-Caveat Lector-
Okay, I guess I don't have anything better to do so I'll take the bait. I
live in the Seattle suburbs and have been subjected to nightly tear gas T.V.
for the past week and I just read Mr. Friedman's editorial. It read a bit
like a Microsoft commercial. But it's rhetoric, anecdotes and diversion.
Nothing more. I'm not an economist, but I don't think you need to be one to
put this in perspective. My comments are general in nature rather than
countering each of Friedman's points, some of which are truisms. The bottom
line is that Thomas Friedman thinks that expanded trade is a good thing and
the W.T.O. necessary. All the rest is diversionary window dressing and name
calling. So what about trade?
Yes! Trade has elevated aggregate standards of living in the U.S. and
presumably throughout the world. Yes, trade in the American context
particularly benefits people who export high technology products or who are
involved in the "information" economy. Lawyers usually love free trade
because they aren't at risk at loosing their job and their buying power is
increased by lower cost imports. Economists love free trade even more. I
am
certain this has nothing to do with their university jobs being almost
completely immune from dislocations associated with trade. We seem to think
it's tacky when union workers clumsily protest to save their jobs but we
tolerate educators, doctors and lawyers protecting their careers through
credentialism. Why? The cost to our society of overpriced domestic steel
is
likely a lot smaller than the cost of credentialism in law, medicine and
education. Maybe it's because the professionals look like someone we want
to
be whereas the typical union guy just looks like someone who needs a shave
and some exercise. In any case, the benefits of expanded trade accrue
disproportionately to smart, educated people. And expanding trade is not
the
only way we can improve efficiencies within economies.
Trade dislocates people who work in low tech manufacturing, textiles and
small scale agriculture. This is nothing new. Workers have always been
displaced with the invention of new technology. Agricultural mechanization
transformed a society in which 70%+ of the population was involved in the
production of food to a mere 2-3% today. China and India have over one
billion "excess" people involved in agricultural production. It will be
"interesting" to see what kind of dislocations occur as these people
transitions to industrial production as agriculture is mechanized and
whether
these dislocations will manifest themselves in areas outside of economics.
"Fair Trade" can only truly occur between countries with similar wages,
taxation schemes, subsidies, productivity, labor and environmental
standards,
available land, land use laws, standards of living and natural resource
bases. Reduction of trade barriers implies an imposition of uniformity
among
most of these variables in order to achieve competitiveness. How can
European transportation industries be as efficient as their American
counterpart when gasoline there is almost 4 times as expensive? The reason
gas is so expensive is because the Europeans are trying to discourage the
use
of cars. They have artificially reduced the efficiencies of many sectors of
their economies in order to achieve social goals. Free trade threatens
those
social goals. That is why they resist and this is what Mr. Friedman doesn't
understand. To truly compete with America, Europe would need to slash
taxes,
close many of its farms, increase its work week, decrease its vacation time,
dismantle its welfare state, crush its unions, change its land use laws to
accommodate American style land use, decrease train service, build more
roads, etc. These things affect people! If someone tried to impose this
stuff on America, we would bomb them. Yet types like Friedman just can't
figure out what the problem is. Why the resistance? Maybe the peasants are
a little slow. That's why we need experts like Michael Mandelbaum at the
Council on Foreign Relations to clarify our thinking.
In an optimized world, the U.S. and Canada would produce grain and software,
the Japanese consumer electronics, the South Koreans steel and super
tankers,
the Swiss fine watches and numbered bank accounts, the Germans good cars,
the
Brazilians timber, etc., etc. This is of course a *gross* over
simplification. However, there certainly isn't any good economic reason for
the Japanese to use scarce land to grow rice. And the economic
rationalization for the more densely populated European countries to use
their land for agriculture isn't much better. There isn't any good
rationalization for Americans to produce anything but specialty small lot
steel when so many other countries can produce steel cheaper. In fact, it
would probably not be justifiable for Americans to harvest many types of
timber when Canada could supply that timber cheaper. And in true free
