Trade Remedies and US Competitiveness

Today Cato's Dan Ikenson published a new paper on the US antidumping law and American competitiveness.  Here's the paper's setup in Ikenson's Forbes op-ed on the same subject:

During the decade from January 2000 through December 2009, the U.S. government imposed 164 antidumping measures on a variety of products from dozens of countries. A total of 130 of those 164 measures restricted (and in most cases, still restrict) imports of intermediate goods and raw materials used by downstream U.S. producers in the production of their final products. Those restrictions raise the costs of production for the downstream firms, weakening their capacity to compete with foreign producers in the United States and abroad.

In all of those cases, trade-restricting antidumping measures were imposed without any of the downstream companies first having been afforded opportunities to demonstrate the likely adverse impact on their own business operations. This is by design. The antidumping statute forbids the administering authorities from considering the impact of prospective duties on consuming industries—or on the economy more broadly—when weighing whether or not to impose duties.

That asymmetry has always been insane, but given the emergence and proliferation of transnational production and supply chains and cross-border investment (i.e., globalization)—evidenced by the fact that 55% of all U.S. import value consists of raw materials, intermediate goods, and capital equipment (the purchases of U.S. producers)—it is now nothing short of self-flagellation.

Here's my favorite part:

If you need more evidence that the antidumping status quo is weighted heavily against import-consuming U.S. industries, consider this gem: three of the nine mineral raw materials that are the subject of the U.S. case against China in the WTO (magnesium, silicon metal, and coke) are simultaneously subject to U.S antidumping restrictions. That’s right! With our own import restricitons firmly in place, the United States is suing China to remove its export restrictions on the same products. That sounds like an excellent use of resources.

And here's the paper's basic conclusions:

The NEI should include a serious commitment to antidumping reform. At a minimum, consuming industries should be given legal standing to participate fully in antidumping proceedings, antidumping measures should be rejected if the projected costs of those restrictions on those firms and on the broader economy exceed some reasonable threshold, and any duties applied should not exceed the level found necessary to remedy injury to the petitioning domestic industry.

Be sure to read the whole thing here.

Two TAA Thought Experiments

Richard Epstein's typically insightful comments on TAA got me thinking more about the abject irrationality of a special program that compensates workers for economic activity (free trade) that overwhelmingly benefits the nation as a whole.  As you'll recall, Epstein wrote:

So conduct this little thought experiment: what would be the state of play in the United States if every time a new firm opened up in one state it was required to fund trade assistance for workers at other firms who lost their jobs as a result? The need to compensate incumbent workers would drive out all new firms, and thus entrench inefficient firms in a near monopoly position. It is for that reason that the proper response is always to ignore these losses, and to deal with the question of unemployment through a generalized system of unemployment insurance that, of course, has massive difficulties of its own.

The "international-versus-intranational protectionism" thought experiment is a favorite of AEI's Mark Perry (among others), and he frequently applies it, with great effect, to demonstrate that protectionism across national borders is just as harmful and irrational as protectionism across state (or county or city or neighborhood) borders.

So it got me thinking: if TAA is, as its advocates in the White House and Congress routinely claim, an absolutely essential "core value" of American trade and economic policy, then why don't we have state-level TAA when, say, freely traded imports of Florida oranges into New York end up putting the Empire State's nascent orange growers out of work, or when imports of South Carolinian BMWs displace Michigan autoworkers?  I mean, if we need to compensate workers due to import competition across national borders, then why don't we do the same thing across state and local borders?

Because it's clearly a ridiculous policy, that's why.  (I know, I know, I shouldn't give our politicians any ideas.)

Perry often demonstrates this ridiculousness by creatively converting a news story on barriers to international trade into one on barriers to intranational trade.  I haven't seen Perry do one on TAA, so with apologies in advance for stealing his awesome idea, I think a simple example is in order.  Here's a sympathetic article on Sen. Sherrod Brown's (D-OH) fight to extend TAA back in February.  Now let's re-imagine the story with state-level TAA (STAA) based on free trade among the US States:

One Ohio lawmaker plans to make the extension of a program that benefits Ohio workers displaced due to free trade among the American states one of his top priorities during this congressional session, according to The Youngstown Vindicator.

Sen. Sherrod Brown (D-OH) plans to begin lobbying fellow members on an extension of state trade-adjustment assistance benefits, which provides Ohio workers displaced due to trade with other American states with reemployment assistance and training, income support and job search and relocation allowances.

Brown said that STAA benefits are “lifelines for tens of thousands of Americans Ohioans who, through no fault of their own, lost their job or their pensions and health-care benefits due to imports of goods and services from places like New York, Alabama and California.” 

With a new Republican majority in the House, however, Brown acknowledges that it will be an uphill battle....

Passing an extension of STAA benefits would be a good step toward helping those Ohio workers that have fallen on hard times due to America’s failed state-level trade policies. But to continue with those trade policies at a time with unemployment already hovering around 10 percent would be foolish.

“We can’t pass trade agreements allow imports from other US states that undermine Ohio workers, and then turn our backs on those workers when they lose their jobs,” Brown said.

