A Second Hand Conjecture

South Korea is getting jittery about prospects for its long sought Free Trade Agreement with the United States, which is still yet to be approved by both countries, and is now under threat from a potentially protectionist Obama administration.

In the past Obama has criticized the agreement as deeply flawed, but has proven somewhat idiosyncratic about that at other times. South Korean Trade Minister Kim Jong-hoon must not like the trend of things though, as today he took the remarkable step of categorically ruling out any renegotiation of the agreement to placate the incoming administration, despite renegotiation talks being something Obama has insisted on.

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Colombian flower farms (photo: Mike Freedman-Schnapp)

Colombia’s flower farm workers have for some time been benefiting mightily from industrial support communities, which practice heavy nongovernmental social investment in workforce collectives. Many of the workers in these communities outside Bogota and Medellin are essentially resettled refugees from the war in the countryside. The community support in the form of daycare, retraining, and counseling have rescued many workers lives.

But they’re in trouble, as the Colombia Free Trade Agreement with the US –which congress is holding up on grounds of Colombian worker rights– can have profound implications if unsigned. The effects:

“If tariff exemptions are canceled on account of not signing the Free Trade Agreement, we would immediately be leveraged between six and seven percent to enter the U.S. market,” said flower consultant Felipe Arango.

“We’d disappear.”
(Reuters)

But there is an alternative view on that. As Democratic Senator Sherrod Brown might put it, Colombian flower workers need to understand that in order to avoid “shortchanging” them, their jobs and communities have to be destroyed:

“For the sake of both of our nations, the United States should not sign a trade deal with Columbia that shortchanges workers, that rewards polluters, and that gives businesses the same power as sovereign governments. And we should absolutely not sign a trade deal that forgives treachery toward labor leaders,”
(Teamsters)

I can only recoil from that argument, given the suffering it would induce as policy, and echo Fausta:

The USA needs to show its support of this progress, and must approve the free trade agreement with Colombia. As Ambassador Shapiro said, it’s good for Colombia, good for the US, and good for our national security.
(Fausta’s Blog)

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(photo: Charles Roffey – Charles & Fred)

Someone once said that in Damascus you truly can get a little bit pregnant. It’s a good aphorism, because if you asked the foreign minister of almost any state in the Middle East or the Mediterranean what his government’s policy relationship was with Syria, he would automatically furrow his brow and call it “complicated.” You always seem to be about half-way somewhere with Syria. Lately that appears to be true even for Tzipi Livni. If so for Israel, doubly so for Lebanon.

Surveying it, Jihad Yazigi describes the situation that exists between the two countries as customarily “complicated”, but the dimension of complication he’s seeing is something relatively new. Where before thirty years of Syrian military occupation (and often not very covert political subversion) might be the most obvious locus, Yazigi is today talking about labor and direct investment in Syria by Lebanese:

Syria would probably not be liberalizing its economy and going through a revival of its services sector without the thousands of Lebanese managers that are running Syrian firms. Lebanese managerial know-how is being exported throughout the Arab world and Syria will continue to need it if it wants to further the opening up of its economy.
(The Syria Report)

That’s a very new economic relationship, as historically it is Syrian labor that has traveled to liberal and cosmopolitan Beirut. It is Syrian enterprise that has worked to create a paternalistic relationship between the two countries with one-way investment, generally government directed.

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As an update to this previous post, be sure to read this from The Economist.

Governments ought to liberalise markets, not intervene in them further. Food is riddled with state intervention at every turn, from subsidies to millers for cheap bread to bribes for farmers to leave land fallow. The upshot of such quotas, subsidies and controls is to dump all the imbalances that in another business might be smoothed out through small adjustments onto the one unregulated part of the food chain: the international market.

For decades, this produced low world prices and disincentives to poor farmers. Now, the opposite is happening. As a result of yet another government distortion—this time subsidies to biofuels in the rich world—prices have gone through the roof. Governments have further exaggerated the problem by imposing export quotas and trade restrictions, raising prices again. In the past, the main argument for liberalising farming was that it would raise food prices and boost returns to farmers. Now that prices have massively overshot, the argument stands for the opposite reason: liberalisation would reduce prices, while leaving farmers with a decent living.

