Re: Free Trade: A Mixed Blessing

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The rhetoric around free trade has always been about the erasure of human suffering and labor conditions, at least since the seventeenth century. It's not just a matter of local skills or agriculture; when the price of something from another country is weirdly lower than it would otherwise be (like the drop in sugar prices in the 1630's), someone is getting seriously screwed. Why this isn't readily apparent is baffling to me.


Posted by: A White Bear | Link to this comment | 05-21-07 9:19 AM
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It's complicated by the fact that some part of the differences in salaries from country to country isn't directly oppressive -- say, an Indian programmer making half of what a Californian programmer is making is being paid a perfectly respectable salary by local standards, so the fact that she can work cheaper is the real kind of comparative advantage that economists talk about. But mostly you're right.


Posted by: LizardBreath | Link to this comment | 05-21-07 9:26 AM
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"price of something from another country is weirdly lower than it would otherwise be (like the drop in sugar prices in the 1630's), someone is getting seriously screwed. Why this isn't readily apparent is baffling to me."

Before I put on my free-trader hat, I'm going to need this explained a little better.


Posted by: mike d | Link to this comment | 05-21-07 9:29 AM
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... But the reason the Indian programmer can get by on much less money than a Californian has a lot to do with the level of development in India, and on the lack of regulations benefitting his public health and safety. Doesn't it?


Posted by: Clownaesthesiologist | Link to this comment | 05-21-07 9:30 AM
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3: I'm figuring the reference to the sugar trade in the 1630's is to the beginning of industrial slavery in the West Indies -- sugar got cheap because it was being made with slave labor. (Admittedly, I'm guessing from 'sugar' -- I couldn't date the introduction of industrial slave agriculture offhand).

4: General level of development yes, but there's a reasonable argument that paying her a decent salary by local standards is a fair way to increase that level of development.


Posted by: LizardBreath | Link to this comment | 05-21-07 9:34 AM
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Thanks LB. It's the "weirdly lower than it would otherwise be" reference that caught my eye.


Posted by: mike d | Link to this comment | 05-21-07 9:37 AM
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There's also the security issue to consider. It would seem to be bad public policy for a state to outsource the bulk of its food production to a potentially hostile foreign state, or even to a friendly foreign state if food production were to drop off sharply. Isn't this part of the rationale the European states use to justify their food tariffs?


Posted by: dob | Link to this comment | 05-21-07 9:39 AM
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3: The specific example is an important one. Sugar used to only be available from Arabic countries, where it was produced and sold at high cost to Europeans. Only royals and a few nobles had access to sugar, which was far more valuable than honey, and class distinctions were made based on who could afford to serve sweets.

When slave labor in Jamaica made sugar suddenly ridiculously cheap and available, it became a household commodity for average middle-class people. That was really the beginning of serious anxiety about overseas goods in England. For one thing, it destabilized the class structure to have just any odd person serving sugar, but it also became obvious that the change was not due to, for example, a really nice climate for sugar cane, but the erasure of the labor that it takes to make it.


Posted by: A White Bear | Link to this comment | 05-21-07 9:41 AM
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I take my time, and get pwned by LB.


Posted by: A White Bear | Link to this comment | 05-21-07 9:41 AM
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Mine was purely parasitic pwnage -- I was guessing what you meant rather that having the relevant knowledge myself.


Posted by: LizardBreath | Link to this comment | 05-21-07 9:45 AM
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But even today it's easier to grow sugar in the Caribbean and South America than it is in the Arab world, and labor has no longer been "erased". Couldn't the real cause of a sugar glut have been more productive growing areas, rather than slave labor (not to say that slave labor didn't effect the price of sugar). There was slavery in sub-Saharan Africa and the Arab world before the discovery of the Americas.


Posted by: mike d | Link to this comment | 05-21-07 9:49 AM
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7: I don't know the European justification for food tariffs, but this makes a lot of sense. I don't really buy arguments that hostile nations are going to poison us all to death (though lots of former pet owners would disagree angrily right now, I know) but it seems like there's a real argument in favor of self-sufficiency that doesn't get made. This surprises me because self-sufficiency is such a classic, knee-jerk American "value."


Posted by: Robust McManlyPants | Link to this comment | 05-21-07 9:53 AM
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Come to think of it, the concept I'm looking for might better be phrased as "self-reliance."


Posted by: Robust McManlyPants | Link to this comment | 05-21-07 9:55 AM
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11: In this particular case, I think we can assume slave labor had something to do with the drop in price. But sure, transportation and agricultural developments result in price drops. Pineapples and pomegranates used to be cultivated painstakingly in English hothouses, producing only a few pitiful, exorbitantly expensive fruits, and then, by the mid nineteenth century, better transportation made it possible to get a reasonable selection of better-tasting tropical fruits into middle class homes on occasion.