Pretty silly, isn't it?  As Americans, we inherently understand the benefits that state-level import competition and specialization bring our economy, so we naturally reject policies to inhibit such helpful economic activity, despite the fact that it necessarily causes some job losses along the way.  But when we move beyond US borders, our brains shut off and the government meddling and handouts begin.

But, hey, let's not stop there and instead conduct another thought experiment to further reveal the irrationality of both TAA and the Obama administration's current TAA/FTA demands.  As economists like Cafe Hayek's Don Boudreaux frequently note, the beneficial job churn associated with import competition is no different from that associated with technology gains:

Would it have been appropriate, for example, for the White House to prevent Americans from buying iPods and Kindles until and unless Congress funded the retraining of workers who lost their jobs at Tower Records and Border’s? Should government have stopped automakers from improving the quality of their vehicles until and unless the public fisc was tapped for funds to retrain auto mechanics and tow-truck drivers? Ought government restrict consumers’ access to Lasik surgery until and unless taxpayers pay to retrain workers who make eyeglasses, contact lenses, and saline solution?

In short, people lose jobs due to import competition and they lose jobs due to new technologies (a lot more of the latter than the former, by the way), and while those job losses are obviously tough for the affected workers, American society as a whole is clearly better off by letting the free market work.  So why do we treat globalization so differently than mechanization?  Boudreaux reasons that it's because "the only thing unique about international trade is its ability to be demagogued by politicians seeking votes from the economically uninformed," so let's go back to that Sherrod Brown TAA article and help inform the distressingly-large group of uninformed Americans with a little more creative editing:

One Ohio lawmaker plans to make the extension of a program that benefits workers displaced due to free trade robots and other innovations one of his top priorities during this congressional session, according to The Youngstown Vindicator.

Sen. Sherrod Brown (D-OH) plans to begin lobbying fellow members on an extension of robot trade-adjustment assistance benefits, which provides workers displaced due to trade new technologies with reemployment assistance and training, income support and job search and relocation allowances.

Brown said that RTAA benefits are “lifelines for tens of thousands of Americans who, through no fault of their own, lost their job or their pensions and health-care benefits due to robots or other innovations.” 

With a new Republican majority in the House, however, Brown acknowledges that it will be an uphill battle....

Passing an extension of RTAA benefits would be a good step toward helping those that have fallen on hard times due to America’s failed mechanization trade policies. But to continue with those trade policies innovating and modernizing at a time with unemployment already hovering around 10 percent would be foolish.

“We can’t pass trade agreements create new technologies that undermine Ohio workers, and then turn our backs on those workers when they lose their jobs,” Brown said.

Hopefully after we've conducted these thought experiments it's easier to see why the White House stance on TAA - i.e., it is the multi-billion dollar price that America must pay to get new, economically-beneficial trade agreements with Panama, Korea and Colombia - is so distressing.  It would be patently offensive and irrational for the President to block intrastate trade or to prohibit further technological advances until Congress agreed to fund workers allegedly displaced by that trade/mechanization, and it's just as offensive and absurd for the White House to do it for international trade and TAA.

Yet here we are.

Man Charged With Assault After Shooting, Stabbing Adult Bookstore Clerk:

Brian Lloyd Jacobs (mug shot GCSO)

A thirty nine year-old man is behind bars in Greene County after allegedly shooting and stabbing a clerk at an adult bookstore in west Springfield yesterday (05-28-11.)

Prosecutors have charged Brian Lloyd Jacobs with assault, robbery and three counts of armed criminal action.

Deputies say Jacobs got into an altercation with a clerk, who was shot in the hip and stabbed four times, at Paradise News and Arcade as he attempted to steal items from the store

Jacobs is being held in the Greene County jail on $200,000 bond and will be formally arraigned when court resumes following the Memorial Day holiday.

Richard Epstein on Fair Trade and TAA

It's not too often that one of my law/policy idols writes on trade issues, so when Professor Epstein does, he gets his own blog post.  In his usual clear-and-brutal manner, Epstein dismantles the White House's Trade Adjustment Assistance demands and the case for "fair trade" more broadly.  Here's the best part, but the whole thing is definitely worth reading - twice:

So conduct this little thought experiment: what would be the state of play in the United States if every time a new firm opened up in one state it was required to fund trade assistance for workers at other firms who lost their jobs as a result? The need to compensate incumbent workers would drive out all new firms, and thus entrench inefficient firms in a near monopoly position. It is for that reason that the proper response is always to ignore these losses, and to deal with the question of unemployment through a generalized system of unemployment insurance that, of course, has massive difficulties of its own.

We have to take the same approach to international trade that we take to domestic trade. Those individuals who lose their jobs to foreign competitors are no better off than those who lose them to domestic competitors. These people should receive the same level of assistance, no more and no less.

In this universe of free trade, compensation takes place in a system-wide fashion, as the increased opportunities for labor help all workers alike, including those who have no jobs at all, those who lose their jobs, and those who hope to advance by finding better jobs for themselves. What is so tragically short-sighted in the Obama administration is that it is willing to sacrifice these systematic gains in favor of a tax-driven subsidy program that reduces all possibilities of gains from trade across the boards.

