Author Archive
Tear Down This Wall … between the U.S. and Cuba
The House Foreign Affairs Committee is holding a hearing today on the almost 50 year old ban on travel to Cuba. The ban is part of a broader economic embargo in place since the early 1960s that was supposed to bring about change in the island’s oppressive, communist regime.
Instead, the embargo and travel ban have needlessly infringed on the freedom of Americans, weakened our influence in Cuba, and handed the Castro government a handy excuse for the failures of its Caribbean socialist experiment.
I wrote an op-ed recently advocating change in U.S. policy toward Cuba, and delivered a talk on the same theme at Rice University in 2005.
Will Congress finally change this failed U.S. policy?
Filed under: Foreign Policy and National Security; Trade and Immigration
U.S. “the Most Open Market”? Not Even Close
Accompanying the president on his trip to China this week, U.S. Trade Representative Ron Kirk couldn’t resist repeating the old line that the United States is “the most open market in the world.” The chief U.S. trade negotiator was trying to rebut criticism from Chinese officials that the Obama administration, with its 35 percent tariff on Chinese tire imports and all that, has retreated from a commitment to free trade.
The administration’s “more open than thou” rebuttal is a weak one. As I write in Chapter 9 of my new Cato book, Mad about Trade:
If an Olympics were held for the most open economy, the United States would be out of medal contention. According to the most recent annual Economic Freedom of the World Report, people living in 26 other countries enjoy greater “freedom to trade internationally” than do Americans. The report considers not only tariffs on imports but regulatory barriers, exchange rate and capital controls, and actual levels of trade. Bragging rights for the most open economies belong to, in descending order, Hong Kong, Singapore, the United Arab Emirates, Chile, the Netherlands, Ireland, Hungary, Switzerland, the Slovak Republic, and Estonia. The United States lies back in the pack, in 27th place among the 140 ranked nations.
Despite the claims of openness, our government imposes significant barriers against imported clothing, footwear, leather products, glassware, watches, clocks, table and kitchenware, costume jewelry, pens, mechanical pencils, musical instruments, cutlery, hand tools, ball and roller bearings, ceramic wall and floor tile, railway cars, processed fruits and vegetables, rice, cotton, sugar, milk, cheese, butter and canned tuna.
Since the book was printed, a new Economic Freedom of the World Report has been published. The United States has slipped to the 28th “most open market in the world.”
Filed under: International Economics and Development; Trade and Immigration
The Missing Leg of Immigration Reform
In a speech this morning in Washington, Homeland Security Secretary Janet Napolitano said the Obama administration remains committed to enacting real immigration reform. In a key passage in her remarks, she said reform must contain three essential components:
Let me be clear: when I talk about “immigration reform,” I’m referring to what I call the “three-legged stool” that includes a commitment to serious and effective enforcement, improved legal flows for families and workers, and a firm but fair way to deal with those who are already here. That’s the way that this problem has to be solved, because we need all three aspects to build a successful system.
The phrase “improved legal flows” is rather vague, but it points toward some kind of expanded visa program to allow future workers to enter the country legally. Our current immigration system offers no legal channel for anywhere near a sufficient number of foreign-born workers to enter the country legally to fill the lower-skilled jobs our economy creates in times of normal growth.
I’ve made the argument for expanded legal immigration in a recent op-ed, and in a Free Trade Bulletin when the Senate last debated reform in 2007.
After a promising start, Secretary Napolitano spent most of the rest of her speech touting how much has been done on the enforcement side, and almost nothing about how we can expand opportunities in the future for legal immigration as an alternative to illegal immigration.
Without that crucial third leg, Congress will just be repeating the two-legged failure of the 1986 Immigration Reform and Control Act.
Good Night, Lou Dobbs
In his CNN swan song last night, Lou Dobbs told his loyal if shrinking audience that important national issues
are now defined in the public arena by partisanship and ideology rather than by rigorous empirical thought and forthright analysis and discussion. I will be working diligently to change that as best I can.
