Time to Lose the Trade Enforcement Fig Leaf
During his SOTU address last week, the president declared it a national goal to double our exports over the next five years. As my colleague Dan Griswold argues (a point that is echoed by others in this NYT article), such growth is probably unrealistic. But with incomes rising in China, India and throughout the developing world, and with huge amounts of savings accumulated in Asia, strong U.S. export growth in the years ahead should be a given—unless we screw it up with a provocative enforcement regime.
The president said:
If America sits on the sidelines while other nations sign trade deals, we will lose the chance to create jobs on our shores. But realizing those benefits also means enforcing those agreements so our trading partners play by the rules.
Ah, the enforcement canard!
One of the more persistent myths about trade is that we don’t adequately enforce our trade agreements, which has given our trade partners license to cheat. And that chronic cheating—dumping, subsidization, currency manipulation, opaque market barriers, and other underhanded practices—the argument goes, explains our trade deficit and anemic job growth.
But lack of enforcement is a myth that was concocted by congressional Democrats (Sander Levin chief among them) as a fig leaf behind which they could abide Big Labor’s wish to terminate the trade agenda. As the Democrats prepared to assume control of Congress in January 2007, better enforcement—along with demands for actionable labor and environmental standards—was used to cast their opposition to trade as conditional, even vaguely appealing to moderate sensibilities. But as is evident in Congress’s enduring refusal to consider the three completed bilateral agreements with Colombia, Panama, and South Korea (which all exceed Democratic demands with respect to labor and the environment), Democratic opposition to trade is not conditional, but systemic.
Why Chile Is More Economically Free Than the United States
In the 2009 Economic Freedom of the World Report, Chile is now #5, one place ahead of the United States.
In 1975, of 72 countries, Chile was No 71. How did this happen? The explanation lies in what I call the “Chilean Revolution,” because it was as important and transformative to my country as the celebrated American Revolution that gave birth to the United States.
The exceptional political circumstances of this period have obscured the fact that from 1975 to 1989 a true revolution took place in Chile, involving a radical, comprehensive, and sustained move toward economic and political freedom (from a starting point where there was neither one nor the other). This revolution not only doubled Chile’s historic rate of economic growth (to an average of 7% a year, 84-98), drastically reduced poverty (from 45% to 15%), and introduced several radical libertarian reforms that set the country on a path toward rapid development; but it also brought democracy, restored limited government, and established the rule of law.
In 1998, The Los Angeles Times described the importance of the Chilean Revolution to the world:
In a sense, it all began in Chile. In the early 1970s, Chile was one of the first economies in the developing world to test such concepts as deregulation of industries, privatization of state companies, freeing of prices from government control, and opening of the home market to imports. In 1981, Chile privatized its social-security system. Many of those ideas ultimately spread throughout Latin America and to the rest of the world. They are behind the reformation of Eastern Europe and the states of the former Soviet Union today… which demonstrates, once again, the awesome power of ideas.
A Tree Grows in Washington
The front-page of the Washington Post’s latest Outlook section features a review of James Tooley’s wonderful book The Beautiful Tree: A Personal Journey Into How the World’s Poorest People Are Educating Themselves. From the review:
The officials Tooley encountered in his travels often denied the existence (much less the superiority) of private schools for low-income children. “There are no private schools for the poor,” a bureaucrat in China’s Gansu province told Tooley, “because the People’s Republic has provided all the poor with public schools. So what you propose to research does not only not exist, it is also a logical impossibility.”
Undeterred, Tooley spent years surveying private schools across the developing world. He found that, on average, they had smaller class sizes, higher test scores and more motivated teachers, all while spending less than public schools…. Tooley blasts development experts for recognizing the problems with public education and still insisting that more investment in public schools is the way to go. “Why wasn’t anyone else thinking that private schools might be part of a quicker, easier, more effective solution?” he asks.
… Tooley, meanwhile, with a Rough Guide in one pocket and an endless supply of exclamation points in the other, drowns readers in local color, detailing every “bright-eyed” school child and every “thin drifting smog” above a shantytown.
Still, Tooley’s passion comes off as genuine.
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