Tim Worstall

Larry Elliott on Doha

At last, something I unequivocally agree with from Larry Elliott:*

By no stretch of the imagination is what is on offer a development
round – it is the usual mercantilist stitch-up with the great powers
seeking to extract as many concessions as they can while giving the
bare minimum in return.

How can we still be having trade talks in which people act as if ignorant of the facts about trade?

The G8’s approach to trade is harder to explain than its foot-dragging
on aid. This, after all, is a pretty rightwing bunch, steeped in the
orthodoxies of market economics. One article of faith is that free
trade is better than protectionism, and that if a country lowers its
tariffs to foreign importers but gets nothing in return, both parties
benefit. There’s not been much evidence of this thinking in the Doha
round so far.

Institutionally the US has never really believed this and from the look of things nor does the EU. Which is part of the problem of course.

We should be starting from the plainest and most obvious result in all of trade theory: if we lower our tariffs, then we benefit. Even in theory (a theory I don’t think applies in the real world) the exception to this is the infant industry argument and that doesn’t apply to the already rich nations. So economic logic should be driving us to lower tariffs, without asking for reciprocation.

But that’s not the way the talks go, sadly. As clear an example as you need of the fact that we are not ruled rationally.

* I’m sure Mr. Elliott is just as excited about this as I am.

In

4 responses

  1. Roger Thornhill Avatar
    Roger Thornhill

    Indeed, but the G8 leaders are often speaking from within a pork-barrel. Inevitable incoming trade is a nice little earner. It is Robber Baronacy nationalised.

    Reply
  2. Mark Wadsworth Avatar
    Mark Wadsworth

    What Roger says.

    Reply
  3. dearieme Avatar
    dearieme

    ‘Fraid so, Rog, Mark: just thieves the lot of them.

    Reply
  4. geneberman Avatar
    geneberman

    Tim:
    Looks like there’s agreement all ’round. All of the “free trade” talks and agreements, etc. made and being made are just an extension of the domestic gangs in each state sending their emissaries to cut deals protecting their privileged status.
    It’s all perfectly rational of course–just proceeding along lines different from those publicized. Not worth arguing or even talking about. The guys doin’ it understand it just as well as do we but get their bread buttered (and their palms greased) by putting on a satisfactory show. It’s simply the case that the privilege is worth big bucks–sometimes existence itself–to the protected firms and labor sectors and not so intensively costly to everyone else as an individual expense item–so the con luxuriates. Even in Keillor’s Lake Woebegone (where every kid’s IQ is above average) you probably couldn’t convince ’em that unilateral free trade made sense (and even if you could do it, they wouldn’t remember it by the time they grown up and began voting).
    This is all “pissing against the wind” and nothing much is going to change. The best that can be said is that protectionism is probably less pronounced today than in the years when protected sectors in the US and the UK convinced the Germans (and Austrians and Turks) they had no other choice than to wage war against the injustice–or starve. And to do it again later with Japan taking the place of the Turks.
    Properly understood, protection (whether tariff or subsidy) is a real, tangible
    assault on the justly-earned livelihood of foreign producers and domestic consumers and is exercised by those who feel in a position to enforce their specific claim to a “piece of the action” militarily.

    Reply

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