I would argue that his very act of resigning from his prime-time perch is probably the best contribution he’s made yet to advancing “rigorous empirical thought.”
Since he launched his program “Lou Dobbs Tonight” in 2003, the CNN anchor has been engaged in one long rant against immigration, free trade, and other populist bugaboos. His approach was anything but rigorous and empirical.
In a review of his 2004 book, Exporting America, I critiqued his flabby reasoning and questionable facts. (My new Cato book, Mad about Trade, is a painless, one-shot antidote to everything Dobbs has said about free trade, manufacturing, and the middle class.) The New York Times, “60 Minutes” and other mainstream news outlets have exposed such outrageous whoppers from Dobbs as his claim that immigrants have caused an explosion of leprosy cases and crime.
Dobbs was vague about his plans for the future last night, but there is some speculation that he will run for office, perhaps for president in 2012. I hope he does. It would be an interesting test of just how popular his sentiments really are among Main Street Americans.
Imports Wrongly Blamed for Unemployment
Import competition can throw Americans out of work. Even advocates of free trade like me will readily acknowledge that fact. And nobody needs to remind the people of Hickory, North Carolina.
On the front page of the Washington Post this morning, under the headline, “In N.C., damage not easily mended: Globalization drives unemployment to 15% in one corner of state,” the paper reports in detail how the people of that community are struggling to adjust to a more open U.S. economy:
The region has lost more of its jobs to international competition than just about anywhere else in the nation, according to federal trade-assistance statistics, as textile mills have closed, furniture factories have dwindled and even the fiber-optic plants have undergone mass layoffs. The unemployment rate is one of the highest in the nation–about 15 percent.
Nobody wants to lose their job involuntarily, but a story like this needs to be read in perspective. As I document in my new Cato book Mad about Trade, the large majority of Americans who lose their jobs each year are not displaced by trade. Technology is the great job disruptor, but Americans also lose their jobs because of domestic competition, changing consumer tastes, and recessions.
For every person who loses their job because of globalization, I estimate there are 30 who have lost their jobs for other reasons. I’m waiting for a front-page story on all the newspaper workers who have lost their jobs because of the Internet, or the 30,000 workers laid off by Kodak in the past 5 years because of the spread of digital cameras and plunging film sales, or the book stores and record stores that have shut down and laid off workers because of Amazon.com and iTunes.
Trade is not a cause of higher unemployment nationwide, either, as the Post story seems to imply. Imports have fallen sharply during the latest recession along with the trade deficit. In contrast, imports were rising at double-digit rates when the unemployment rate was below 5 percent. Like technology, trade can put people out of work, but it also creates new and generally better paying opportunities for employment, while raising our overall standard of living.
Cato Podcast Exposes Anti-Poor Bias of U.S. Tariffs
The dirty secret of the U.S. tariff code is that it is not only insanely complex but that it is biased against the poor. Our highest remaining trade barriers are imposed on goods that loom the largest in the budgets of poor and middle-income families — such as food, shoes, and clothing.
Politicians and interest groups that fight any reduction of U.S. tariffs are unwittingly picking the pockets of the poor every day. I discuss how President Obama supports this unfair status quo in a new Cato podcast, in an earlier newspaper column, and in Chapter 9 of Mad about Trade.
And you can bet your imported t-shirt that I will highlight this inconvenient truth during my presentation at today’s Cato book forum. You can watch it live online beginning at noon, eastern time. Commenting on Mad about Trade will be Steven Pearlstein, business columnist for the Washington Post.
Ask Consumers if They Like a Weak Dollar
According to a Washington Post story today, “the weak dollar is one problem the United States loves to have.” The story reports how the fall of the dollar against the euro and other currencies in the past year has boosted U.S. exports and discouraged imports, cutting the trade deficit and allegedly boosting the U.S. economy. A weaker dollar has spurred complaints in Europe and elsewhere, but here at home the Post story leaves the impression the approval is practically unanimous.
