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View Full Version : Interesting Take on What USA Should Do About It's Subsidies


adios
09-20-2003, 05:43 PM
I posted this on the stock market forum as well. Gene Epstein writes the economic beat column for Barron's almost every week. IMO it's one of the few worthwhile columns in the paper. Here's what he had to say in this week's column in Barrons entiled The 1200 Pound Hog. His statement is in regards to what should happen after the failed WTO conference in Cancun:

Before turning to what will probably happen next in this slow-moving circus, let's pause a moment and ask: What should happen next?

Answer: The U.S., for one, should eliminate all its subsidies, tariffs and duties, repeal its farcical "antidumping" law, and do anything else necessary to turn itself into the largest free-trade zone ever. Right away, and without demanding reciprocity from any country, firm or lemonade stand.

Then it should require that Secretary of Commerce Donald Evans learn some economics. "Americans are willing to compete, on even terms, with any country in the world," he declared in Detroit last week, "But we will not stand for unfair competition."

But what-you-mean-we, White Man? (to quote the Lone Ranger's faithful Indian companion, Tonto). What the secretary was really saying, probably without quite knowing it, was that the many must sacrifice their own financial interests for the sake of the few, even though these few are generally better off to begin with.

Is there a domestic industry that can't compete with imports from abroad because the imports are being subsidized by foreign governments? Well, then, the American consumer must be denied these bargains and pay more because the "playing field" isn't "level."

If that doesn't persuade us, how about something even more sinister? If allowed to drive our domestic industry to the wall, those foreigners are planning to start gouging us, secure in the knowledge that no one else in the world will ever compete with them, according to our own government seers.

Such rationales are hydra-headed monsters. Slay one, and two more appear. Even worse, some arcane exception can always be invented. But what cannot be invented is a world in which protectionism can occur without protectionists. Since those are the very folks who are so easily corrupted, they can start believing their own propaganda. We're asking the fox to guard the chicken coop.

Americans can only be better off if the country's protectionist shackles were cast off unilaterally. Indeed, the original 48 states consisted of an enormous de facto free-trade zone in which the division of labor -- and location -- could work its miracles. Who knows what other miracles might occur if we fully avail ourselves of the rest of the world's entrepreneurial energy?

By strengthening the forces of free trade within other countries, we would probably do more to break down trade barriers than we could possibly achieve through several Doha Rounds.

brad
09-21-2003, 03:40 AM
nafta/gatt amercan (lack of) jobs

wall street benefits

etc

adios
09-21-2003, 04:45 AM
Wildbill doesn't post on this forum too often (a very smart man) so I cross posted this on the Stock Market forum. IMO his post nails it perfectly.

ACPlayer
09-21-2003, 11:14 PM
I read wildbill's interesting comment and generally agreed with him. I was struck by a parallel, perhaps more relevant to the usual rantings on this forum.

Would non-proliferation be more likely if the US was to unilaterally disarm? I wonder what the author of the editorial would think.

MMMMMM
09-21-2003, 11:24 PM
"Would non-proliferation be more likely if the US was to unilaterally disarm?"

We would be taken over, what else? what the heck do you think would happen?

ACPlayer
09-21-2003, 11:29 PM
Well, thats the reaction of people who want protection. If you dont protect my industry we will all die of hunger. They want protection and more protection. Dismantling cotton subsidies would kill the Cotton farmers (in their minds).

BTW I am not suggesting doing this.

MMMMMM
09-22-2003, 12:00 AM
The reaction might be similar but the scenario is worlds apart.

adios
09-22-2003, 09:46 AM
What does disarmerment have to do with subsidizing US industries? I suppose it may be relevent to the defense industry but I don't think it is. Something that is perhaps more relevant and along the same vain what about if the US DOD opened up it's procurement process and allowed more competition from foreign companies.

US disarmerment would eliminate a giant consummer from the market place. Ending US farm subsidies does no such thing.

ACPlayer
09-22-2003, 09:52 AM
I am pointing out that the thought of the article is eliminating subsidies, which is a protectionist measure, to make the world markets more open and hence better.

Can one argue (without MMMM's superego "we'll be fried" getting in the way) that eliminating the protectionist nuclear stockpile as a protectionist measure would make the world more open and hence better? Now I am not arguing, at this point just speculating.

adios
09-22-2003, 10:00 AM
"the protectionist nuclear stockpile as a protectionist measure"

Not sure I understand this. Our nuclear stockpile is a disincentive for US consummers to buy foreign imports? Don't know why that would be. The rational reason that a disincentive would exist is that foreign produced goods would be higher in price. I guess another way to interprest this statement is that our nuclear stockpile enables the US to subsidize it's industries and it could not do so without such a stockpile. I'm not ready to buy that arguement.

ACPlayer
09-22-2003, 10:17 AM
No, the question is does our stockpile encourage others to have the same? Does our desire to "protect" ourselves by having them make others want them too? Nothing to do with economics (at least not directly).

Probably not, but who knows for sure. We do know for sure that as long as we got them others will try to get them too out of fear of a "unipolar" world.

MMMMMM
09-22-2003, 01:58 PM
"We do know for sure that as long as we got them (nuclear weapons) others will try to get them too out of fear of a "unipolar" world."

And just how do we know that for sure? It hasn't even been tried yet (or for that long, however you want to look at it). On the other hand for many decades many countries have been trying to acquire nukes and not due to fear of a unipolar world.

ACPlayer
09-22-2003, 02:01 PM
Look around everyone is trying to get them -- thats how we know for sure that they are trying to get them. Would you like a list of those who have it, are suspected to have them, and would try to have it.

Nobody wants to be left out.

MMMMMM
09-22-2003, 02:24 PM
Countries are trying to get nukes--and have been so trying for decades--but that does not support your assertion that they will surely try to do so "out of fear of a unipolar world."

They'll try to get them regardles of if there is a unipolar world or not--your statement states as certainty a motivation which is: 1) untested, 2) unproven, and 3) probably irrelevant as the last 50 years have shown.

ACPlayer
09-22-2003, 02:27 PM
OK. Drop the assertion about unipolar. It has nothing to do with the main point.

This is an out of the box, provocative, concept that may or may not have merit. I expect YOU to dismiss it without further thought.

MMMMMM
09-22-2003, 02:34 PM
Regarding your earlier point: yes, our arming may encourage others to try to do so, but I believe the effect in this direction is quite minimal compared to other reasons for which countries arm themselves.

Arming has been one aspect of national history throughout the ages. If one country stops arming the others freqiuently just continue. Some countries have also armed purely for offensive reasons.

So I don't think us disarming unilaterally would do much except contribute to world instability and quite possibly get us attacked (make that certainly get us attacked if we disarmed too much).

brad
09-22-2003, 02:47 PM
heh most guys dont do well with these metaphorical thought processes.

but my 2 cents: UN has publicly stated it will use food (withholding food) as a weapon. ie, starvation as a means of control.

imho this is why japan subsidizes its rice farmers when its cost of rice is like 10 times higher. think about it. (also note that farmland once let go cannot easily be turned back into farmland, at least in some cases)

Boris
09-23-2003, 05:14 PM
What's wrong with the status quo in with respect to our agriculture policies?

adios
09-23-2003, 07:28 PM
If you don't object to the amount of subsidies to US farmers nothing is wrong with the status quo.

ACPlayer
09-25-2003, 12:30 AM
Some countries have also armed purely for offensive reasons.

So true.