Is Trade Policy Obsolete?
That is one of the conclusions in my new paper, “Made on Earth: How Global Economic Integration Renders Trade Policy Obsolete.”
For hundreds of years, trade policy has been premised on the assumptions that exports are good, imports are bad, and the interests of domestic producers are tantamount to the “national interest.” Though that mercantilist worldview has never been accurate, its persistence as a pillar of trade policy into the 21st century is especially confounding given the emergence and proliferation of disaggregated production processes, transnational supply chains, and cross-border investment. Those trends have blurred any meaningful distinctions between “our” producers and “their” producers and speak to a long chain of interdependent economic interests between product conception and consumption.
Democrats Favor Trade Sanctions on Americans
Scott Lincicome sharpens his pencil today and calculates that Congressional failure to ratify the U.S.-Colombia Free Trade Agreement–a deal that was signed almost three full years ago–has so far cost American exporters $2 billion. That tally increases $1.9 million each and every day.
Since that time [the trade agreement signing], American exporters have paid approximately $1.9 million per day in Colombian tariffs that they wouldn’t have paid if the Democrat-controlled Congress had just passed the FTA back then and thus allowed it to enter into force. By my math, that means that Congress’ and (now) the President’s partisan stalling has resulted in a pointless tax on American businesses of almost $2 billion ($1.9798 billion = 1042 days times $1.9 million) and counting.
My colleague Dan Griswold explained yesterday how U.S. trade policy punishes poorer people abroad, and amounts to a regressive tax here at home:
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 pecent or more on food and lower-end clothing and shoes — staple goods that loom large in the budgets of poor families.
The Obama administration and Congress could easily remove the sanctions that burden America’s exporters and lower-income consumers. But until they’re convinced that they can make up the revenues lost by crossing Big Labor, the Democratic Party playbook counsels more of the same disingenuous rhetoric of fraternity with the common man and more exaggerations about evil foreign labor practices.
Cato on Facebook
Cato on Twitter
Cato on Google+
Cato on YouTube
