protectionism

Barone is Right: Appeasing Protectionists Is a Bad Idea

by Ivan Osorio on October 5, 2011

in Deregulate to Stimulate, Economy, Labor, Politics as Usual, Trade

President Obama is finally sending three pending trade agreements — with South Korea, Colombia, and Panama — to Congress for a vote. The three trade deals were ready for this moment before Obama entered the White House. So what’s taken so long?

Quite simply, as Michael Barone notes in his Washington Examiner column today, the president wanted to avoid angering his political allies in organized labor.

[Obama] could have sent [the treaties] 985 days earlier; negotiations were completed in 2006 and 2007. Or, if he were concerned they’d be deep-sixed when his fellow Democrats controlled Congress, he could have sent them 274 days earlier when Republicans took over the House.

To be sure, they are opposed by many labor union leaders and congressional Democrats. There is a nostalgia among many union and party old-timers for the days, more than 30 years distant, when the auto and steel workers’ unions had nearly 2 million members.

Now each has less than half a million. But the old-timers seem to feel that somehow something like those olden days can be brought back if they oppose FTAs.

Indeed. In the new CEI OnPoint, “Free Trade without Apology,” CEI Adjunct Fellow Fran Smith and former CEI Research Associate Nick DeLong document how  efforts at appeasing organized labor — in the hopes of blunting union opposition to trade deals — have been not only ineffective, but harmful.

Union leaders have taken all concessions they’ve been offered only to ask for more. This has led to trade agreements becoming weighted down with provisions governing labor and environmental issues (to appease environmentalists) which have nothing to do with trade. And those provisions have only gotten longer and more onerous in each subsequent agreement.

Organized labor’s success in getting labor issues included in trade negotiations is a relatively recent phenomenon. The 1985 U.S.-Israel free trade agreement was the last American trade deal that did not include labor and environmental provisions. Since that time, the U.S. has entered into 10 free trade agreements covering 17 countries.

Eight years after the Israel agreement, the Clinton administration, as part of a deal to ratify the North American Free Trade Agreement (NAFTA), pushed Mexico and Canada to sign the North American Agreement on Labor Cooperation (NAALC) and North American Agreement on Environmental Cooperation (NAAEC) as side letters to the trade pact. That was the first time that labor and environmental objectives were directly linked to international trade negotiations. From that point onward, interest groups of various stripes have lobbied hard to include a host of irrelevant political agendas in trade negotiations. Organized labor and environmental groups have been especially active in this effort.

The NAFTA labor provisions were still not enough to satisfy Big Labor. Four years after the labor cooperation agreement was passed, the AFL-CIO stated in a public comment that the agreement had been “ineffective in promoting the concerns of workers beset by stagnant wages and job insecurity.” Rather than appease, the NAFTA labor provisions only whetted the union leaders’ appetites. To this day, unions continue to pressure Congress for more stringent labor obligations in current and future agreements.

It’s time to end this game, which only advantages protectionist lobbies.

For more on trade, see here and here.

Free Trade vs. Protectionism

by Ryan Young on September 1, 2011 · 1 comment

in Economy, International, Trade

Don Boudreaux hits it out of the park in this video.

He brings up an important question that free-trade skeptics need to answer: if international trade barriers create wealth, why stop there? Every state should have its own trade barriers against every other state.

Heck, intercity trade should have barriers, too. Imagine how wealthy we would be if San Diego placed tariffs on all goods from Los Angeles! Barriers to inter-household trade within the same city could have even more profound effects.

The economic logic is exactly the same in all those cases. Protectionism’s greatest failing is that it does not recognize that fact. It is astounding that many people see nothing inconsistent in favoring restrictions at one level, but not the others.

Constipated Colombia Pact

by Michael Fumento on April 8, 2011

in Economy, International, Trade

Post image for Constipated Colombia Pact

Pres. Obama has made expanding U.S. exports a centerpiece of his economic plan. In his January State of the Union Address, he noted that “95% of the world’s customers and fastest-growing markets are beyond our borders” and that export-related jobs “pay 15% more than average.” At a time when jobs are in short supply, he later said, “building exports is an imperative.”

So naturally, he’s done everything possible to ease passage of the Colombia Free Trade Pact, which the Bush Administration negotiated and the then-Democrat controlled Congress battled up. Right? Wrong.

As I write in Investor’s Business Daily, the Pact is lopsided towards the U.S. in that Colombia’s exports to us are already tariff-free, while our products sent there carry duties of up to 25 percent — an estimated $3.2 billion total since the agreement was reached.