Posted by: A White Bear | Link to this comment | 05-21-07 9:56 AM
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11: While there was slavery, there wasn't the combination of slavery and industrialized agriculture. I don't know if the cost of paying free laborers to grow sugar in the West Indies would have raised costs enough to eliminate the comparative advantage completely, but it would have been pretty significant -- living in the West Indies was considered terribly dangerous and unhealthy at the time, and you would have needed to pay awfully high wages to make people come there to work.


Posted by: LizardBreath | Link to this comment | 05-21-07 9:58 AM
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15: Industrialized agriculture doesn't mesh well with sugar. While sugar cane processing is industrialized, harvesting is still (I believe) largely done by hand. Those guys are paid (not a lot, granted), and it's still 54 cents/lb. cheaper than sugar from beets here in the US.

living in the West Indies was considered terribly dangerous and unhealthy at the time

You and I must be talking about different West Indies. The ones I'm talking about were not particularly more dangerous and unhealthy than a plague-ravaged Europe, and there were gold-covered cities and fountains of youth the next island over.


Posted by: mike d | Link to this comment | 05-21-07 10:10 AM
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it also became obvious that the change was not due to, for example, a really nice climate for sugar cane, but the erasure of the labor that it takes to make it.

Ya reckon there's no advantage in cultivating sugar cane in the West Indies (...or somewhere where it rains) over cultivating it in Arabia? I'm used to Friedmanesque world-is-flat glibbers being startlingly clueless about agriculture (why don't those Colombians just grow something else rather than cocaine on their infertile, roadless mountain? I can't work out why. Maybe it's Iran? That sounds about right!), but anti-trade lefties doing it is a new one on me.

Also, I'm not aware of a big run up in sugar prices after 1838 - and I think you'll find sugar harvesting wasn't mechanised for a long time after that.

Anyway, substance. I have to say I think "free trade=no food safety regs" is a bit of a strawman. "No tariffs", OK. But I don't think anyone who isn't completely batshit insane suggests *no food inspection*. Except perhaps for...right, current president excepted..


Posted by: Alex | Link to this comment | 05-21-07 10:14 AM
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Isn't this part of the rationale the European states use to justify their food tariffs?

The big rationale is cultural patrimony, although farmers in Europe do like the national security crutch. Realistically, though, the idea of national self-sufficiency in agriculture is a pipe dream for almost everyone except the US, the Auzzies, Argentina, Brazil, and Canada. And the only reason the US can pull it off is because of our agro-industrial complex, which doesn't need all these subsidies. But they lobby to keep them. Why do you think all the Sunday talk shows are sponsored by ADM?


Posted by: mike d | Link to this comment | 05-21-07 10:15 AM
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I'm working off contemporary novels, so I don't know how accurate they were. But traveling to tropical countries was regarded as the next best thing to a death sentence -- malaria, yellow fever, and so on. Whether or not it really was more dangerous from a disease point of view than Europe, I'm pretty sure that Europeans thought it was more dangerous, and that would have driven up the wages you had to pay.

Industrialized agriculture doesn't mesh well with sugar. While sugar cane processing is industrialized, harvesting is still (I believe) largely done by hand.

Industrialized≠mechanized; I meant 'large scale and organized for high productivity.' The point of using slaves in industrial agriculture is that you're using people as cheap substitutes for machines, where the machines don't exist yet or are more expensive.


Posted by: LizardBreath | Link to this comment | 05-21-07 10:17 AM
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I'm working off contemporary novels, so I don't know how accurate they were. But traveling to tropical countries was regarded as the next best thing to a death sentence -- malaria, yellow fever, and so on. Whether or not it really was more dangerous from a disease point of view than Europe, I'm pretty sure that Europeans thought it was more dangerous, and that would have driven up the wages you had to pay.

Industrialized agriculture doesn't mesh well with sugar. While sugar cane processing is industrialized, harvesting is still (I believe) largely done by hand.

Industrialized≠mechanized; I meant 'large scale and organized for high productivity.' The point of using slaves in industrial agriculture is that you're using people as cheap substitutes for machines, where the machines don't exist yet or are more expensive.


Posted by: LizardBreath | Link to this comment | 05-21-07 10:18 AM
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re: 18

Most European countries could be self-sufficient for agriculture with some effort and planning. Europe is actually pretty damn great in terms of climate and fertility of the land. Most of them have been in the fairly recent past. That's not to say that they are anything like self-sufficient but that's for economic reasons.


