July 28, 2005

• Oops, that's 52 minutes. Enjoy, kiddies! Do give it a listen, it's amazing...
• Good, bring it on. The sooner we finish the race to the bottom, the sooner this shit will be done with.
• "But in another sense, it's meaningless because CAFTA wasn't passed on its merits but on side deals and arm-twisting." Goodness gracious! Still, I think this is pretty good law. The benefits of free trade are legion, especially for the smaller, poorer countries who have historically had their exports priced out by high tariffs and subsidies, and in addition it frees up travel, shares culture, improves communication and ultimately, improves understanding between men and, ultimately, countries. I checked the Stop CAFTA link, but I can't find any real charges against CAFTA that aren't either VERY speculative or wild hyperbole (i.e. "hundreds of thousands of unemployed Canadians and Mexicans due to NAFTA"). world government by global corporations But I think someone's having a bit of fun, though :)
• Here in Canada, there were many doomsday predictions from opponents of NAFTA and it's precursor, the Canada-US Free Trade Agreement. We were told that Canada's automobile industry would disappear (it hasn't...it's actually improved). We were told that Canada's wine industry would die (it hasn't...the FTA forced the industry to increase quality and as a result the industry is very strong). We were told that Canada's social programs, like Medicare, would be eradicated (they haven't). In fact, since NAFTA, Canada has gone from severe government deficits to several years of surplus budgets. It's currently the only major world economy to be running a budget surplus. I'm all for limiting the power of corporate influence over public policy, because in many cases big corps need to be reined in a little, but I've yet to see any evidence of why freer trade is bad for anybody except big unions (who could do with a little reining-in themselves). Is there something in CAFTA that makes it worse than NAFTA? Or is this just the same noise from the big unions and anti-capitalists? On preview...what Fes said.
• cafta + nafta = caftan
• One of the things we heard in the NAFTA debate in Canada was this "race to the bottom" idea. The thought being that the cheapest labour wins. Turns out it's a little more complicated than that. The recent best example is Toyota deciding to build their brand new auto factory here in Ontario. We beat out cheaper competing sites in the Southern U.S. The main reason: our highly educated workforce. Free trade and social spending are not mutually exclusive.
• but I've yet to see any evidence of why freer trade is bad for anybody except big unions (who could do with a little reining-in themselves) Unions represent maybe 8% of American workers today. You can make all the comments that you like about the need to rein in unions, but ever since the Taft-Hartley Act of 1947 cut them off at the knees they've been a shadow of their former selves. I've never understood the anti-union vitriol in this country. Unions are the main reason that we have had pensions, a 40-hour workweek, child labor laws and compulsory public school education, and a host of other benefits that so many people seem to take for granted. They'll never regain the strength they had in their heyday (thanks to laws like Taft-Hartley and the "right-to-work laws" in many states), and yet I think we may just need them more than ever right now.
• the_bone: The vitriol comes from years of anti-Union propganda causing an unquestioning acceptence of the idea unions are eeeeeeevil. One of the points I'd make about the success of NAFTA is that all the participants are reasonably functional democaracies. In that context, free trade is, I think, generally going to work well. Where free trade does turn into a race to the bottom is when non-free societies participate. If you shift your factory to Canada or Mexico, people who have the right to free association and voting will be able to raise pay and conditions as demand for their labour increases, and there'll eventually be an upward-reaching equilibrium reached with the wealthier nations involved in the exchange. Conversely, when partnering with countries like China or Myanmar, you're dealing with a slave populace. The cages in China may be comfortable, but, at the end of the day, Chinese citizens do not have the right to form a union to buck for better pay, or to demand difference environmental laws or working conditions backed by the government. The national government decides what policies will be most advantegeous, and that's the way things go. And that's where the race to the bottom comes from.
• The reason why unions are a former shadow of themselves is largely that they've lost touch with the modern day work world. They haven't been able to demonstrate their usefulness to the non-unionized worker. Unions were instrumental in improving work conditions in the past, but when employers decided to smarten up and improve conditions by themselves, unions lost the moral high ground. Instead unions are seen as just another interest group. They do still fulfil an important role though, i.e. the threat of unionization helps prevent backsliding by employers.
• the_bone, rocket88 is a Canadian. Your links don't really apply to his point.

