how free is trade?

Wednesday 20 August, 2008

I read this article Free trade an elusive conceptby David Greising, the only business writer @ the Chicago Tribune who seems to have much of anything to say about international business. The impetus for the article was the breakdown of the Doha round of trade talks. I don’t disagree with much of what he says, that China’s yuan is undervalued, & that governments of both developed & developing countries steer negotiations towards political ends rather than economic ends. I’d just like to add a few points:

-it should never have been expected for the Chinese to adjust their currency in 1 fell swoop. It will take time for the Chinese to adjust & the rest of the world to adjust to that. Is it adjusting fast enough? Probably not, but it’s difficult to tell what the optimal rate of adjustment would be.
-it’s government’s role to protect/manage trade, however to protect freedom & fairness to competitors as well as their own constituents. Farmers acquire disproportionate attention because of their sheer numbers rather than their declining economic clout. Regions with proportionately lots of farmers protect agriculture, to the detriment of those who’ve automated agriculture.
-trade is only free if all who participate do so on a fair & level playing field. Distortions like incorrectly valued currencies, logistical obstacles, tariffs create minefields instead.
-different regions look out for different constituent groups. In the US, assuring investors of high returns & consumers of low prices are paramount. In Europe, governments look out to assure the jobs of its workers. Japan seems to mirror Europe in protecting entrenched bureaucracies. I don’t know the rest of Asia & Latin America as well, but I’d bet they lean more towards Europe than the US.
-the main problem with free trade is not that it’s costing Americans jobs, rather that not enough retraining is being provided to those whose jobs are displaced. Europe does a much better job of this.


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