Posted by: nattarGcM ttaM | Link to this comment | 05-21-07 10:18 AM
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That article is full of fascinating facts about the position China has in the world food market. For example, "China controls 80 percent of the world's production of ascorbic acid.... Only one producer remains in the United States." Also, apparently they are contemplating soon allowing China to sell poultry to the US, which, ack eep, no thank you.


Posted by: redfoxtailshrub | Link to this comment | 05-21-07 10:19 AM
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17: Anyway, substance. I have to say I think "free trade=no food safety regs" is a bit of a strawman. "No tariffs", OK. But I don't think anyone who isn't completely batshit insane suggests *no food inspection*.

You don't think there's a real difference between the practicality of inspecting every shipment of food at the borders, and a regulatory regime that (to some extent) insures that the production of food is sanitary and so forth at the source? As a practical matter, testing all imported food to be certain that it's fit to eat seems likely to be impractical, where raising tariffs for countries that don't generally meet our standards at the production end isn't.


Posted by: LizardBreath | Link to this comment | 05-21-07 10:22 AM
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"... But the reason the Indian programmer can get by on much less money than a Californian has a lot to do with the level of development in India, and on the lack of regulations benefitting his public health and safety. Doesn't it?"


Part of it is also that they get services from lower-cost providers, like haircuts from barbers charging .50$ instead of 50$. So it has to do with other people's wages too.


Posted by: yoyo | Link to this comment | 05-21-07 10:23 AM
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24:
And part of that is because the barbers don't have regulations benefiting their health etc, and after that it's squalor all the way down.

But the programmer example is not a good one: it isn't any cheaper to write code w/ viruses. The point LB was originally making didn't rest on the absence of labor laws, but rather the uncertain quality of the imported goods.


Posted by: foolishmortal | Link to this comment | 05-21-07 10:36 AM
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Well, I normally would be making that argument, and did allude to it. This post was trying to appeal to the purely self-interested argument against absolute free trade, but I'm generally also all about the exploitation argument as well.


Posted by: LizardBreath | Link to this comment | 05-21-07 10:41 AM
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Feh - it costs a lot less to hire a programmer in Manhattan than it does in North Carolina, and it's not because of New York has more regulation benefitting their health but because Manhattan is full of investment bankers and lawyers who find it worth paying an extra million bucks for their house so they can live in the area that has all the good jobs in their field.

But I think that the same argument of "we don't know where these things crossing our borders came from and what their history is" is frequently deployed against people as well as cat food.


Posted by: Jake | Link to this comment | 05-21-07 10:48 AM
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But I think that the same argument of "we don't know where these things crossing our borders came from and what their history is" is frequently deployed against people as well as cat food.

Are you suggesting that LB has an irrational dislike for foreign cat food?

Look, we spent a hell of a lot of time 100 years ago cleaning up our food industry. I don't think it's xenophobic to question the produce of countries that have not done this. I would note that, at least until recently, lots of raw milk cheeses were unimportable from France, and I don't think that came from Francophobia (Big Ag lobbying, perhaps, but that's not Jake's apparent argument).

Anyway, what struck me was "stands to harm the US economy, too." Ah, yes, how harmful to stop sending dollars to China in exchange for poisonous food! And we all know how backwards the US became once rat-filled hot dogs were banned. Why, regulation is always harmful! It's Econ 101.


Posted by: JRoth | Link to this comment | 05-21-07 11:01 AM
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28:
frequently deployed against people as well as cat food
People is not being used to modify food here: I think he's talking about immigration.


Posted by: foolishmortal | Link to this comment | 05-21-07 11:08 AM
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16: I'm fairly certain - I don't have the citations on me - that mortality rates in the 17th century were higher in the West Indies and the British colonies from Virginia southwards than they were in England, but that New England colonists were on average healthier than the English. Mortality rates among slaves were, oh, just a bit higher than for nonslaves, and the West Indian population was maintained mostly by importation to replace those who'd been worked to death.


Posted by: eb | Link to this comment | 05-21-07 11:14 AM
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The pros/cons of free trade complex, free-trade backers do oversimplify, and LB is surely correct to note that a chemical with 99.9% purity may not be the same product as a chemical with 99% purity. So it's probably unhelpful to nit-pick. Nonetheless, I will.

A significant part of the reason goods produced in the US are comparatively expensive is that we have the sort of regulations that make it less likely that consumers will be injured by, say, tainted foods, let alone our labor laws that make it less likely that workers will be injured producing them.