The record of governments trying to manage markets is woefully poor.  Free markets assuredly are not free from their own anomalies and swings; witness our current real estate difficulties.  Nevertheless, even with all their flaws, free markets are superior to the alternatives.

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Given the discussion at this post about Obama’s condescension, I suggest Tom Maguire’s roundup of the coverage of Obama making the mistake of speaking his mind about the rubes who he needs to vote for him:

I can’t believe that in all those Harvard classes they never emphasize that you can’t tell the rubes what you really think of them. Surely they aren’t relying on the common sense of the elitist snobs passing through to figure that out themselves? Didn’t work!

For those not in the know, here is what he thinks, or at least wanted this audience to believe he thinks:

At issue are comments he made privately at a fundraiser in San Francisco last Sunday. He was trying to explain his troubles winning over some working class voters, saying they have become frustrated with economic conditions:

“It’s not surprising, then, they get bitter, they cling to guns or religion or antipathy to people who aren’t like them or anti-immigrant sentiment or anti-trade sentiment as a way to explain their frustrations.”

I really don’t have a problem with the guy, or, as McQ points out, that Obama’s claims of being some kind of “new” politician are a load of horse hockey. Marketing is the stuff of campaigning. I do have a problem with supporters who actually believe that load of BS.

Hmm, I do like this quote from Tom as well:

Bayh skips past the odd tension between Obama’s own opposition to free trade and his apparent belief that free trade opponents are embittered economic losers; maybe Barack opposes free trade on behalf of Michelle, who is struggling to get by on only $400,000 per year.

Heh, well so much for talking straight and holding a position from principle. Given his employment of Austan Goolsbee I think Obama is a free trader, he just doesn’t want us to know. Whether that should make one more likely to vote for him or not I have no idea. What is better? Wrong or insincere?

Update: McQ picks this theme up and goes a little deeper.

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Some interesting parallels with our current situation and the period before the Great Depression. Interestingly, it seems the Democrats are intent on not learning from history, at least not about what led us to the Depression. Or maybe they want a replay of the policies that helped drag us out of the Depression.

http://www.bloomberg.com/apps/news?pid=20601039&refer=columnist_shlaes&sid=alBsmRS72DyM

Schumer used the Bear Stearns collapse to call for “a greater degree of regulation” in the industry that is relevant this time, investment banking.

Hoover knew free trade was beneficial. But his party, the Grand Old Party, was the tariff party. So in spite of himself, he signed a big new tariff, the Smoot-Hawley act, triggering retaliation from U.S. trading partners.

For many decades now, Democrats have contrasted Hoover’s concession to protectionists unfavorably with free-trade legislation written by Roosevelt and his globalization guru, Secretary of State Cordell Hull.

Today it is the Democrats who are doing wrong, and they know better. Candidates Hillary Clinton and Barack Obama are both internationalists by temperament, yet they seem to be in a race to see who can repeal the North American Free Trade Agreement first.

Channeling Hull

Bush, by contrast, was channeling Hull when he called a plan to reject a new trade accord with Colombia “a terrible signal.”

Finally, there was Hoover’s tax policy. Today every fool, right or left, knows that imposing a tax increase in an economic downturn is like kicking a wounded man in the stomach.

Yet in the dark days of 1932, with unemployment at 20 percent, Hoover perversely signed an increase that reversed the multiple cuts by his predecessor, Calvin Coolidge.

Hoover more than doubled rates at the bottom of the tax schedule. He also increased the top marginal tax rate to 63 percent from 25 percent. The effect was predictable. That tax error has haunted economists ever since.

Yet today it is not Republicans but Democrats who are preparing to replicate it. Obama has suggested a payroll tax increase and an income tax increase; together they would just about offset all the breaks created by Bush. Clinton is scarcely different. Who’s Hoover now?

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Competition plays a large role in much of my life. As a tournament bridge player, competition is the name of the game. The better you do, the more you rate to win. The more you do to learn, improve your game and secure superior partners and teammates, the higher you climb.

As a Realtor, it’s much the same. If I deliver top-notch products and services to my clients, then I rate to prosper with my business. If I fail to improve, connect and listen to the needs of my clients, then I am unlikely to do as well as the next guy.

Competition is great. Most people enjoy doing well – but you cannot unless you work hard and try your best. Learning, improving, growing …. All of us should strive to include this in our lives.

Why, then, is it that so many Democrats seem to spurn competition?

