Friday, July 1, 2016

This is What Negotiated Trade Looks Like

A joint statement was issued yesterday by Canadian Prime Minister Justin Trudeau and President Obama.

The statement concerned negotiations on a trade deal for softwood lumber.

If you have ever wondered why so-called free trade arrangements take so long to complete and seem to require pages and pages of trade details, it is instructive to examine the statement put out by Obama and Trudeau.

First, they tell us this:
 Given the great importance of the softwood lumber industry to the economies of the United States and Canada, on March 10, 2016, we instructed the United States Trade Representative and the Canadian Minister of International Trade to intensively explore all options and report back on the key features that would address the issue.
In response to these instructions, our Ministers and their teams have been meeting diligently on softwood lumber over the past three months. These discussions have been challenging but productive.
Then they pretty much tell us that what they are really negotiating is a crony deal:
 The U.S. and Canadian federal governments have made significant advances in understanding our industries' sensitivities and priorities since March...
A new softwood lumber agreement will need to reflect the realities of Canadian timber management policies and the U.S. domestic market. A new agreement must be equitable and provide a predictable business environment that gives producers on both sides of our border the ability to react confidently to changing market conditions. Any agreement must deliver a durable and equitable solution and benefit softwood lumber producers from Canada and the United States, related industries and consumers, and support the overall economic well-being of both countries.
Then it is down to the nitty gritty  of the protectionist aspects of the developing deal:
Efforts to achieve such an outcome will be facilitated by focussing on the following key features:

an appropriate structure, designed to maintain Canadian exports at or below an agreed U.S. market share to be negotiated, with the stability, consistency and flexibility necessary to achieve the confidence of both industries; 
provisions for region or company exclusions if justified;...

provisions to ensure information collection and exchange to create meaningful transparency;
institutional arrangements to administer the agreement;
effective enforcement tools that are neutral, transparent, binding, expeditious, and well-timed to address concerns as they arise;...

provisions to address other issues, such as product scope, remanufacturers and joint market development
These aren't "free trade" deals that are being negotiated. They are protectionist deals that favor the well-connected.

The full statement is here.



  1. Since there is no free trade, only managed trade, why are you hating on Trump for promising managed trade agreements that are in America's favor?

    1. Pointing out that managed trade deals run counter to free trade doesn't imply that free trade can't exist. Free trade could easily be established by dismantling the crony trade deals and replacing them with nothing.

      Trump's protectionism is anything but "in America"s favor", unless you want an authoritarian strongman depriving Americans of access to low-cost goods.

    2. Strawman, and not even a good one. Typical. The "free trade" deals are often one sided, with low tariffs or no tariffs on our side, and high tariffs on their side, which means that our businesses can't compete in their markets. Threatening tariffs is a demand to get them to open their markets to us.

  2. Free trade is incompatible with national sovereignty. This is something a few leading libertarian lights are starting to get. Tom Woods, after moderating the great free trade debate between Vox Day and Robert Murphy is one. Gary North is another.

    No less a personage than Karl Marx himself was a major advocate for free trade. Why? As mentioned above, because free trade as people like Wenzel advocates is incompatible with national sovereignty.

    The free trade/managed trade argument is a canard. It is a classic No True Scotsman defense.

    Argument against Free Trade #1
    Free trade hasn't made USA wealthier because USA is less wealthy. 50-year GDP +15x. Total Debt +34x.

    Argument against Free Trade #2
    Comparative Advantage doesn't add up when demand curves are not stackable, as proved in 1953 by Gorman. [Robert, your continued spouting of this easily disproved assertion is getting tired.]

    Argument against Free Trade #3
    To realize benefits, free trade requires labor mobility that would force 50% of young Americans to emigrate.

    Argument against Free Trade #4
    The alternative to tariffs is not no taxes, but more intrusive and economically disruptive income taxes.

    Argument against Free Trade #5
    As Mises himself admitted, the argument for free trade is identical to the argument for open immigration.