the presuppositions made by this pedigree, any call for new rights is likely to be misconstrued and misapplied.  We need to recover the fullness of Catholic moral and social teaching without exacerbating the problem, while also appreciating the role that private enterprise has within the liberal tradition.

Not surprisingly, the Pontifical Council for Justice and Peace (PCJP)’s latest document on water has garnered scant media attention. Why, after all, would journalists, already notorious for their professional Attention Deficit Disorder and dislike of abstract disputation, report on something named “Water: An Essential Element of Life,” especially when it is nothing more than an update of a document originally released in 2003, and then updated in 2006 and 2009, with the exact same titles?

Back then, First Things editor-in-chief Fr. Richard John Neuhaus mischievously remarked, “There is an unconfirmed report that under discussion at the UN is an International Year of Air. If that ambitious step is taken, informed observers say, the Pontifical Council on Justice and Peace will be ready with a major statement, ‘Air, An Essential Element of Life.’” If nothing else, the PCJP, where I worked from 1999 to 2004, needs to hire a marketing specialist to come up with snazzier titles for their publications.

So you could be forgiven for thinking that reading such a document would make a spiritually-beneficial type of intellectual mortification during this Lenten period. But skipping it altogether would also mean neglecting the serious questions contained therein on how the Holy See thinks about important matters such as human rights and economics. In fact, one may wonder if those responsible for the document have taken them as seriously as they should have.

Thanks to the invaluable Real Clear Religion website, I came across this analysis by George McGraw of DigDeep Water. It’s a mainly positive appraisal of the Holy See’s call for an internationally-recognized “right to water” but it also draws attention to some problem areas:

[T]here is one aspect of the Vatican’s position on water that makes its international intervention decidedly controversial. In this year’s “Water, an Essential Element” the Holy See will defend water access as an essential human right, one still hotly debated in international law.

When legal human rights were first introduced in 1948, the right to water wasn’t included in either the Universal Declaration of Human Rights or in the treaties derived from it. Many scholars believe that water was considered so basic, that it was quite simply overlooked. Since then, other water-related obligations have found protection in international law, but the closest thing we have to formal recognition of a human right to water is a (non-binding) 2010 UN resolution.

It seems states have generally failed to acknowledge the right to water for two reasons: either due to a concern that it would make them liable for water provision (a costly endeavor), or because such a right might challenge traditional property rights.

The Vatican’s position is doubly controversial because it’s couched in a criticism of “an excessively commercial conception of water” which the Holy See insists isn’t just another “for-profit commodity dependent on market logic.” This language was used to announce the new position paper at last week’s World Water Forum in Marseille — a gathering that suffered criticism for allowing corporate interests and dissenting states to weaken consensus on the human right to water.

So, assuming the importance of water and sanitation has not been simply neglected, there are at least two reasons why the “right to water” doesn’t exist: 1) States are neither able nor willing to pay for “free” water, and 2) it would interfere with the property rights of those who, for example, own land with abundant supplies of water. These would seem to be quite understandable, but not insurmountable, concerns for those who care about the common good. There are many ways for necessary goods to be produced, distributed and consumed through a novelty called commerce, the supposed “excess” of which is criticized by the Holy See. In fact, the Nobel Laureate economist Amartya Sen has argued that calamities such as droughts and famines are most devastating where local markets and effective protections of private property do not exist.

One has to ask: Does the Holy See really believe that water is any less of a commodity, or any less necessary to human life, than food, normally considered the most common form of commodity? If markets don’t exist for important things like food and water, why should they exist at all? Wouldn’t markets be truly useless if they only traded “non-goods”?

If States are reluctant to recognize the “right to water,” why does the Holy See insist on it so regularly? One likely explanation is that most States and the Holy See have very different understandings of human rights. Does a right fundamentally entail freedom from state coercion or entitlement to a government-provided benefit? Should all human goods and needs, which obviously go beyond basic rights such as “life, liberty and the pursuit of happiness,” be considered human rights? If so, who will protect and provide them, i.e., the State, civil society or individuals? Is accommodation or synthesis possible among these divergent understandings of rights, some of which would limit the scope and reach of governmental (and ecclesiastical) power while others would expand them? More basically, aren’t these notions of rights and government based on fundamentally different understandings of human nature, on which we are unlikely to agree at anything approaching a universal level?

It ought to be clear that such questions are central to our understanding of the liberal human rights project, much larger than that of providing “free” water for all. But I wonder if the idea of limited government that allows individuals and voluntary associations to provide for needs beyond those ensured by certain enumerated rights is adequately understood by those who promote previously-unrecognized human rights. Some will say that these new rights are proof of an increasing awareness of human dignity, but I am not convinced. Many of these “rights,” in fact, are not based on a fixed idea of human dignity or human nature, but a denial of it; man is nothing more than a historical, “progressive” being whose wants and needs are constantly evolving. And it is, of course, these “progressives” who are constantly calling for new “rights” to be delivered by the state, rather than the private sector (exhibit A: Obamacare).

In my opinion, the continual expansion and discovery of new “rights” to cover all human needs have a particular appeal to religious believers because it institutionalizes and universalizes our social obligations to care for our fellow human beings. But we must also realize the particular, albeit partial, truths of liberalism and economics, especially with regard to the distribution of resources such as water. (The socialist paradise of Cuba, after all, recognizes the “right to water” as well as those to “health”, “religious freedom,” etc.) God did indeed create the world with enough goods for all. He also gave us the freedom and responsibility to cultivate and share these goods with each other, though we all too often fail at doing so. But let’s not assume He commands us to toss international law, private property, and economic good sense out the window as well.