It's not obvious that labor protection and environmental regulations are "a significant part" of the reason US goods are more expensive. Or at least, one wants a better definition of significant (>20%?). There are many goods for which it's quite the opposite of obvious that worker or consumer protection eats up any meaningful costs, but where outsourcing/importation is ubiquitous (call centers, e.g.). I haven't looked into the empirical studies on this, so am open to correction, but my understanding is that the bulk of "free trade" advantage in manufacturing comes from differences in wages. Which brings me to AWB's point:

when the price of something from another country is weirdly lower than it would otherwise be (like the drop in sugar prices in the 1630's), someone is getting seriously screwed.

The difficulty is that someone was *already* screwed prior to institution of free trade . To quote a famous right-wing nut job, "global poverty is not something recently invented for the benefit of multinational corporations." The people earning low wages in a 3rd world export-industry would, almost certainly, be earning even lower wages absent the existence of an export industry.

And finally:

we have those laws here because we want their protections, and we think they're worth paying for

Sometimes. And sometimes we have laws simply because a powerful domestic interest has lobbied the government to stifle foreign competitors. The linked article addresses an explicit tariff. However, I gather that the use of "non-tariff barriers" is a hot topic in trade economics. One can imagine that it will be frequently difficult to to distinguish good, consumer-protection focused regulations from bad, domestic-industry protecting ones.


Posted by: baa | Link to this comment | 05-21-07 11:17 AM
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Also, it's not like the 17th century was a heyday of free trade.


Posted by: eb | Link to this comment | 05-21-07 11:20 AM
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Admittedly, I either didn't have a point or it was poorly phrased. Melamine-enhanced cat food is clearly no good; and while I think it's reasonable to say that if you want to sell your food products in the US your food industry has to follow whatever the good manufacturing processes are, I don't think that this is going to dramatically raise the prices of imported goods.

I also resent being told that thinking about US immigration policy and worrying about what the effects of changes might be means that I don't like brown people. Seeing this post by Mark Kleiman about businesses getting cold feet on the proposed immigration law changes makes me more inclined to support them, so who knows.

I should go to work.


Posted by: Jake | Link to this comment | 05-21-07 11:20 AM
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but my understanding is that the bulk of "free trade" advantage in manufacturing comes from differences in wages.

I was thinking of minimum wage laws as a regulation protecting labor; as well as all the health and safety regulations (building codes and so forth) that drive up the US cost of living and therefore wages as well.

But more generally, sure, there are bad reasons for tariffs and other trade barriers as well as good ones. Absolutely. But if there are good reasons at all, then talking about Free Trade as generically a good thing doesn't resolve the question of whether any particular trade barrier is a good one.


Posted by: LizardBreath | Link to this comment | 05-21-07 11:21 AM
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The sugar issue (and iirc the mortality of slaves on sugar plantations, which I think was actually slightly worse in Brazil than in the West Indes; being sold to work on a cotton plantation or in a Mexican silver mine was a vastly superior option, if only because you were likely to live for more than a few years) is discussed in Sweetness and Power; I can dig up my copy and see what Mintz has to say about what happened after the Abolition Act.


Posted by: snarkout | Link to this comment | 05-21-07 11:37 AM
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Barry Unsworth wrote a novel called Sugar + Rum.


Posted by: ben w-lfs-n | Link to this comment | 05-21-07 11:43 AM
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The more interchangable the good, the more cost becomes the deciding factor. As mentioned above, a programmer may have a comparable advantage because code is code, and a t shirt is a t shirt whether it is made in Indonesia or North Carolina. Burt when you talk about food, chemicals and other items where purity and standards are important, costs differentials tend to even out over time, because of incidents like the pet food. Sure those companies saved some money in the short run, but now their brand is tainted. That is why branding is actually a net positive for the economy, no matter what Naomi Klein says.


Posted by: Tassled Loafered Leech | Link to this comment | 05-21-07 11:45 AM
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their brand is tainted.

To the extent there's regulation making the sources of ingredients and so forth transparent, maybe.


Posted by: LizardBreath | Link to this comment | 05-21-07 11:48 AM
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To the extent there's regulation making the sources of ingredients and so forth transparent, maybe.

Really? I don't know where Jack in the Box gets their beef, but I know it gives you E. Coli.


Posted by: Jake | Link to this comment | 05-21-07 11:49 AM
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With something like this pet food thing, or the E.Coli on spinach, though, the warnings were about the ingredient -- there's no individual brand you can shop away from to avoid melamine in your cat food, or E.Coli on your spinach.


Posted by: LizardBreath | Link to this comment | 05-21-07 11:52 AM
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It's also probably worth seperating free trade the rhetoric from free trade the implementation, which sometimes has very little to do with free trade, at least not in a bilateral way: e.g. IMF/WB in Jamaica.