The Democratic Party has become the anti-competition party.

It’s true in education where Democrats, with their slavish devotion to teachers unions, oppose vouchers even for constituencies they pretend to champion such as minorities and the disadvantaged. Vouchers would force public schools into competition.

It’s true with immigration, where many Democrats advance the phony argument that illegal immigrants displace U.S. workers by lowering wages. For low-skilled workers who refuse to get more skills or learn a new trade, illegal immigrants amount to competition.

And it’s certainly true in the area of trade, where Democrats do the bidding of organized labor by fighting trade agreements and advocating protectionism. Trade, by its very nature, encourages competition by opening up markets across borders and seas.

This rejection of competition I believe relates to the Democrats’ embracing of equality. Don’t get me wrong; I am someone who strongly believes in equality. But – equality should be a matter of equal opportunities, and equal justice before the law. What each of use chooses to do with those opportunities can vary widely among us – just as our abilities, talents, strengths and weaknesses vary dramatically.

Total equality is a fiction. It is impossible to make the human condition the same for everyone, irrespective of what steps are taken.

Nor, as explained above, should we really want to do so. It is competition and variance that causes us to improve and yearn for something better.

When President Clinton worked to get the passage of NAFTA, I applauded him. More free trade was a win-win situation for the world.

Why do the Democrats of today – and in particular, President Clinton’s wife – reject it today?

Why do they not wish to compete and search for new heights and achieve new goals?

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Due to free markets, capitalism and freedom in general, the world is getting wealthier.

The last quarter century has witnessed remarkable progress of mankind. The world’s per capita inflation-adjusted income rose from $5400 in 1980 to $8500 in 2005.Schooling and life expectancy grew rapidly, while infant mortality and poverty fell just asfast. Compared to 1980, many more countries in the world are democratic today.

The last quarter century also saw wide acceptance of free market policies in both rich and poor countries: from private ownership, to free trade, to responsible budgets, to lower taxes. Three important events mark the beginning of this period. In 1979, Deng Xiao Ping started market reforms in China, which over the quarter century lifted hundreds of millions of people out of poverty. In the same year, Margaret Thatcher was elected Prime Minister in Britain, and initiated her radical reforms and a long period of growth. A year later, Ronald Reagan was elected President of the United States, and also embraced free market policies. All three of these leaders professed inspiration from the work of Milton Friedman. It is natural, then, to refer to the last quarter century as the Age of Milton Friedman.

Oh!  The agony of it all!

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In electing a President we are rarely presented with candidates who represent our views, so in the end it really comes down to prioritizing. Frankly I may yet again not vote for a major party candidate, but if I do one issue of great importance to me, though not mentioned nearly often enough, is a candidates devotion to free trade.

This is not merely because of its importance to our own economic health, though the negative impact if the views of Hillary were to become actual policy would be extremely negative. The consequences would far outstrip the housing and credit crisis that is presently plunging us into recession.

Of even greater importance to those of us who are not nationalist in our views, is the impact upon billions of others, primarily the impoverished people of Africa and Asia. The transformation in the living standards of the people’s of Asia over the last twenty years has been overall the most important story for mankind by far in most of our lifetimes. A breakdown in the global trading system would cause more suffering than al Qaeda can even contemplate.

So read this by David Ranson for a review of what the candidates have said about trade. Obama seems preferable to Hillary, though his rhetoric is vague. However, his hiring of Austen Goolsby gives me some comfort.

On the Republican side the clear favorite should be McCain, though he has suggested some pretty expansive views on how to help dislocated workers adjust.

On this issue McCain is the clear choice overall.

Hat tip: Instapundit

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Megan McCardle looks at some silly arguments at Max Sawickey’s old place on trade. Read the whole thing, but she hits the nail on the head here:

There are three possibilities for what will happen if we liberalize trade:

1) We will sell more stuff to foreigners than they sell to us. Since we can’t use all those funny banknotes, we will essentially be giving them free stuff.

2) Over the long run, we will sell about as much stuff to foreigners as they sell to us.

3) Over the long run, foreigners will sell us more stuff than we sell to them. Since they can’t use all those funny banknotes, they will essentially be giving us free stuff.

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If you didn’t read this when you saw it on Instapundit, please do. And then follow the link as well, and the link there too. It is important.

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