Tuesday, March 23, 2010

Tuesday Quick Hits

A few quick things worth noting (and praising) today:
  • Yesterday, Cato's Dan Griswold points out the absurdity of protectionists' claims that the US trade deficit somehow destroys American jobs (something I've also discussed at length).  He asks, "According to the Bureau of Economic Analysis, the U.S. current account deficit plunged from $706 billion in 2008 to $420 billion last year — the smallest deficit since 2001. I’ve been waiting for a few days now for the usual trade deficit hawks to hail this development as great news for millions of Americans looking for work."  My favorite part is that Dan's blog post then goes on to bag on the Economic Policy Institute's silly "trade deficit = jobs" models, and guess who released a new study based on those silly models?  Doh!
  • A group of wise and diverse Republicans (Price, Kirk, Dent, Brady and Herger) have sent House Majority Leader Steny Hoyer a very good letter (PDF) asking Hoyer to urge President Obama to submit the implementing legislation required to implement pending US Free Trade Agreements with Panama, Colombia and South Korea.  My favorite part: the letter actually focuses on both the export and import benefits of free trade, as well as trade's important foreign policy implications.  In other words, it's not the usual mercantilist pabulum that the White House has been spewing for the last year or so.  Refreshing!
  • Congressmen Jeff Flake (R-AZ) and Ron Kind (D-WI) issued on March 17 a "Dear Colleague" letter (unpublished) to their fellow members of Congress, asking them to support immediate reform of US farm subsidy programs in order to avoid about $850 million in Brazilian retaliation against American exports due to US non-compliance with adverse WTO rulings on American cotton subsidies.  And they plan to submit legislation reforming the offending programs in the coming days.  (Obviously, I enthusiastically approve.)  Best line: "Because of Congress’ inability to tackle the issues in the face of intense lobbying from the cotton industry and other commodity groups, a wide array of American businesses will face high penalties at a time when they can least afford it."  If only Wheat Leader Collin Peterson (chairman of the House Agriculture Committee) didn't stand squarely in the way of much-needed reforms.
  • Cafe Hayek's Don Boudreaux teaches us all a quick lesson about free trade, protectionism, consumers and producers.  The whole thing is worth reading, especially for those who have enjoyed my recent discussions about the obvious immorality of the government's use of protectionism to forcibly steal from consumers to pay producers.  But the anecdote is priceless: "You fly to New York City. You get a cab at LaGuardia Airport and ask the driver to take you to Times Square in Manhattan – which is west of LaGuardia. Soon, though, you notice that your cab is headed east.

    'Where are you going?' you inquire.

    'To Times Square, but via Montauk,' the driver responds.

    'Montauk! That’s a hundred miles east of here, and Times Square is west of here! What the heck are doing?!'

    Your driver informs you that the taxicab business isn’t just for riders; its for drivers, too. Drivers need incomes, and his income of late has been too low to enable him to pay his bills. 'So,' your driver announces, 'by first going out to Montauk before heading to Times Square, I’ll make a lot more money off of you than I would if I drove you directly to Times Square. You’ll get there, but just not as quickly or as inexpensively as you would if I drove you there directly. Relax and enjoy the view.'

    The above little tale sounds nuts. No taxi driver would do such a thing and justify his actions in that way.

    But what the fictional driver in my little story does differs in no fundamental way from what producers everywhere do when they succeed in getting government to protect them from competition – for all such protection involves government preventing consumers from striking the best deals they can find."
Me: Fantastic.


    Anonymous said...

    Actually, I think Boudreaux's lesson as it relates to free trade is rather weak. In a free market, driving out of the way would never make sense. It takes a government regulation to enforce bad trade. If the story was that in an effort to support the income of taxi cab drivers, the government mandated taxi cab entry into NYC only via Montauk, it would make sense.

    In another post, you thought that free traders ought to change the gist of their position into a moral one. I tend to agree--trade is boring and we need to jazz it up for better popular consumption. That's why I like Boudreux's taxi driver story, but we must get it right.

    Scott Lincicome said...

    That's a great point (and one I should've caught myself, given how much I've been talking about government coercion). Thanks.

    Anonymous said...

    Veering into a different trade argument, what do you think about the Eurozone and its problems.
    Here is a link to Naked Capitalism with an extensive quote from a Stratfor article with an interesting warning about Obama's export strategy.

    Scott Lincicome said...

    I think the Eurozone is, to put it quite technically, in deep doo-doo. I'll definitely check out that NC article tonight. Thanks.