Dani Rodrik tells us. My whirlwind summary is pro-trade, pro-safety net, multilateral not bilateral, better procedures, pro-immigration, progressive toward poor countries, letting poor countries determine their own economic policies, and giving democracies more trade rights than non-democracies.
I might well accept that if it were truly a package deal and truly the deal we would get. But I don’t think multilateral institutions — a thin reed as they are — can stand that much stress or take on that much responsibility. I also shudder to think who gets to define what a democracy is and what deals are cut to grant the higher status and how the excluded non-democracies take such a scolding. Boosting safety nets and boosting immigration are not in every way congruent. Most of all I wonder which of these goals are priorities. I’ll put all of the procedural issues on the low side, as people aren’t happy with procedures no matter how good they are. I want to start with more trade and immigration — unilaterally or bilaterally if need be — and see how much social spending we can afford without moving to European-level rates of taxation. Most of the progressives I suspect want to start with more social spending and see how much open trade the public will then accept. Viewed in these terms, we’re probably going to end up in very different places.
Two party trades are the best. I can’t imagine trading selling share of XOM to counterpartyABC, who in turn sells 2 GE to counterpartyXYZ, who then sells me 3 MSFT.
The less of that, the less wars will be fought.
With SS, Medicare and other entitlements, we are _already_ on track to go well higher then current European-level taxes — you weren’t aware of this?
“see how much social spending we can afford without moving to European-level rates of taxation.”
With SS, Medicare and other entitlements, we are _already_ on track to go well higher then current European-level taxes — you weren’t aware of this?
“see how much social spending we can afford without moving to European-level rates of taxation.”
Tyler,
Your list looks pretty good to me.
PrestoPundit,
That is entirely because medical care in this country is so
ridiculously expensive (already 50% higher than in the nearest
competitors, Luxembourg, Norway, and Switzerland), while being
objectively not all that good for the majority of people, see
the pathetic performance of the US in international comparisons
on life expectancy and infant mortality.
The surprising thing is, even Republicans no longer believe in the free-trade mantra. The recent Washington Post/NBC poll of likely Republican primary voters has 59% of them saying they believe trade has hurt the U.S. economy.
With both parties agreeing on this one, I suspect we’re in for a period of protectionism.
If you combine mobility for both capital and labor, ordinary Americans are disadvantaged twice. First, they loose as capital moves abroad decreasing the relative per-person capital investment American have traditionally enjoyed. At the same time, they loose as increased wage competition reduces incomes here at home and shifts domestic returns to capital and the upper portion of the skill spectrum.
Why would ordinary Americans embrace such a program? Hypothetical redistribution of the efficiency gains via progressive taxation? Given that it is not happening now, why would any one believe such a prospect in the future?
@nobody
So just because Europeans are subsidizing their farmers, it is still a bad choice for America to end their farm subsidies? I don’t believe that. Opening up trade is not a zero-sum game.
That’s not quite what I meant. Generally*, unilateral trade liberalization that is uniform across trading partners is a good thing. I’m all for this, but it’s generally politically impossible because countries don’t want to lower trade barriers unilaterally.
Bilateral (or x-lateral, as long as it doesn’t include everyone) is problematic because it is almost always preferential – that is, you lower tariffs on some trading partners but not others. That can lead to “trade diversion”, which under many circumstances can make bilateral liberalization worse than no liberalization at all.** Obviously if bilateral trade liberalization caused countries A & B to lower tariffs on ALL their trading partners this problem would be avoided… but that almost never happens in the real world.
*I say “generally” because it’s a fairly straightforward result in trade theory that for a “large” country there is always a positive “optimal” tariff that maximizes national welfare. (Though it reduces overall international/global welfare.) The agricultural subsidies, from an overall national welfare perspective, are always bad… except under “special circumstances”.
**The basic idea of trade diversion is as follows: country A can import televisions from low cost producer B or high cost producer C. When it has a uniform tariff for both, it will import from B. But if it eliminates tariffs only on C and starts importing televisions from C, then the paradoxical result of “free trade” will often be that country A will be worse off than it was before.
kurt:
@nobody
But your example of trade diversion fails to look at exporters in country A. Wouldn’t exporters in country A benefit more from opening up trade relations with a high cost producer (C), than opening up trade relations with a low cost producer (B)?
We are just talking about the cost of producing televisions. Because of comparative advantage, presumably A doesn’t both import and export televisions. Also (and this is the shortcoming of using a partial equilibrium model), from a trade theoretic perspective what really matters is relative rather than absolute cost (i.e., when you take one unit of A’s exports and send it abroad, how many TVs it brings back).
Let’s draw an analogy to technology (rather than trade). Let’s say that there are two ways to produce televisions, by hand (high cost) or by machine (low cost). Initially the government sets the same sales tax on both, so all TVs are produced by machine. But for whatever reason, the government decides to eliminate sales taxes on “by hand” TV production.
In that case production may shift to the high cost “by hand” method (because tax-free handmade TVs are cheaper for consumers than taxed machine-made TVs). The tax cut has two effects — lowering the price of TVs (good for consumers and the economy as a whole), but increasing the inefficiency of production by moving to a wasteful higher-cost method (bad for the economy as a whole). Without more details, it’s unclear which of these effects predominates, but it is clearly possible that this tax cut could actually have an overall negative effect on the economy.
How’s this:
“Free trade” means that the U.S. government allows any person or business in the U.S. to do business with anybody in the world, on whatever terms they can voluntarily negotiate with them–so long as they do it all on their own nickel.
That means eliminating subsidies to long-distance transportation. It means repealing international “intellectual property” [sic] accords that give Western capital a permanent monopoly on the latest production technology, so that Third World countries are locked into the position of supplying sweatshop labor and raw materials; this would mean, likewise, an end to the IP-based business model of most of the thriving sectors in the global economy, like entertainment, software, and biotech. It means ceasing, through World Bank loans and foreign aid, to subsidize the utility and road infrastructure necessary to make overseas capital investments productive. It means government ceases to underwrite the risk of foreign expropriation or to conduct a foreign policy aimed at putting pro-corporate regimes in power: the CIA and SOA/WHISC are no longer in the business of making the world safe for United Fruit Company and ITT.
My guess is that this genuine free market and free trade agenda would result in Americans buying a lot more stuff produced close to where they live, and Third Worlders doing likewise. It would result in a much better standard of living for the average working person in both the U.S. and the Third World, and a much (much, much) lower standard of living for the corporate welfare pimps who currently talk the most about so-called “free trade.”
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