Thursday, April 17, 2008

Marching Backward on Trade

On economic grounds, there's no reason to reject the Colombia free trade agreement. Colombia's exports already enter the U.S. market duty-free under the 1991 Andean Trade Preference Act. Meanwhile, many U.S. exports to Colombia face stiff tariffs -- up to 35% on autos, 15% on tractors and 10% on computers -- most of which would ultimately go to zero under the agreement.

The tariffs dampen demand for U.S. exports by raising their price and putting them at a competitive disadvantage. Whirlpool annually exports about $50 million worth of refrigerators, washer-dryers and dishwashers to Colombia from plants in Ohio, Arkansas and Iowa. On a $1,000 refrigerator, a 20% tariff raises the retail price $200 in a fiercely competitive market with appliances also supplied by local firms and imports from Korea and elsewhere.

MP: That seems like a real no-brainer. The U.S. has everything to gain (eliminating tariffs on U.S. exports to Colombia), and nothing to lose.

Yet, it's politically convenient to oppose the free trade agreement with Colombia because the popular imagery is that trade destroys U.S. jobs. The loss of almost 4 million U.S. manufacturing jobs since 1998 seems easy to explain by cheap imports or the flight of plants to Mexico, China and other poorer countries. The truth is murkier: Although this has occurred, job losses also stem from greater efficiency (fewer workers producing more goods, see chart above using these data) and slumping domestic demand (for communications equipment and computers after the dot-com bust and for housing materials and vehicles now). Nor has falling factory employment crippled overall U.S. job creation.

Robert Samuelson in today's Washington Post article "Marching Backward on Trade"


At 4/17/2008 8:33 AM, Anonymous Anonymous said...

That seems like a real no-brainer.

Which is why Congress doesn't get it.

At 4/17/2008 1:27 PM, Anonymous Anonymous said...

Washington is merely reflecting the mood of the country...telling us what they think we want to hear.
Unfortunately, the vast majority of Americans don't get it.

What is really funny is watching the death of the culture wars. A few years ago, Obama's remarks about small town Americans "clinging to guns and religion" would have hardly raised an eyebrow. Liberals have been implying that anyone who is religious is dumb for decades. Now, Obama & Clinton are bending over backwards to court these folks. It is funny watching a liberal tell you about their personal relationship with God.

There was a great quote from the last presidential election:

"The Democrats discovered religion like a crash dumb discovers the windshield."

Bill Clinton at least was smart enough to claim NAFTA. Hopefully, the lightbulb will go on at the Democratic Party Headquarters.

At 4/17/2008 1:28 PM, Anonymous Anonymous said...

meant to write:

crash dummie

kinda messes up the quote but what the hay.

At 4/22/2008 10:00 AM, Blogger WIP said...

I forget which comedian made the following statement...

"If the opposite of pro is con, and progress means to move forward...then...what the hell is Congress?"


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