Interesting Take on What USA Should Do About It's Subsidies

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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]

nafta/gatt amercan (lack of) jobs

wall street benefits

etc

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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]

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]

"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]

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]

The reaction might be similar but the scenario is worlds apart.

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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]

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.

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"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.