imports

What’s Expected on Trade in the State of the Union Address

by Fran Smith on January 25, 2011

in Agenda for Congress, International, Trade

In his State of the Union address tonight, President Obama will finally set out his agenda and timetable on three pending free trade agreements — with South Korea, Colombia, and Panama, with few surprises. As expected and as announced earlier this month by U.S. Trade Representative Ron Kirk, the president will announce that he’ll send implementing legislation to Congress on the U.S.-Korea Free Trade Agreement by July 1 of this year.  That’s good news, since this FTA is expected to deliver significant economic and geopolitical benefits to both countries.

Disappointing though will be the president’s declaration that both the Colombia and Panama FTAs still have problems to be worked out before Congress can consider those agreements.  This, after the Colombia pact was signed in 2006, and the Panama FTA in 2007.  And, in 2007, the Democrat-controlled House also insisted that stringent new labor and environmental provisions be added to both FTAs and to all subsequent trade agreements.  What else does the administration — and union supporters — want to force on our close trading partners and allies before they can trade freely?

Given that the new House Ways and Means Committee chairman Dave Camp and major business leaders — at a hearing today — said that all three FTAs should be considered in the next six months, President Obama could announce a timetable for the Colombia and Panama trade pacts that gives the Administration wiggle room for trade union opponents. I expect he’ll move that timetable up a bit for the Korea FTA.

Also expected in the SOTU address will be the president’s heavy emphasis on the economic importance of increased exports, especially in creating jobs — and his National Export Initiative announced last year. Forgotten about, though, will be mention of the benefits of imports — in also providing jobs, but, more importantly, in providing consumers with greater choice in goods, including products that are inexpensive and lets them keep more of their hard-earned money, and in increasing competition so that better products emerge.

Job Losses and Productivity Gains

by Fran Smith on October 5, 2010

in Economy, Employment, Trade

I came across this chart tracking U.S. manufacturing jobs and U.S. productivity over the past 38 years (posted yesterday by Mark Perry).

It’s worth considering, especially in today’s climate when free trade — particularly NAFTA — is pointed to as the chief culprit in lost manufacturing jobs.  And when a lot of people have bought into that myth hammered over and over by labor unions and politicians running from their records in raising taxes and costs for businesses — from stimulus packages to new financial constraints to Obamacare.

That’s not to say that free trade doesn’t cause job losses in some sectors, while creating jobs in others. But, contrary to the current rhetoric, an export-centric approach to trade is not the answer. Imports are not just “cheap” consumption goods, stereotyped as a t-shirt from Wal-Mart.  Rather, imports provide consumers with greater choices over a range of prices and quality levels — they also increase competition, which fuels the search for innovation in better value, better quality.

Check out this podcast by Russ Roberts in early 2010 on the economics of trade and specialization.

More Mercantilist Claptrap

by Fran Smith on August 27, 2010

in Economy, International, Trade

No wonder people are confused about the trade issue when they read mercantilist articles like the front-pager by Howard Schneider in the Washington Post today – “Economic growth slowed by trade gap.”

According to this article’s premise, it sounds like we would all be better off if we just exported and didn’t import any goods and services.  Here’s the article’s lead sentence:

A widening U.S. trade deficit has become a substantial drag on economic growth as the country’s exports struggle to keep pace with the swelling sums that Americans are again spending on imported goods.

And then it goes on to say:

But the spike does raise fresh concerns about whether some of the same factors that led to the economic crisis, including U.S. overconsumption, are beginning to reemerge. The yawning deficit may also prove frustrating for the Obama administration as it seeks to create jobs by boosting U.S. exports.

But what about choices?  Does the U.S. produce everything we consumers – and producers — want and need at prices we can afford?  Of course not.   And therein lies the confusion, as with this assertion:

At a basic level, trade deficits represent a loss of wealth for a country – money flowing abroad for goods and services produced elsewhere, supporting businesses and workers in other countries.

I would offer that the lack of imports would also “represent a loss of wealth” for consumers and producers.

Cato’s Dan Griswold points out a major oversight of the Post writer – he ignores the fact that many of those “overconsumed” imports actually provide inputs for producers to use to produce goods for export!

That view neglects the supply-side role of imports. More than half of what we import consists of goods consumed by producers-capital machinery, raw materials, parts and other intermediate inputs. Those imports help us produce more, not less. The Keynesian view also confuses cause and effect: Imports usually grow in response to RISING domestic demand. Consumers more eager to spend “swelling sums” on imports typically buy more domestically produced goods as well.

Imports, when they represent less expensive alternatives, also may put more discretionary funds in the hands of consumers to purchase other goods or services, to save, or to invest.

Maybe some Post editor noticed some of the problems with that article – a different trade article with a coauthor is on the front page of the online edition.

