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Trading Exaggerations

Cal

Well-known member
http://www.tcsdaily.com/article.aspx?id=101007B

Trading Exaggerations

By Philip Levy : 11 Oct 2007

As the Bush Administration and Congress gird for battle this fall over four newly signed free trade agreements, one could be forgiven for thinking that these FTAs must be economically momentous to merit the looming conflict. But one would be wrong. While the global political stakes are huge, the domestic economic stakes are penny ante.

The agreements with Panama, Peru, and especially Colombia and South Korea are immensely important for U.S. foreign policy. They can also play an important role in spurring economic development in these U.S. allies. But the debate in the United States has largely focused on how the U.S. economy and U.S. workers will fare. By that measure, these agreements are trivial.

How can it be that FTAs' impact is so badly misconstrued? There are multiple layers of confusion. To begin with, there is a general tendency to see trade as affecting workers more than research really supports. Technological change and domestic competition have both had a large impact on workers in recent decades, but they are much harder to protest than trade agreements.

Whatever one thinks about trade's effects on workers in general, there are two reasons to think that the impact of the FTAs under discussion would be much more muted. First, these FTA partners are small relative to the size of the United States. South Korea is the most significant of the bunch, with an economy just under 10 percent the size of the United States, but it's a developed economy with an average income of roughly $25,000 per year. Colombia's economy is less than 3 percent of the size of the U.S. economy. Peru and Panama are smaller still.

The second key point is that the United States is already open to trade with these countries. Colombia, for example, already gets special access to the U.S. market through existing preference programs. In 2006, 92 percent of U.S. imports from Colombia entered duty-free - that's before any agreement is adopted! The new liberalization that occurs under such agreements is thus lopsided in favor of U.S. exporters. Given the countries' small size, though, even these benefits are small.

One needn't be steeped in the mysteries of international economics to discern all this. Congress requires that before the Administration submits an FTA, it must first get an assessment of the agreement from the independent non-partisan U.S. International Trade Commission (USITC). Those publicly-available reports make for rather repetitive reading. The USITC found that the Peru agreement might increase U.S. output by more than $2.1 billion. If that sounds impressive, remember that U.S. annual output exceeds $13 trillion. So we're talking about an increase of less than 0.02 percent. The positive effects of the Colombia FTA were estimated to be a bit larger, but still less than 0.03 percent. In the case of Panama, the USITC found that "U.S. imports would not likely grow significantly since most Panamanian products already have duty-free access to the U.S. marketas a result of trade liberalization under the TPA because most Panamanian products already enter the U.S. market duty free."

In other words, the likely economic effects of these agreements are positive, but so small that they would be wiped out as rounding errors in ordinary newspaper reports on U.S. economic progress.

One might ask why we should bother with such agreements, if we can barely discern their effects on the U.S. economy. The answer is that FTAs can have an enormous political and economic impact on our trading partners. In the case of Peru, for example, President Alan García barely beat a staunch opponent of the United States in the last election. He did so promising economic reform and trade. An FTA between the United States and Peru would cement those reforms in place and reward Peru's allegiance.

Colombia is even more significant politically. As Hugo Chavez in neighboring Venezuela has attempted to rally Latin America against the United States, Colombia has remained steadfast in its support. To repay them with the public repudiation of a negotiated FTA would leave the United States' reputation in the region in tatters.

As bad as this would be, at least the United States' commitment to the Western Hemisphere is clear. If the United States were to forsake South Korea, that would likely be read as the U.S. abandonment of Asia. China has already been maneuvering to arrange regional Asian groupings that exclude the United States. To spurn the Koreans would almost certainly further U.S. exclusion in the region.

True enough, these are political arguments for economic agreements. But if the economic effects of the FTAs in the United States are negligible, why not focus on the political impact? If these agreements have enormous foreign policy benefits coupled with very small economic benefits (not costs!) it is hard to fathom how anyone looking out for the United States' best interests could oppose them.
 

Sandhusker

Well-known member
All this guy is doing is sprinkling sugar on a turd. You're supposed to look at the sprinkles and ignore the FTA's loss of sovereignity, lowering of safety and health standards, etc.....
 

Cal

Well-known member
Sandhusker said:
All this guy is doing is sprinkling sugar on a turd. You're supposed to look at the sprinkles and ignore the FTA's loss of sovereignity, lowering of safety and health standards, etc.....
Yer right....much better to let these little countries struggle, and be vulnerable targets for foes of the US.

I heard a comment a couple months ago....something like, what you don't see on the tag of that shirt that was made in (whatever country) is that it was likely made out of cotton that was grown in the US.
 

Sandhusker

Well-known member
#1, How much good have we done for Mexico, a partner in our largest FTA?