Posted by: soubzriquet | Link to this comment | 05-21-07 11:56 AM
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39: That probably has less to do with Jack in the box, though, and a lot to do with the general state of the industry (fecal matter shows up in a significant percentage of all sources).


Posted by: soubzriquet | Link to this comment | 05-21-07 11:57 AM
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On reflection, Jamaica falls nicely under AWB's blanket 'someone getting seriously screwed'.


Posted by: soubzriquet | Link to this comment | 05-21-07 11:58 AM
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That probably has less to do with Jack in the box, though, and a lot to do with the general state of the industry (fecal matter shows up in a significant percentage of all sources).

I always assumed it had to do with a low-cost chain purchasing meat from the lowest-cost slaughterhouses (= even more likely to be contaminated), and then using a workforce less likely to be trained in food safety, in facilities less likely to be up to code.

But I dunno, I don't live in a part of the country that has Jack in the Box. Is it generally perceived as equal to McDonald's?


Posted by: Witt | Link to this comment | 05-21-07 12:02 PM
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I'm not from the JitB area, but I've eaten there on trips, and on appearance and taste it's slightly higher-rent than McD's rather than the reverse. But maybe it's also more variable or something.


Posted by: LizardBreath | Link to this comment | 05-21-07 12:04 PM
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There are many goods for which it's quite the opposite of obvious that worker or consumer protection eats up any meaningful costs, but where outsourcing/importation is ubiquitous (call centers, e.g.)

First, to some extent the wage difference is the product of a societal infrastructure conducive to wealth-creating activities. Your average American call center worker needs to be paid more than his South Asian colleague because he needs to be convinced to forgo:
a)investing in his future earning potential by attending community college
b)getting paid $10/hour serving $3 lattes to investment bankers
and
c)investing in his future earning potential by getting a union type job.
The South Asian call center worker has none of these opportunities, and will consequently work for less.

The difficulty is that someone was *already* screwed prior to institution of free trade

Well, someone is still getting screwed, it's just the screwees have changed. Undoubtably the outsourcer and the SA call center guy benefit. The US call center worker and the domestic SA employers get screwed. In theory, the consumer should benefit from cheaper call centering, but in my limited experience this is where the wheels fall off. (Warning:anecdote follows) I recently bought an Xbox 360 that was, as shipped, unable to be plugged in. Microsoft is, in theory, responsible for fixing this. I call up tech support and speak with a South Asian gentleman who is difficult to understand and completely clueless. He has about five stock answers and displayed no comprehension skills whatsoever: he talks as if he has a copy of the xbox 360s version of XP's "Help and Support" tab in front of him. In the end, after 45 mins of this nonsense, I fix the problem myself w/ a pair of needle nose pliers and a really big knife. Now, as a consumer, have I been screwed by the outsourcing? It could be argued that a domestic tech support guy might not have been any more clueful, but surely he would have been easier to understand. And it could be argued that this outsourcing made my xbox cheaper, but it was still very fucking expensive. As a consumer, I did not get the tech support owed me, and I certainly came away from the transaction feeling screwed over.
(end anecdote)

In theory, free trade makes everyone better of in aggregate. In practice, the distribution of benefits is often skewed. As the aphorist said,
pareto can suck me.


Posted by: foolishmortal | Link to this comment | 05-21-07 12:05 PM
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Is there a point of contention between baa and LB? I agree with baa as far as I can see, but I'm not sure how that puts me in opposition to LB.


Posted by: SomeCallMeTim | Link to this comment | 05-21-07 12:06 PM
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I agree with baa

Wingnut.


Posted by: Clownaesthesiologist | Link to this comment | 05-21-07 12:08 PM
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but I've eaten there on trips, and on appearance and taste it's slightly higher-rent than McD's rather than the reverse.

So, so wrong. That calls everything you've ever said into question, including but not limited to affirmations of love for your children. JitB is much greasier that McD's.


Posted by: SomeCallMeTim | Link to this comment | 05-21-07 12:09 PM
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40. Actually LB there were able to trace the spinach back to the farm it came from, because although you may not see the brand, the wholesalers do. Think of the pretty orange crate labels that are so collectable now. Those weren't for the the consumer to see, but for the wholesaler.


Posted by: Tassled Loafered Leech | Link to this comment | 05-21-07 12:10 PM
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But there's nothing the consumer can do about that.

47: I don't think there's much against agreeing with both of us. Unless I'm misunderstanding, you could summarize the conversation as:

Post: Free Trade™ isn't always good -- there are problems with it sometimes.