Regulation of the Day 112: Importing Pork Rinds

by Ryan Young on February 8, 2010

in Health and Illness, Regulation, Regulation of the Day, Trade

The federal government is loosening its restrictions on importing pork rinds from Brazil. Rudolph Foods, Inc., an Ohio company, owns a factory in Brazil, and stands to benefit from the ruling.

Competitors are up in arms. Citing exotic illnesses like foot-and-mouth disease, one competitor told The Wall Street Journal, “It just takes one pig” that is infected to spread a disease… “The risk is low, but the consequences are really high.”

If that is his strongest argument, then the case against liberalization is as weak as it gets. Instead of using the power of government to hobble its rivals, this company should go out and improve its product. Make its pork rind recipe even tastier. And cheaper. Use the import liberalization to its own advantage if possible.

Regulation of the Day 104: Haggis

by Ryan Young on January 25, 2010

in Deregulate to Stimulate, Health and Illness, Nanny State, Personal Liberty, Precaution & Risk, Regulation, Regulation of the Day, Trade

Haggis is the national dish of Scotland. It has also been banned in the United States since 1989. Some of its ingredients are illegal for humans to consume in the U.S.

I won’t list what those ingredients are; they’re a bit hard to stomach (that would also be one of the ingredients). But having tried a small amount of haggis while in Scotland, I can testify that it doesn’t taste as bad as it sounds.

Fortunately, the haggis ban may soon be reversed. There has been no evidence of harm from eating offal ingredients. People have been eating haggis for centuries and been just fine. American shores may soon be teeming with the latest Scottish culinary innovations, including haggis nachos and haggis pizza.

“Leveling the playing field” with border taxes (read “bring down the economy”)

by Fran Smith on June 25, 2009 · 1 comment

in Energy, Environment, International

In Washington, beware any proposal that attempts to “level the playing field.” What is usually meant is hobbling competition with restrictive rules and regulations that often raise costs for consumers. On the international playing field, such “leveling” can have broader disastrous consequences.

That’s likely to be the case with the House Ways and Means’ misguided proposals to impose carbon taxes on imports from countries that haven’t taken stringent measures to control greenhouse gas emissions.

It turns out that the huge and complex energy bill – the Waxman-Markey bill – is scheduled to be voted on Friday. It sets up a “cap and trade” system by setting a limit on carbon emissions and issuing tradable allowances. The bill got some carbon-intensive industries realizing the high costs they would have to pay under the program and then pass on to their customers. They and environmental groups eager to suppress energy use talked about “leakage,” that is, firms in countries that didn’t have strict emission standards would be able to offer lower prices, and other firms might move to those countries as well. Their solution? Hit those foreign imports with a hefty tax too, and Ways and Means is figuring out a way to do that.

China, India, and other powerhouse developing countries are the main bugbears. Yet going down that road to protect domestic industries could put our fragile economy in a tailspin. CEI and others have written about the increased costs to consumers from suppressing the use of fossil fuels that supply more than 80 percent of U.S. energy. At a time when many families are struggling with bills, adding these new costs will be a hefty burden. Assessing carbon taxes on imports from certain countries would mean that consumers would get no relief from those increased costs.

Perhaps the main threat, however, is to the whole economy of the U.S. Countries like China and India won’t sit back and take this blow to their exports. They will likely retaliate with trade measures against the U.S. possibly affecting a broader range of products. In fact, China’s top climate change official Li Gao had suggested that countries importing goods from China might themselves pay for the emissions created in their production. Those large developing countries point out that they have only recently been experiencing rapid industrialization and economic growth, in contrast to the developed world, and do not want to be penalized and have their growth curtailed, as millions of their people are still living at a subsistence level.

The U.S. border measures – and perhaps the free allowances offered under cap-and-trade –will undoubtedly face challenges in the World Trade Organization, which can go on for years and further disrupt the world trading system.

Also, the threat is real that retaliation might be initiated outside the trading system. Currently, China holds almost one-quarter of all U.S. debt held by foreign countries. Suppose China threatened to dump some of its holdings?

Let’s hope policymakers have more sense than to vote “yea” for this economically destructive bill.

LibertyWeek 32: FCC Don’t Tread on Me

by Richard Morrison on March 5, 2009

in CEI Projects, Podcast

Your hosts Richard Morrison and Cord Blomquist bring you Episode 32 of the LibertyWeek podcast with special guest Sam Kazman and surprise guest co-host Jeremy Lott. We start by looking into the possible future of the Federal Communications Commission with nominee Julius Genachowski about to ascend to the chairmanship, and then take another stroll through the New Great Depression with high-level financial talks between unpopular British Prime Minister Gordon Brown and über-popular President Barack Obama. Oregonian brewers fight a proposed fifteen cents a pint tax in Beer News, and the Lady Madoff tries to stash away tens of millions from the feds in this edition of Scandal Watch. We hit our stride with an interview with CEI General Counsel Sam Kazman and his tales of the icy global warming rally staged earlier this week here in Washington, D.C. Finally, a little belt-tightening Olympic News from the USOC.

Listen here!