Those tariffs would disappear and, according to the U.S. International Trade Commission, expand opportunities for a broad array of U.S. sectors, increase our gross domestic product by about $2.5 billion, lower our massive trade deficit and create J-O-B-S.

[click to continue…]

CA to criminalize Internet poker?

by Michelle Minton on June 29, 2010 · 9 comments

in Nanny State, Odds & Ends, Personal Liberty

That is, unless you play at one of the three state-sanctioned “hubs”.

Much like other proposals to “legalize” online poker and other Internet gambling activities, proposals to legalize on a limited basis such as the proposed SB 1485 in California, seem like a step forward to online poker players who, for many years, have wagered money on the Internet in a legal gray area.  But sometimes it is better to be uncertain of your legal standing than to know that an activity you enjoy has become a criminal offense.

After the UIGEA was passed in 2006, as I have written about in the past, it was thought that online gambling would soon be officially criminalized. But when the final rule came down and the implementation date arrived (the day when all banks and credit processing companies needed to abide by the new rules), poker players realized that not much had changed in their experience of online play.

However, during the interim between UIGEA’s passage and the implementation of it’s watered-down version, a few legislators initiated bills to legalize certain online gambling activities, both federally and locally in their home states.

sen-rod-wright

Making news these days is California’s latest attempt, initiated by Sen. Rod Wright introduced SB 1485, a bill that supposedly legalizes Internet gambling for residents. What it would actually do is legalize gambling only at the three online platforms and criminalize Internet poker played anywhere else online. Currently, there are no federal laws that make online poker games a crime and the DOJ has never prosecuted individual players associated with the activity. California makes 11 names games illegal to play online, but poker is not one of them. Thus, in CA, poker is not consider an unlawful Internet gambling activity at the moment. But if a law is passed that sanctions only three online providers, chosen by the state, as SB 1485 does, then playing poker online anywhere else will be a crime. The state’s DOJ will be allowed to arrest any individual caught playing poker online at a non-sanctioned site.

Currently, California law makes 11 named games illegal to play online or any game where the operator takes a rake (a cut of the money won in each hand). Thus, online poker in the state is legal at the moment.

This type of restricted legalization is, not only offensive to defenders of individual rights, open markets, or personal privacy, but also it just will not work or do what Wright and proponents hope it will.

1. First, it will not add protections for consumers because gamblers will continue to operate at non-sanctioned sites:

The text of the proposed regulations recognize that “millions of Californians” gamble at online casinos for money. Once there are a handful of state-sanctioned casinos, Californians will continue to play at the online sites that they are familiar with or that court their business.

2. It pushes gambling further into the shadows

If the Senator is concerned about these millions of gambling Californians, he should be aware that criminalizing their chosen activity will not accomplish this goal. Rather, it simply pushes them further into the shadows. Any player who is defrauded or robbed in an online game might be too afraid to speak with authorities, lest he be charged with the misdemeanor offense of playing a game online.

3. There is no way to prevent people from continuing to gamble at the online sites they want to.

Much like UIGEA before it, this type of limited access is impossible without some other major intrusion on personal privacy (such as monitoring a person’s computer activity). Online casinos in other states or other countries will continue to serve Californians.

4. The flow of money into the state’s coffers will not increase.

Sure, criminalizing an activity adults engage in freely and that violates no other person’s rights is massive breach of regulatory authority, but it won’t even increase tax revenue for California. The gamblers who play online now will continue to play unlawfully, and have greater incentive not to report income earned online. Add in the cost of enforcement and licensing the three sanctioned hubs and the final tally may end up costing Californians more money than it brings in.

With the state’s massive deficit, the promise of millions in new revenue might convince others that this is a good idea. My advice, as it often is when it comes to the Golden State, is that gamblers or anyone else who likes to make decisions about their own life, might consider moving to Nevada.

A hearing of the proposal is scheduled today at 3:30pm PST

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 89: Purple Dye

by Ryan Young on December 22, 2009

in Deregulate to Stimulate, Economy, International, Personal Liberty, Regulation, Regulation of the Day, Trade

Ancient Roman consuls – equivalent to our presidents – wore togas edged in purple to mark their high status. As Republic became Empire, new emperors were said to “ascend to the purple.”

Purple clothing was a status symbol for most of human history. It was the ancient equivalent of the Mercedes-Benz. Originally discovered in the glands of shellfish (reputedly by Heracles’s dog!), it took 12,000 of the creatures to get just 1.5 grams of dye. Purple garments could be as rare and costly as gold in some places.