Baa: But Free Trade™ is sometimes good, and tariffs are sometimes bad!

Me: Sure. But that means that you have to evaluate trade policies individually, rather than all under the assumption that Free Trade™ is always good.

Comparative advantage is a real thing, but it doesn't end the conversation.


Posted by: LizardBreath | Link to this comment | 05-21-07 12:14 PM
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Mmm. I'd only add that to the extent we are not able to evaluate all policies individually, if only for lack of either professional competence or time, I think baa and I are likely to default to Free Trade (TM). I suspect were baa and I disagree is that I think we should build a pretty strong welfare state using the gains from Free Trade.

And then we should declare war on Sweden. I think baa's with me on that one.


Posted by: SomeCallMeTim | Link to this comment | 05-21-07 12:20 PM
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And then we should declare war on Sweden.

Tim's only in it for the war brides.


Posted by: apostropher | Link to this comment | 05-21-07 12:22 PM
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44: What I meant is that e.coli contamination is a very real risk factor for all fast food outlets, and it's probably not that differentiable between them. The reasons you state are correct, but you have to note that this describes the majority of all beef cattle handling in the system, and that ground beef is just the worst case (due to surface area, etc) and lowballing on cost makes it even worse. All fast food chains seem to be pretty much in the same boat.


Posted by: soubzriquet | Link to this comment | 05-21-07 12:24 PM
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Unlike you, Apo, I have a keen sense of loyalty: I'm in it to avenge ogged's crumpled pride and broken heart.


Posted by: SomeCallMeTim | Link to this comment | 05-21-07 12:25 PM
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The individual consumer is not the only one with a vote. If a particular brand doesn't sell through, even if the end consumer can't differentiate, the wholesaler knows and will buy elsewhere. One reason why establish new products in the market is because of the very expensive real estate of shelf space at the market. New brands are sometimes charged "slotting fees" to move up or down the shelf. There is a reason Coke always has a big display at the end of the aisle.


Posted by: Tassled Loafered Leech | Link to this comment | 05-21-07 12:25 PM
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JitB is definitely lower rent than McDonald's. Don't be decieved by the fact that their menu has things other than burgers on it, or by the fact that it's something you don't see every day.

Not only did all those people die from E. coli, but the last time I got food poisoning it was from a chicken sandwich at JitB.

46: that's what you get for buying a product from MS.


Posted by: Jake | Link to this comment | 05-21-07 12:27 PM
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57: No way is JitB lower-rent than Mickey D's. JitB explicitly markets its shakes as made from ice cream, in marked contrast to most other fast-food chains, and they're one of the chains bringing what used to be yuppie food to the mass market. (I mean, ciabatta buns? No way that's lower-rent than McDonald's.)


Posted by: Josh | Link to this comment | 05-21-07 12:34 PM
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Unsurprisingly , I would gloss it somewhat differently...

On the specific case

If the reason Brazillian sugar is 10 cents cheaper is because it is 500-fold more likely than US sugar to be cut with rat poison, then yes, absolutely, it is problematic to regard that lower price as a benefit from free trade. Fully informed consumers would not make that trade. So in this case, I support LB all the way. What I doubt, however, is that for the (many, many) goods produced more cheaply outside of the US, consumer or worker protections often account for a substantial amount of the cost advantage.

I think the main difference is usually going to be wages. Here's where LB's minimum wage clarification was really useful. A 3rd world country is not usually going to be competitive in a service industry if it needs to pay 1st world wages. Or even if it would be competitive, it wouldn't be as competitive as it could be. India's average GDP per capita is ~$3700. This means there are lots of people who would benefit from a wage well below the US minimum. We can, of course, refuse to accept imports from any factory that does not pay the US minimum. Whether such a policy should count as 'worker protection' seems to me debatable. So it does seem that LB and I likely differ on a) what policies can correctly be described as consumer/worker protections, and b) the degree to which gains from international trade are overstated because the benefits of consumer/worker protections are ignored.

At the abstract level:

It is always tempting to say that policies with complex consequences should be evaluated case-by-case, but let me give reasons for resisting this temptation. Any policy will have pros and cons. The existence of pros and cons, however, does not preclude us from concluding that a policy is generally or overwhelmingly the correct policy. This is where one want to use an analogy, but in deference to ogged, I won't. Let me just say that just because we can think of costs to free trade, or benefits to tariffs does *not* mean we cannot proceed under the assumption (or, perhaps, with the strong bias) that tariffs are a bad idea. If free trade is almost always a plus, and tariffs are almost always a minus, we can indeed use those as our null hypotheses. And if we think case-by-case evaluation is likely to be costly, biased, or prone to error, then we may be better off with the broad assumption.