Nowhere in the 1,058-word story is the impact on consumers ever mentioned. But it is American consumers who pay the biggest price when the dollars we earn buy less on global markets. We are paying more for oil, which not coincidentally has zoomed toward $80 as the dollar flounders. A weaker dollar means higher prices than we would pay otherwise for a range of goods, from imported shoes and clothing to food, that loom large in the budgets of American families struggling to make ends meet in this difficult economy.
Ignoring consumer interests is widespread in reporting about trade. It reflects the strong bias of elected officials to see trade issues strictly through the lens of producers and never consumers. After all, it is producers who form trade groups and hire lobbyists to promote their exports or protect themselves from imports. Nobody in Washington represents the diffused, disorganized but much more numerous 100 million American households.
The dollar’s value should be set by markets, and I have no reason to believe the dollar is over- or undervalued. But pardon me if I dissent from the consensus that a falling dollar is unambiguously good news.
Filed under: International Economics and Development; Trade and Immigration
Spectator.org Readers Getting “Mad about Trade”
My new Cato book, Mad about Trade: Why Main Street America Should Embrace Globalization, has sparked a lively exchange this morning over at the American Spectator’s popular web site.
Contributing Editor Shawn Macomber introduces a Q&A with me by telling his readers:
Daniel Griswold is not shy about sharing the high aspirations he harbors for his superlative new book Mad about Trade. Griswold has managed to compose a volume as accessible and persuasive as it is indispensable, as fresh and uplifting as it is firmly grounded in accumulated wisdom–a rare bird, indeed.
A Globalized Reading List
If you are looking for a good book on globalization and trade, an excellent source of ideas is the book review section of the Yale Center for the Study of Globalization. The site features excerpts and reviews of the latest books covering all aspects of the subject.
I have an understandable soft spot for the latest posting, on my new Cato book titled Mad about Trade: Why Main Street America Should Embrace Globalization.
Filed under: International Economics and Development; Trade and Immigration
Bernanke Criticizes Trade Deficit, but Not Trade
In a speech on the West Coast this morning, Fed chairman Ben Bernanke at first glance appears to be agreeing with the critics of trade who blame the trade deficit for much of our economic ills. “Bernanke Calls for Action on Trade Gap,” according to the Wall Street Journal. “Bernanke warns against trade imbalances,” chimes in the French news agency, AFP.
Underneath the headlines, however, Bernanke’s comments offer no comfort for the critics. The real culprit is not “unfair trade” or “currency manipulation,” but misguided tax and spending policies in the United States and other major trading countries.
That is a point I hammer home in Chapter 5 of the new Cato book, Mad about Trade: Why Main Street America Should Embrace Globalization:
If our politicians are determined to do something about the trade deficit, the most constructive step they could take would be to promote a higher level of national savings. More domestic savings would reduce the need for foreign funds to finance domestic investment. … The most direct approach would be to reduce or eliminate the federal budget deficit. If the federal government were to borrow a few hundred billion dollars less each year, the pool of domestic savings would rise and more domestic funds would be available for investment. …Ironically, many members of Congress who complain loudest about the trade deficit have voted in the name of economic “stimulus” to plunge us ever deeper in debt.
Chairman Bernanke agrees. His policy prescription was not to raise barriers against imports, but to cut the federal government’s appetite for debt.
Reflections on China’s 1949 “Liberation”
During a speaking trip to China three years ago, the young tour guide in Beijing kept referring to “the liberation.” I soon realized that she meant the October Revolution of 1949, in which Mao Tse Tung and the communists seized power and began their rule 60 years ago today.
Far from liberating China, the reign of Mao represents one of the worst tyrannies in the history of mankind. Opposition parties, free speech and freedom of religion were quickly eliminated. The Great Leap Forward of 1958-61 forced the collectivization of agriculture, resulting in a famine that killed tens of millions. The Cultural Revolution of 1966-76, while not as deadly, unleashed chaos that crippled the economy and scarred a generation. As Gordon Chang writes in a Wall Street Journal op-ed this morning, the celebration by the Chinese people will be understandably muted.