• I've yet to see any evidence of why freer trade is bad for anybody except big unions

  some development economists would argue that free trade traps weaker economies into producing goods that stronger economies demand but at unfair terms. this idea relies somewhat on historical views of economic development - the world's rich economies grew rich partly in the context of protectionism - and somewhat on theories concerning comparative advantage. at a very basic level, the suggestion is that the north exploits the south by trapping developing economies into producing commoditized agricultural goods while selling machinery/other technology into those economies.
• Many economists, probably most, would argue that government subsidies, not freer trade, are to blame for the commoditization of argricultural goods. First world countries, especially in the EU, but also the United States and others, heavily subsidize the argriculture industry.
• I'm not exactly a right-wing kook, and I find that I have a bit of a negative knee-jerk reaction to unions. Part of it is that the only time you hear about them is when they're going on strike, and more often than not they're goverment workers making more than you are in jobs they can't be fired from providing services the rest of us can't live without like public transit or garbage collection. I think unions have a place when the government is right-wing and pro-business. But when the government and the unions are in collusion it's good for them and bad for the rest of us, just like when the government and big business are in collusion.
• so the maples formed a union/ and demanded equal rights/ they said the oaks are just too lofty/ and they grab up all the light/ but the oaks cant help their feelings/ if they like the way they're made/ and they wonder why the maples/ can't be happy in their shaaaade!
• *applause* for the Dr!
• smo, i take your point, but there are few government subsidies in first world countries for the production of tropical fruit, such as bananas. this is the sort of commoditized agricultural good i was thinking about, i.e. ones that developed economies require but cannot produce. at a basic caloric level, the european union and the u.s. are essentially agriculturally self-sufficient, but there are several foodstuffs that cannot be cultivated in either area. it is specifically in these areas that developing economies run the risk of becoming trapped into a low-value export/high-value import trade cycle.
• Where free trade does turn into a race to the bottom is when non-free societies participate. This really depends on the ruling clique. South Korea and Singapore were not all that democratic during their export-driven boom years in the 60s and 70s. Their governments largely had the best interests of their citizens in mind and that made things turn out alright. But even if the government is a kleptocracy, (Nigeria comes to mind) a race to the bottom is not necessarily in the cards. If you were a multinational (other than Shell) would you be rushing to invest in Nigeria right now? Citizen unrest, corruption and social squalor just isn't good for business. Low wages is just part of the decision matrix. More important is productivity. Last year there was a big noise about North America losing software jobs to India. But the lastest stats show software employment increasing here because when you factor in everything (training, quality, cultural knowledge) it just makes sense to keep the jobs in North America.
• Funny you should mention bananas.
• coming back to smo's point, i've been thinking that this:

  Many economists, probably most, would argue that government subsidies, not freer trade, are to blame for the commoditization of argricultural goods.

  doesn't really make sense. most or all economists will argue that "commoditization" (being the making of something into an almost generic thing and therefore tradable commodity) is dependent upon free trade and has little or nothing to do with government subsidies.
• I meant to use "commoditization" in the negative sense. That is, as a result of low differentiation between a type of good, the good is devalued to a price roughly equal to the marginal cost, and so it becomes very difficult to make a profit on the sale of that good. In this context, my point makes more sense. Agricultural subsidies create excess supply. This leads to artificially low prices on the world market. Developing countries depend on agriculture to a greater extent than developed ones and so, obviously, this hurts them the most. Absent these subsidies, developing countries could sell their food for the true market price, not the distored one, and their farmers could make more money, pump it into the local economy, and begin the process of economic modernization.

• Funny you should mention bananas.

  no, i mentioned bananas because they're a particularly interesting case: eu/u.s. banana trade war to vastly simplify my original point: developed economy:we rather like bananas less-developed economy:oh, we can make those developed economy:we'll buy whatever you can make, and with the money we pay, you can buy tractors and fertilizer to produce more bananas less-developed economy: okay, that'll be one bushel of bananas for one bag of fertilizer? developed economy: ah, no. we can get a bushel of bananas from those other banana producers for half a bag of fertilizer. less-developed economy: oh, okay. but maybe you could teach us how to make tractors? developed economy: yes, in time, in time. don't want to run before you can walk. and anyway, with the magic of free trade it's cheaper for you to buy tractors from those who have already made them than to spend the time developing tractors all by yourselves. less-developed economy: so how much for a tractor? developed economy: well, as we're friends (you're a preferred supplier), let's say 20,000 bushels of bananas. less-developed economy: but that's like 25% of a year's production!!! developed economy: but we'll buy all of the extra bananas that you produce...

• Absent these subsidies

  and we are dependent upon peaceful relations among (most) nations to feed our nation's people... at the end of the day, this is the crux of the matter. i'd love to say that it's no longer important, but to be honest i think it's more important now than ten or fifteen years ago :-(
• World-wide banana production ranked by country. You'd be surprised who #1 is. Ecuador is a big player. But Africa doesn't even show up on the top 10. Other sources seem to indicate though that African exports to EU seem to be increasing in recent years....