Whether free trade is an example of this, I don't know. I fear that we must inevitably decide on a case-by-case basis which broad issues to evaluate on a case-by-case basis...


Posted by: baa | Link to this comment | 05-21-07 1:13 PM
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Of course, we have professionals in government who devote their careers to evaluating trade deals on a case-by-case basis -- while it may be prohibitively timeconsuming for you and me to evaluate each possible tariff or other trade barrier on an individual basis for the purpose of having an opinion on it, it's patently not prohibitively expensive for the government to do so. For any given trade deal, the amount of money at stake is vastly greater than the salaries of the people needed to evaluate it.


Posted by: LizardBreath | Link to this comment | 05-21-07 1:22 PM
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60: right. this sort of thing scales well.


Posted by: soubzriquet | Link to this comment | 05-21-07 1:26 PM
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The sugar case is a particularly bad one, because the climate in the U.S. is simply dreadful for growing sugar. I don't think you need to be a moronically slavish follower of David Ricardo (like Tom "Things Labelled 'Free Trade' Are Always Good" Friedman) to think that it's laughable to have protectionist policies in place to encourage sugar to grow where it doesn't really want to grow. See also: ethanol.

60 - I think we should default to what Dr. Amelia Fletcher tells us, as she was in the best British band of the '90s and sang on some Wedding Present albums.


Posted by: snarkout | Link to this comment | 05-21-07 1:32 PM
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Plus, aren't all of the US sugar growers (or at least a large fraction thereof) objectionable anti-Castro lunatics?


Posted by: Jake | Link to this comment | 05-21-07 1:33 PM
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62: Agree about sugar, but isn't ethanol a very different issue? I mean, corn grows incredibly well here, particularly given the assumption of a modern industrial methodology. Problem is it's already completely subsidy based, and bumping up ethanol production from this source just raises food prices (and doesn't really help oil use, because the corn was dependent on oil too)


Posted by: soubzriquet | Link to this comment | 05-21-07 1:43 PM
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62/63: what is Hawaii's output like?


Posted by: soubzriquet | Link to this comment | 05-21-07 1:43 PM
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63. The brothers Fanjul are loathesome toads. I don't mind a little nuzzling at the government tit, but these guys have grown ridiculously fat. For a pop culture reference, Burt Reynolds seedy congressman in the underappreciated Demi Moore vehicle "Stripper" was in the pocket of the local sugar barons.


Posted by: Tassled Loafered Leech | Link to this comment | 05-21-07 1:44 PM
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I think we grow most of our sugar in Hawaii. I'm not sure what they think of Castro there.
One problem with trade policy is that US agriculture tends to take place in states w/ disproportionate levels of political representation, producing extra protectionism.


Posted by: foolishmortal | Link to this comment | 05-21-07 1:46 PM
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Corn grows well here, but at the moment corn isn't a particularly good source of ethanol; sugarcane stalks are apparently much better (both cheaper and more sustainable; plus, Brazil mandated that cars be fuel-flexible, so the chicken-and-egg problem about distribution was solved fifteen years ago.) There's a white paper on greenhouse gas impact from various forms of ethanol processing, but I believe it's largely focused on the North American market and looks at corn, with future switchgrass production mentioned in passing.


Posted by: snarkout | Link to this comment | 05-21-07 1:56 PM
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64

If I recall correctly it is much cheaper to make ethanol from sugar cane than from corn so it is only because of protectionism that we make ethanol from corn. Similarly with high frutose corn syrup, there is only a market for it because of restrictions on importing sugar.


Posted by: James B. Shearer | Link to this comment | 05-21-07 2:15 PM
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For any given trade deal, the amount of money at stake is vastly greater than the salaries of the people needed to evaluate it.

That's true, but I am unsure how important a point it is. When we consider imposing regulations X, Y, Z we need to ask if the process is costly, or prone-to-error, or biased, or prone to capture such that the benefits are unlikely to be positive vs. less regulation or no regulation.

I quite agree that the salaries of regulators is the very least of the concerns about a regime which determines the appropriate import tariff for goods on a category-by-category basis.


Posted by: baa | Link to this comment | 05-21-07 2:28 PM
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There's also transportation costs (not just the money involved, but also the energy output) for imported sugar cane ethanol. Another problem with ethanol is storage and refining. Apparently you can't mix ethanol into gasoline at the refinery because it likes to bond with water; you have to set up completely water-tight storage facilities near the distribution points and mix it in right before sale. That involves a giant overhaul of the infrastructure, and of course a lot of the local distribution centers are inevitably going to do a shitty job waterproofing their facilities, so there will be leaks. My dad, the oil refining engineer, is pretty cynical about ethanol, from whatever source.