China’s real liberation began not 60 years ago, but 30 years ago, with the reforms of Deng Xiaoping. While China remains an oppressive, one-party state politically, its economy has taken a true great leap forward in the past three decades because of market reforms in agriculture, industry, and trade. China’s liberation has far to go, but the Chinese people today are much more free of government interference in their personal, daily lives than they were in the time of Mao.
When I point to China’s economic progress as an example of what trade liberalization can deliver, my debate opponents will sometimes counter that China is a communist country. But China’s dramatic growth has not occurred because of its residual communism. For 30 years now, its government has been in the process of abandoning the communist economic policies of Mao and his fellow “liberators,” much to the benefit of the Chinese people and the world.
Filed under: International Economics and Development; Trade and Immigration
President Obama’s Trade War on the Poor
A Wall Street Journal story yesterday reports the rising level of poverty in America caused by the steep and lingering recession. As I point out in a Washington Times column that also ran yesterday, one unintended consequence of President Obama’s trade policies so far has been to make the growing number of poor even poorer.
As I explained in the “Economic Watch” column:
America’s highest remaining trade barriers are aimed at products mostly grown and made by poor people abroad and disproportionately consumed by poor people at home. While industrial goods and luxury products typically enter under low or zero tariffs, the U.S. government imposes duties of 30 percent or more on food and lower-end clothing and shoes – staple goods that loom large in the budgets of poor families.
To win favor with organized labor and other opponents of trade liberalization, Mr. Obama has either defended or actually raised barriers on precisely those products of most interest to poor households. …
The $25 billion in revenue raised each year from import duties represent by far the most regressive tax the federal government imposes. Yet the Obama administration and the Democratic Congress have refused to move forward with trade agreements that would lower trade taxes that fall most heavily on the poor. By supporting the farm bill, but not new trade agreements, the president has embraced the status quo rather than change.
Read the full article.
Curbing Free Trade to Save It
In the latest example of “We had to burn the village to save it” logic, Sen. Sherrod Brown (D-OH) argues in a letter in the Washington Post this morning that the way to “support more trade” in the future is to raise barriers to trade today.
Brown criticizes Post columnist George Will for criticizing President Obama for imposing new tariffs on imported tires from China. Like President Obama himself, Brown claims that by invoking the Section 421 safeguard, the president was merely “enforcing” the trade laws that China agreed to but has failed to follow. He scolds advocates of trade for talking about the “rule of law” but failing to enforce it when it comes to trade agreements. Brown concludes, “If America is ever to support more trade, its people need to know that the rules will be enforced. And Mr. Obama did exactly that.”
Nothing in U.S. trade law required President Obama to impose tariffs on imported Chinese tires. As my colleague Dan Ikenson explained in a recent Free Trade Bulletin, Section 421 allows private parties to petition the U.S. government for protection if rising imports from China have caused or just threaten to cause “market disruption” to domestic producers. If the U.S. International Trade Commission recommends tariff relief, the president can decide to impose tariffs, or not.
The law allows the president to refrain from imposing tariffs if he finds they are “not in the national economic interest of the United States or … would cause serious harm to the national security of the United States.”
As I argue at length in my new Cato book Mad about Trade, trade barriers invariably damage our national economic interests and weaken our national security, and the tire tariffs are no exception. If the president had followed the letter and spirit of the law, he would have rejected the tariff.
And since when is causing “market disruption” something to be punished by law? Isn’t that what capitalism and market competition are all about? New competitors and new products are constantly disrupting markets, to the discomfort of entrenched producers but to the great benefit of the general public and the economy as a whole.
Human beings once widely practiced an economic system that minimized market disruption. It was called feudalism.
C/P Mad About Trade
Filed under: International Economics and Development; Trade and Immigration
Congress to Lift the Travel Ban to Cuba?
