Skip to comments.Free trade bandwagon loses its steam
Posted on 12/05/2005 6:56:18 AM PST by 1rudeboy
IN THE next six months or so, the world has to agree on a new set of rules to reform global trade. Yet as trade ministers prepare for a critical meeting in Hong Kong next week, their ultimate choices could be between no reform at all, or reform that barely moves the goalposts.
That prospect might seem odd to Australians, who are used to governments promoting free trade regardless of public opinion.
But that is not the attitude of governments in most of the World Trade Organisation's 150 member countries. They approach trade negotiations as opportunities to gain market access, not to give it.
And so, after four years of talking, the WTO's Doha round negotiations have failed to bridge a chasm on the central issue of trade reform: how to cut tariffs on farm produce so that low-cost farmers in countries such as Australia get access to the high-cost markets of Europe, Japan, Korea, Taiwan and the US.
A valuable new book edited by World Bank economists Kym Anderson and Will Martin,
Agricultural Trade Reform and the Doha Development Agenda , shows how unbalanced trade rules are now.
In the rich countries, tariffs on manufactures now average just 3 per cent, yet tariffs on farm produce average 22 per cent. On some, they are astronomical: 94 per cent on sugar to the US, 153 per cent on beef to Europe, and 693 per cent on wheat to Japan.
Export subsidies are banned in manufacturing, yet thrive in agriculture. OECD farmers receive a staggering $A320 billion a year in subsidies. Anderson, an Adelaide economist, and Martin estimate that almost two-thirds of all potential gains from full trade liberalisation would come in agriculture.
Removing all trade barriers, say Anderson, Martin and Dominique van der Mensbrugghe, would lift the world's output by $US287 billion ($A385 billion), as resources move from high-cost producers to low-cost producers, allowing far more to be produced.
On their numbers, all countries gain, although the big winners would be countries scrapping high farm protection Europe, Japan, Korea and Taiwan as cheap imported food frees up money for consumers and governments to spend on other things.
Australia would be another winner, with a 1 per cent rise in national income. That's not much, but at least it's more than the 2.4 billion people in low-income countries would get.
John Howard, who keeps telling us trade reform is the cure for global poverty, might take note: the World Bank estimates that complete free trade would lift the incomes of the world's poor by just $A9 a head. It would give more income to the 24 million people in Australia and New Zealand than to the 720 million in sub-Saharan Africa. Of course, that's just modelling, based on assumptions that could be wrong: such as assuming that elderly European, Japanese and Korean farmers whose farms become unviable will find jobs doing something else.
Real-world outcomes can be very different from those in models.
The WTO's members are not flocking to the free trade banner. There has been real progress in some areas, but unless ministers can bridge the chasm on farm tariffs, that too could be lost.
There have been two big steps. The European Union independently reformed its farm subsidies so they do not act as price supports, began slashing its sugar and cotton subsidies, and offered to scrap export subsidies.
On tariffs, however, the EU's proposal would exempt up to 175 types of farm products from change enough, say Australian officials, to block any real market opening.
Second, key developing countries such as India and Brazil have flagged that they are willing to cut manufacturing tariffs if the EU, Japan and Korea agree to genuinely open their agricultural markets.
But EU trade commissioner Peter Mandelson insists that he has offered everything he can under the mandate given him by the 25 EU governments. The EU right now cannot even agree on its budget. A second round of farm reforms could be beyond it.
Back when the WTO was known as the General Agreement on Tariffs and Trade, it was seen as the only international body that worked. But that was so because the EU and US decided the outcomes, and everyone else had to accept them.
The WTO no longer works that way, as developing country ministers showed at Seattle (1999) and Cancun (2003), when they refused to be railroaded into supporting the developed countries' agenda.
The question now is whether the WTO can work at all. If not, the trade game now is every man for himself.
And China, with its undervalued currency, will keep winning.
"The question now is whether the WTO can work at all. If not, the trade game now is every man for himself.
And China, with its undervalued currency, will keep winning."
There is our "free trade"
The grain production in Japan will be eliminated and in case of any disruption of trade, Japanese people will STARVE!
We can't have free trade if our trading partners don't respect the free market.
"We can't have free trade if our trading partners don't respect the free market."
You have it all wrong. Free trade works as long as I can buy cheap stuff and my portfolio climbs.
The rest of it is all details. / < sarcasm>
Blame the Asian Merchantilists.
That's right. Buying (unnecessarily) expensive stuff and a falling portfolio are not only ideals, but evidence of patriotism. /sarc
"You have it all wrong. Free trade works as long as I can buy cheap stuff and my portfolio climbs.
The rest of it is all details. / < sarcasm>"
I just love that mentality. Those cheap prices are great until our paychecks start dropping along with them.
So we should screw the people with low wages now, and avoid the wait?
Please don't make sense here. It rubs the anything for a buck communist chinese supporters the wrong way.
Free Trade in its current form is an absolute scam.
Trade agreements are bilateral between two nations, and should remain that way.
One nation wishes to gain access to anothers markets, it should earn them...
Our biggest failure as the world's superpower has been in the area of trade.
Instead of using it to rid the world of despots and improve liberty around the world, we have burned the opportunity wholesale.
With large multinational organizations with no accountability, we export our wealth wholesale, to nations that execute political dissenters wholesale...
We are squandering God's providence and grace.. and there will be a price to pay for it.
Who/what are you quoting? Are you on the proper thread?
