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Written by LNC
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Friday, 28 December 2007 |
NY Times op-ed writer Paul Krugman takes on the trade policy simpletons today. He does not get it entirely right, but his main point is that shouting down those with trade concerns is wrong. I think he was tiptoeing into the waters, testing a message, and trying to avoid being shouted down himself.
My main point has been that free trade is good if it is truly free trade, and without all the ancillary stuff that bulks up the trade agreements. But we must enforce the rules, we must have balance, and we must not violate national security, environmental, safety and other important domestic policy interests.
I'll start by giving some kudos. Krugman's best point is this:
But I am arguing for an end to the finger-wagging, the accusation either of not understanding economics or of kowtowing to special interests that tends to be the editorial response to politicians who express skepticism about the benefits of free-trade agreements.
It’s often claimed that limits on trade benefit only a small number of Americans, while hurting the vast majority. That’s still true of things like the import quota on sugar. But when it comes to manufactured goods, it’s at least arguable that the reverse is true. The highly educated workers who clearly benefit from growing trade with third-world economies are a minority, greatly outnumbered by those who probably lose. ... [T]hose who are worried about trade have a point, and deserve some respect.
Krugman does not propose a good remedy. He advocates a "social safety net" which is currently Trade Adjustment Assistance. Jock Nash of Milliken & Co. appropriately calls this "burial insurance." A good metaphor because we want to avoid the burial altogether.
Krugman should have strengthened his point by addressing currency manipulation, VAT tariffs, China government ownership of industries, and China subsidies to favored industries.
He should consider reading a trade agreement in all its ancillary, non-Adam Smith glory. That would be the next step on the road to reality.
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