(Caveat: all of this scientific stuff has been filtered through my highly unscientific mind. All errors are mine.)


Posted by: Jackmormon | Link to this comment | 05-21-07 2:30 PM
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67: Not true. There's beet sugar on the mainland and cane in Florida (maybe also elsewhere in the South?), and the Hawaii industry has contracted by probably 80%+ in the last 10-15 years. When I moved here in 1991 there was still lots of cane grown on Oahu. Now there's no cane at all here or on the Big Island and much less than there was on Maui and Kauai.


Posted by: DaveL | Link to this comment | 05-21-07 2:43 PM
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Another point: if you're concerned that corporate lobbying is in yr house, corrupting yr senators, it's not very sensible to give them something more to lobby for that's really, really valuable. In the US, tariffs are set by legislation - it's not obvious to me that the poor are going to be successful at lobbying Congress for protection on stuff they want, rather than Archer Daniels Midland, Microsoft, or the RIAA lobbying for tariffs on stuff they want.

And if you're concerned about inequality, surely it would be better to tax the rich? Tariffs on imports from (poor country) are, by definition, taxes on the poor - they just happen to be poor people somewhere else.


Posted by: Alex | Link to this comment | 05-22-07 4:10 AM
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Isn't that an argument against having the government do anything? Sure, whatever action government takes is subject to capture by interest groups. I don't see why that's a reason to knee-jerk assume that whichever policy option is labeled "Free Trade" is the better one, rather than looking at each decision on its merits, to see whether this particular action is a good or bad idea in terms of protecting consumers and so forth.

Tariffs on imports from (poor country) are, by definition, taxes on the poor

Not 'by definition', and really not always in practice.


Posted by: LizardBreath | Link to this comment | 05-22-07 6:16 AM
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Er, yes. If you assume that "trade" happens only with poorer countries (dubious assertion, but it seems you do), taxing their exports is, well, a tax on a poor country's exports. Taxing cigarettes is a tax on cigarette producers - it makes their product more expensive relative to everything else. Taxing (poor country)'s exports is a tax on (poor country) - it makes their products more expensive relative to everything else. Making cigarettes more expensive is meant to make people smoke less - making imports from (poor country) more expensive is meant to make people buy less of them.

This is going to reduce (poor country)'s income, unless they can sell as much stuff at the same price or better elsewhere - in which case, they wouldn't have been selling you so much stuff in the first place, no?

There seems to be an assumption here that because the IMF's idea of free trade was crap for various poor countries, and some poor countries (South Korea, Taiwan, etc) got rich by doing the opposite, this can be generalised to the US. Somehow, US protectionism will be good for Brazil, say. It's really, really stupid. I can certainly think of countries that got less poor while operating tariffs on imports. I can't think of one that got rich because someone else put a tariff on its exports!

But this is precisely the problem. Every import is somebody else's export. If you think about it, South Korea (say) was effectively receiving a sizable transfer payment from the rest of the world by selling masses of stuff to free-trading countries while practising protectionism towards their exports. This was a cracking deal for them, but I see no reason why the United States needs development aid from the rest of the world. And, not being a US citizen, I see no reason to offer it.

Further, even if the benefits from exporting for (poor country) mostly go to the rich within that country, absolute numbers count. Mr Tycoon won't notice a 20 per cent drop in his profit margin, but 20 per cent of his employees' wages means a shitload more to them. I am very unkeen on the idea of a welfare state at the expense of the global poor, to say the least. There is quite enough money in the city of Chicago to make a rather good one.


Posted by: Alex | Link to this comment | 05-22-07 7:15 AM
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I'm not sure precisely what we're disagreeing on. I'm not interested in using tariffs as a means of transferring wealth from poorer countries to the US. I am interested in pointing out that (1) there are circumstances where the lower costs of imports from poorer countries reflect practices dangerous to US consumers, and trade policy is one way of dealing with that, and, while I didn't really address this in the post, that (2) it is not impossible that trade policy can be used for leverage to improve conditions for overseas workers. As you note, income to poor countries isn't equivalent to income to poor people, and there's nothing impossible about using trade policy as an incentive for more redistributive policies (worker safety laws, rights for organized labor, and so forth.)


Posted by: LizardBreath | Link to this comment | 05-22-07 8:13 AM
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Given the use of capital goods and a positive rate of interest, the theory of comparative advantage doesn't justify "free" trade anyway.


Posted by: Robert | Link to this comment | 05-22-07 3:45 PM
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