Better wake up to reality... it takes 2 incomes per househould just to match in real dollars what 1 did 30 years ago.
Ever notice that arguing with a free trader is like arguing with a communist? They're so convinced of their own righteousness that there's no point.
" The grain production in Japan will be eliminated and in case of any disruption of trade, Japanese people will STARVE!"
They always seem to assume that everything will be perfect. When you degrade or destroy a nations ability to feed itself you place that nation at grave risk. Of course the profiteers could care less.
What was that, exactly? 4-room house, no garage or a/c, and a 12" b/w TV?
Yea, a 4 room house no garage or A/C and a 12" B/W? Uh... where were you in the 70s? You better go brush up on your time reference my friend.
No need to tell me, my wife and I both work. It's getting to be that even double-income families can't afford to own a home. You would think something's gotta give.
What makes your comment doubly ironic is that your typical protectionist not only bases his or her argument on pure emotion, but shares much in common with the political Left.
Lets talk about the Doha round. Do you claim farm tariffs are the only topic on the table?
You just wait 15 years, Chief. Then you preach to me the virtues of free trade.
Yes, I got called a liberal! Woohoo! Now I need a "Go back to DU" and I'll have bingo.
"What makes your comment doubly ironic is that your typical protectionist not only bases his or her argument on pure emotion, but shares much in common with the political Left."
What makes your free trade argument amusing is that it's based on half-truth and shortsightedness.
I am not a protectionist, just a realist. A large part of China's workforce is slave labor. How exactly do you plan to compete with that?
I must've missed the FR rule that specifies that you are entitled to refer to your opponents are "communist," yet I cannot.
Probably the same one that allows you to refer to your opponents as liberals or DUmmies. Get over it.
Household incomes in real dollars have been virtually flat since 1970... this is in spite of the fact that in 1970 the typical household was 1 income, and now it is 2 income.
Department Of Labor will gladly back up what I have said.
I look forward to the day when free traitin' will be discarded upon the rubbish heap of history; and the advocates of that misguided policy will be accorded the disrespect they've earned.
Where did I do that? And does the following comment sound familiar?
"Ever notice that arguing with a free trader is like arguing with a communist?"
Ah, a "true patriot" chimes in.
My wife and I have been treading water for the past 3 years. We have had small cost of living increases but inflation, raising health care insurancea, and now gas that is about 30+ cent a gallon more today then this time last years we are just staying where we were. And the sad part is when we look at many of our friends we are happy to be doing that.
Yep, I said it and I mean it, so get over it. Did I hurt your feelings?
And has you standard of living increased, or decreased?
No, not at all. I was simply trying to determine whether your attention span is measured in seconds or minutes.
Oh don't worry it will, even if this rude fellow doesn't want to believe it will.
He wants to cite "standard of living" as sign of growth.. instead of REAL WEALTH.
Problem with that is, is that most of America's "standard of Living" today is on DEBT... where 30 years ago that sort of credit access didn't exist. So we are barely treading water, but borrowing even more in terms of real dollars... and he thinks this is a good thing, and a sign of great things.
We have no real wealth, but hey, we've got a 42" plasma... aren't we doing so much better than our parents? In a single word "NO". Families in the 70s had debt on 2-3 primary things.. HOUSE and CARS... maybe a Durable Good from Sear's... That was it. Now nearly EVERYTHING is bought on credit.... a savings rate on -2.2%....
The only thing proping it up at this point is paper value in Real Estate.. which has already turned nationally (though not as much as its going to)... And when interest rates go up, money supply tightens, winfall appreciations get taxed (which is coming), etc etc etc.. you are going to see some serious "give" across the board.
"Instead of using it to rid the world of despots and improve liberty around the world, we have burned the opportunity wholesale.
With large multinational organizations with no accountability, we export our wealth wholesale, to nations that execute political dissenters wholesale..."
Lemme guess....you have traveled overseas more than once. One rarely gets that kind of wisdom from the average untravelled Joe .
Honestly, decreased, because I got wise to debt living, and live within my means now. As well as more and more income going to health care, energy and general inflation.. it has flatlined or declined since 2001.
You don't build wealth on debt... citing "standard of living" when its being payed for by debt is a fools errand. But, hey... enjoy the errand.
You realize all you're doing is proving my point, right?
And demonstrated by you in reply #15.
Point? You actually have one?
I suspect you're right. There's going to be quite a wild time in this country when we find we've been living beyond our means. I think of what happened to Japan when their real estate bubble burst and I shudder.
"I just love that mentality. Those cheap prices are great until our paychecks start dropping along with them."
Another poster said it very well: It's like watching someone cut their own throat in slow motion.
It's a reflection of our "don't worry about the future or R&D, just make a profit this quarter" business environment. We are so taken by instant gratification, that when the impact hits, people will be totally confused.
"That's right. Buying (unnecessarily) expensive stuff and a falling portfolio are not only ideals, but evidence of patriotism. /sarc"
I know you are anti-union, and somewhat confused. That's ok, I can be patient with the challenged.
And how will you weather the storm when your domestic customer base shrinks? Can you expand your markets to China where the average wage is a fraction of what it is here? I wonder.
You just wait
1 year; no, 5 years; no, wait, 10 years; no, really, in 15 years, Chief, that NAFTA agreement is really going to kill our economy and cause a massive loss of wealth and incredible unemployment. Then you preach to me the virtues of free trade.