Bloomberg News reports today that the U.S. House may pass a bill by the end of the year lifting the almost five-decade-old ban on travel to Cuba by American citizens. The step is long overdue. According to the article:
A group of House and Senate lawmakers proposed in March ending restrictions to allow all U.S. citizens and residents to travel to Cuba. [Rep. Sam Farr, a California Democrat] said the legislation, known as the “Freedom to Travel to Cuba Act,” also has enough votes to clear the Senate, where Senator Byron Dorgan, a North Dakota Democrat, and Republican Senator Michael Enzi of Wyoming introduced the legislation.
As Rep. Farr succinctly added, “If you are a potato, you can get to Cuba very easily, but if you are a person, you can’t, and that is our problem.”
I rebut a lot of what Sen. Dorgan has said about free trade and globalization in my new book, Mad about Trade, but on the issue of the Cuban embargo and travel ban, Sen. Dorgan and most of his fellow Democrats are pushing in the right direction, while most Republicans still vote to maintain our failed policies. For more on why the travel ban and embargo should be lifted, read my speech at Rice University in 2005.
Here is one issue where those of use who support less government and more economic freedom really can hope for progressive change.
Trade Delivers Peace and Bargain Prices
For a fair and authoritative (and did I mention favorable?) assessment of my new Cato book, Mad about Trade: Why Main Street America Should Embrace Globalization, you can read William H. Peterson’s review in today’s Washington Times.
Dr. Peterson is an adjunct scholar with the Heritage Foundation and the Ludwig von Mises Institute who holds a Ph.D. in economics from New York City University. In his review he writes:
Daniel Griswold’s tour de force explores, reasons and documents how import competition benefits the American consumer, seeing him move ahead toward greater peace incentives, lower real prices, more choices, better quality. Mr. Griswold also tracks how the big-box retailers such as Wal-Mart, Home Depot and Best Buy deliver the world’s goods mostly by sea via millions of big, truckload-size containers. …
So Mr. Griswold would have the United States adopt or maintain trade policies best for most Americans, especially the poor and middle class, no matter what other nations do. Says the author: Let’s drop the remaining barriers separating us from ongoing growth and peace policies enhancing the global marketplace. Bully for him.
Information at the beginning of the review should have given the cover price of the book as $21.95. It is available with a nice discount at Amazon.com along with a peek inside at the table of contents and selected pages.
Learning from Trade Wars Past
David Rockefeller, the former chairman and CEO of Chase Manhattan Bank, makes a compelling historical case in today’s New York Times for pursing free trade policies. Rockefeller has been around long enough to remember the Smoot-Hawley tariff bill of 1930 and the Great Depression that followed. In an op-ed piece titled, “Present at the Trade Wars,” he writes:
I lived through the stock market crash of 1929 and the Great Depression that followed it, and I saw that there was no direct cause and effect relationship. Rather, there were specific governmental actions and equally important failures to act, often driven by political expediency, that brought on the Depression and determined its severity and longevity.
One critical mistake was America’s retreat from international trade. This not only helped to turn the 1929 stock market decline into a depression, it also chipped away at trust between nations, paving the way for World War II.
On the eve of the G-20 summit in Pittsburgh this week, Rockefeller offers a timely warning to President Obama not to repeat the mistakes of the past.
A Super-Majority of Economists Agree: Trade Barriers Should Go
Sure, economists disagree among themselves about a number of public policy issues, but not about the desirability of free trade. The latest edition of Econ Journal Watch, published by the American Institute for Economic Research in Great Barrington, Mass., reports the results [pdf] from a random survey of members of the American Economic Association.
Based on questionnaires returned by more than 100 members, all with Ph.D.s in economics, the survey’s author, Robert Whaples, reports:
- The economics profession continues to show a consensus in favor of unfettered international trade, as 83 percent agree and only 10 percent disagree that the United States should eliminate remaining tariffs and other barriers.
- Other issues in which the economists reached a strong consensus:
- 82 percent disagreed that the U.S. government should ban genetically modified crops; only 7 percent agreed.