#2 How many countries have we helped out in so many ways that ended up crapping on us?

I'm sorry, Cal, I see this article as an effort to direct attention away from that FTAs have really brought; lower standards, bigger trade deficits, loss of sovereignity, weakening of our economic infrastructure, etc....
 

PPRM

Well-known member
Cal said:
Sandhusker said:
All this guy is doing is sprinkling sugar on a turd. You're supposed to look at the sprinkles and ignore the FTA's loss of sovereignity, lowering of safety and health standards, etc.....
Yer right....much better to let these little countries struggle, and be vulnerable targets for foes of the US.

I heard a comment a couple months ago....something like, what you don't see on the tag of that shirt that was made in (whatever country) is that it was likely made out of cotton that was grown in the US.

Odds are it was not,

http://r0.unctad.org/infocomm/anglais/cotton/market.htm

PPRM
 

jigs

Well-known member
free trade is a slang term for lets screw the USA


we get very little out of it, and the other countries get a frigging gold mine!
 

Mike

Well-known member
Cal said:
Sandhusker said:
All this guy is doing is sprinkling sugar on a turd. You're supposed to look at the sprinkles and ignore the FTA's loss of sovereignity, lowering of safety and health standards, etc.....
Yer right....much better to let these little countries struggle, and be vulnerable targets for foes of the US.

I heard a comment a couple months ago....something like, what you don't see on the tag of that shirt that was made in (whatever country) is that it was likely made out of cotton that was grown in the US.

Cal, China and India more than Double the USA cotton production now!

http://www.nationmaster.com/graph/agr_cot_pro-agriculture-cotton-production

The old cotton fields down here aren't here any more.

Cotton mills are a thing of the past down here now. Used to be one on every corner.
 

Cal

Well-known member
Sandhusker said:
#1, How much good have we done for Mexico, a partner in our largest FTA?

#2 How many countries have we helped out in so many ways that ended up crapping on us?

I'm sorry, Cal, I see this article as an effort to direct attention away from that FTAs have really brought; lower standards, bigger trade deficits, loss of sovereignity, weakening of our economic infrastructure, etc....

From the CIA fact sheet. One thing that I noticed is that the 9% or so illiteracy rate for the population is equal, roughly, to the estimated number of illegal aliens that we have in our country. No wonder Mexico is eager to get rid of them, and shame on both political parties for doing such a pisspoor job of controlling the boarder. Sandhusker, do you have a plan to immediately replace the oil provided by our number 2 oil supplier, 2nd to Canada, and a catchy jingle to get Americans to eat lots of tripe and whatever organ meats, while locking us out of the high end beef markets created by Mexican resorts?
Economy - overview:
Mexico has a free market economy that recently entered the trillion dollar class. It contains a mixture of modern and outmoded industry and agriculture, increasingly dominated by the private sector. Recent administrations have expanded competition in seaports, railroads, telecommunications, electricity generation, natural gas distribution, and airports. Per capita income is one-fourth that of the US; income distribution remains highly unequal. Trade with the US and Canada has tripled since the implementation of NAFTA in 1994. Mexico has 12 free trade agreements with over 40 countries including, Guatemala, Honduras, El Salvador, the European Free Trade Area, and Japan, putting more than 90% of trade under free trade agreements. The new Felipe CALDERON administration that took office in December 2006 faces many of the same challenges that former President FOX tried to tackle, including the need to upgrade infrastructure, modernize the tax system and labor laws, and allow private investment in the energy sector. CALDERON has stated that his top priorities include reducing poverty and creating jobs. The success of his economic agenda will depend on his ability to garner support from the opposition.
 

Cal

Well-known member
Sandhusker, from Pat's link...OMG, how did this happen?

The United States is also the single largest exporter of raw cotton to Mexico, which has relied heavily on US imports to supply its export assembly plants, known as Maquiladoras
 

Cal

Well-known member
PPRM said:
Cal said:
Sandhusker said:
All this guy is doing is sprinkling sugar on a turd. You're supposed to look at the sprinkles and ignore the FTA's loss of sovereignity, lowering of safety and health standards, etc.....
Yer right....much better to let these little countries struggle, and be vulnerable targets for foes of the US.

I heard a comment a couple months ago....something like, what you don't see on the tag of that shirt that was made in (whatever country) is that it was likely made out of cotton that was grown in the US.

Odds are it was not,

http://r0.unctad.org/infocomm/anglais/cotton/market.htm

PPRM
With an annual average export of 1.6 million tonnes since 1980 (that is, 26% of the world's cotton exports), the United States are by large the dominant exporter with regard to cotton fibre.

Wouldn't surprise me a bit if some of it came back to us in the form of clothing, and that countries with huge populations require more of what they're raising for their own citizens.
 
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