Modern innovations such as inexpensive synthetic dyes, the Minnesota Vikings, and purple M&Ms have taken away the color’s exotic reputation. But no worry. Federal regulators are doing what they can to bring it back.

Alpinil Industries, a dye manufacturer in India, sells its carbazole violet pigment 23 cheaply. Too cheaply, it seems. Even commoners can afford to buy products colored with their purple hues!

Irate American competitors convinced the government in 2004 to put an anti-dumping duty on Alpinil’s purple dye. That raised the price to match pricey American-made dyes. Purple would once again be reserved for the rich.

Now that the tax has been in place for five years, the Department of Commerce is wrapping up an investigation to see if it has been working as intended. A repeal would be best for consumers. Don’t expect to see it happen, though.

The benefits are concentrated to a few dye manufacturers, who have a strong incentive to lobby to keep the status quo. Meanwhile, the costs are diffused onto millions of consumers, none of whom have much incentive to spend thousands of dollars in an effort to save themselves a few pennies.

Regulation of the Day 50: Tires from China

by Ryan Young on September 14, 2009

in Economy, Mobility, Regulation, Regulation of the Day, Trade

Consumers have been buying a lot of tires made in China lately. Naturally, U.S.-based tire manufacturers are upset at their competitors’ success. Fortunately, there are two ways for the aggrieved American firms to ease their troubled minds:

1: Make better tires for less money. Give consumers a reason to buy American tires rather than Chinese. Compete, in other words.

2: Don’t compete. Too much hard work. Instead, persuade some politicians to place a 35 percent protective tariff on competitors’ tires. Price them out of the market. Then keep making the same old tires that people don’t want. If the tariff is large enough, you may even be able to raise your prices, even without raising quality.

This is a choice between raising the bar and lowering it. Unfortunately, U.S. tire firms and allied politicians have chosen to lower it. China, by putting up its own barriers to retaliate, is lowering the bar even further.

The really audacious part is that tire tariff supporters think they are really helping the economy. Raising that bar. Saving American jobs!

There is something very unsettling about the notion that an American job is intrinsically more valuable than a Chinese job. We are all human beings, are we not?

This is an ugly, ugly mindset. And it is one that politicians and tire companies have explicitly adopted. The burden is on them to explain why they think people who live in one country are more deserving of economic opportunity than people who live in another.

Regulation of the Day 36: Buying American

by Ryan Young on August 20, 2009

in Deregulate to Stimulate, Economy, Regulation, Regulation of the Day, Stimulus to Nowhere, Trade

The $787,000,000,000 stimulus contains a provision requiring the Department of Homeland Security to buy US-made textiles. Basically, that means TSA uniforms will go up in price.

Let’s look at the logic behind this. If DHS would just pay more money for the same product, leaving less money left over for purchasing other goods, we can stimulate the economy. Jobs will be created or saved.

Amazing that some people still think that restricting trade and voluntarily paying higher prices will increase prosperity.

LibertyWeek 51: Watch for Falling Rupees

by Richard Morrison on July 14, 2009

in CEI Projects, Podcast

Your host Richard Morrison brings you Episode 51 of the LibertyWeek podcast, along with special guest co-host Jeremy Lott and Fellow in Regulatory Studies Ryan Young. We start with Judge Sotomayor in the Senate hot seat, a privacy threat from “smart” passports and why Rep. Dan Lipinski has decided your suitcase is too big. The discussion continues with Rep. John Murtha’s expanding corruption scandal, beer news from the Beaver State and the arrival of Wal-Mart in India. We wrap up with this week’s dose of brothel-themed Olympic News.

India calls carbon tariffs protectionist

by Fran Smith on April 7, 2009 · 1 comment

in Energy, Environment, Global Warming, International

At the Bonn, Germany, UN meetings on global warming issues, India urged rich countries not to use “green” protectionism by imposing carbon tariffs on carbon-intensive products from poor countries.  India’s special envoy to the talks, Shyam Saran, was quoted as saying:

“That is simply not acceptable, that is protectionism.”

“We should be very careful that we don’t start going in that direction. We welcome any kind of arrangement … where there can be a sharing of experience or best practices for any of these energy-intensive sectors.”

Earlier, China’s top climate change official had warned about possible retaliation if carbon tariffs were assessed, as was suggested by the U.S. Secretary of Energy.  Sounds like this issue is shaping up as the rich against the poor, i.e., already industrialized and developed countries attempting to penalize those emerging economies dependent on energy use for their continued economic growth.

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