- 78 percent agreed that U.S.-government subsidies for ethanol should be eliminated or reduced, compared to 10 percent who want them increased.
- 72 percent agreed that “A Wal-Mart store typically generates more benefits to society than costs,” versus 15 percent who disagreed.
- 72 percent disagree with the proposition that “Employers in the U.S. should be required to provide health insurance to ALL their employees”; 20 percent agreed.
- 70 percent believe the typical American saves too little; 0 percent believe we save too much.
- 70 percent agreed that “The U.S. should allow payments to organ donors and their families,” while 16 percent disagreed.
To learn more about why the economists are right about free trade, see my new Cato book, Mad about Trade: Why Main Street America Should Embrace Globalization.
20-somethings Will Pay for Big Government
A front-page Washington Post story today notes that the cost of Obama-style health care reform will fall disproportionately on young adults.
Younger workers are typically more healthy than the population at large, and a significant share of them quite rationally choose not to buy health insurance, as my colleague Mike Tanner explains in a recent op-ed. The major health care plans on the table in Washington would force them to buy coverage. As the Post story explains:
Drafting young adults into any health-care reform package is crucial to paying for it. As low-cost additions to insurance pools, young adults would help dilute the expense of covering older, sicker people. Depending on how Congress requires insurers to price their policies, this group could even wind up paying disproportionately hefty premiums—effectively subsidizing coverage for their parents.
I’m beginning to see a pattern. Those same young workers will be forced to pay the bills for soaring Social Security and Medicare expenditures when the Baby Boomers begin retiring en masse a decade from now. And of course, they will be the ones paying off the $9 trillion in additional federal debt expected to be wracked up from the current explosion in federal spending.
I always thought parents were supposed to support their kids, not saddle them with bigger bills and huge debts.
Filed under: General; Health, Welfare & Entitlements
Rep. Flake’s Wise Counsel on the Tire Tariff
Earlier today, Congressman Jeff Flake, Arizona Republican, sent a letter to President Obama urging him to reconsider his decision to impose a 35 percent tariff on tires imported from China.
Rep. Flake makes all the right points in his letter, reminding the president that:
Your decision to impose duties on Chinese tires is likely to encourage other domestic industries to file their own petitions for relief under Section 421. The potential for an endless cycle of U.S. restrictions and subsequent retaliation from China is the last thing our economic recovery needs.
I wish there were more members of Congress like Rep. Flake. Our Trade Vote Records feature on our web site offers a searchable data base of all major trade votes going back to the mid-1990s. Our data base confirms that Rep. Flake is the most consistent supporter in all of Congress in opposing both subsidies and barriers to trade.
The president should heed Rep. Flake’s wise letter.
Filed under: International Economics and Development; Trade and Immigration
Obama’s Tire Tariff Could Raise Prices by 20 to 30 Percent
President Obama’s decision to impose a 35 percent tariff on imported tires from China was not an act of statesmanship. The White House admitted as much by announcing its decision at 10 p.m. on Friday evening in order to minimize news coverage.
A few union leaders are cheering, but in just about every other way our country is worse off. Among the biggest losers will be low-income American families. The tariffs apply to lower-end tires that sell for $50 or $60 each, compared to $200 for higher-end tires. As The Wall Street Journal reported this morning:
The low end of the market will feel the impact of the tariff most, as U.S. manufacturers, who joined the Chinese in opposing the tariffs, have said it isn’t profitable to produce inexpensive tires in domestic plants.
“I think within the next 60 days you’ll see some pretty significant price increases,” said Jim Mayfield, president of Del-Nat Tire Corp. of Memphis, Tenn., a large importer and distributor of Chinese tires. He estimates prices for “entry-level” tires could increase 20% to 30%.
The anti-poor bias of U.S. tariffs is one of the themes of my new Cato book, Mad about Trade: Why Main Street America Should Embrace Globalization. With his decision Friday, President Obama has revealed himself to be a friend of the status quo.
Cato on Facebook
Cato on Twitter
Cato on YouTube
Cato Tweets