Given the Obama administration’s logic about trade assistance, it is fair to ask whether he and his union supporters are prepared to offer trade adjustment assistance to those nameless individuals whose own job prospects have been rendered bleaker by the president’s refusal to put these bilateral trade agreements to an up or down vote.

His answer would, of course, be in the negative, but for the worst of all possible reasons. Politicians don’t respond to real losses suffered by diffuse individuals who find themselves unable to organize interest-group pressure on their behalf. But these people should not be forgotten in the shuffle to hand out political goodies to the president’s allies.

Instead of getting lost in these political diversions, we should keep our gaze firmly on this central truth: the larger the expanse of the market, the greater the competitive forces everywhere within the system. More product, higher wages, and greater growth are the predictable consequences of a system that lets capital and labor flow to the areas of their higher use. As overall unemployment rates remain stubbornly high, I am hard pressed to think of any counterargument to free trade that is inconsistent with this fundamental insight: free trade leads to economic growth.

Man, that's just plain excellent.

(h/t Don Boudreaux)

Friday Quick Hits (UPDATED)

Here's some light beach reading for your hopefully-sunny Memorial Day weekend:

• Friday Night News Dump, Holiday Weekend Edition: Treasury once again declines to cite China as a "currency manipulator."  Key line from the new report: "Because inflation in China is higher than it is in the United States, the RMB has been appreciating more rapidly against the dollar on a real, inflation adjusted basis, at a rate of around 9 percent per year."

• Cato's Sallie James explains perhaps the biggest reason why free traders should loudly object to the Obama administration's new demand that the price for its submission of pending FTAs with Korea, Colombia and Panama is expanded Trade Adjustment Assistance.  Key line: "What we have here is a reversal of the grand bargain on trade liberalization, that gave extra welfare to workers who lost their job because of freer trade in exchange for support for trade agreements that lowered trade barriers. That ‘grand bargain’ has been tenuous for years now, of course — witness the complete lack of movement on the trade agreements even after the 2009 enhancement of TAA, at least until recent months.  But now, rather than using TAA to buy votes for trade liberalization, the administration and their allies appear to using pretty-much-assured votes for trade liberalization to buy TAA.  As a Wall Street Journal editorial said on Friday, it’s extortion."  I have a little more on this issue in my comments to this post (and, yes, I stole "grand bargain" from Sallie).

• Frank Stephenson notices that "Peter Morici, Lou Dobbs's favorite China bashing economist and an advocate of taxing China to 'bring back US jobs,' has become a pitchman for Kyocera copiers.  And guess where Kyocera copiers are made?  The company has one plant in China and two in Japan."  Am I the only one who's totally unsurprised by this?

• Microsoft's Steve Ballmer denounces "rampant" Chinese software piracy... IN CHINA.  The Middle Kingdom's IPR enforcement problems certainly aren't new, but I can't recall a major CEO so openly discussing them on Chinese soil, can you?  Interesting stuff.

• Although I tend to focus on import benefits here, this great new IBD editorial reminds that exports are pretty great too, and our FTAs certainly help increase them.

• Cato's Dan Ikenson takes the Washington Post's Andrew Higgins to the woodshed for missing the real story behind the US antidumping order on wooden bedroom furniture from China.  Money quote: "At the time this case was initiated, the same U.S. furniture producers who were petitioning for relief from imports from China were investing in furniture operations in other countries. There’s nothing illegal or objectionable about investing in foreign production, but the assertions of the petitioning U.S. producers that their aim was to restore U.S. production and U.S. jobs were clearly false. It is testament to the laughably modest standards for finding a domestic industry injured by reason of dumped imports that duties were ever imposed in the furniture case."

• GOP Presidential Candidate Tim Pawlenty signals a willingness to support reform of America's awful ethanol policies... IN IOWA.  Given the location, this does qualify as somewhat brave.  But, as Brian McGraw explains, let's not go giving Pawlenty the Congressional Medal of Honor just yet. [UPDATE: Meanwhile, Mitt Romney loooooves him some cornfuel.]

• The Kauffman Institute surveys top economics bloggers about US federal government policies, and guess what got the most support?  (Shocking, I know)

Have a great, long weekend, and remember: apply sunscreen 30 minutes before laying out.  It needs time to soak in!

Politix Can Make You Stoopid

It's often said that "politics makes strange bedfellows," but after yesterday's Senate Finance Committee hearing on the US-Panama FTA, I think you could safely add that it makes otherwise-smart people sound really, really dumb.  National Journal (no link - sorry) provides the latest proof:

A top administration trade official testifying Wednesday on Capitol Hill was short on specifics about how many American jobs, if any, could be lost because of a free-trade agreement with Panama.

Appearing before the Senate Finance Committee, Ambassador Miriam Sapiro, deputy U.S. Trade Representative for Europe, the Middle East, and the Americas, demurred on the question of which jobs would be lost and from what part of the economy they would come if the pact is ratified. The discussion was dominated by the Obama administration's renewed push to extend Trade Adjustment Assistance programs to help such workers.

Pressed on the jobs question repeatedly by Sen. Orrin Hatch, R-Utah, Sapiro became visibly frustrated.

“I don’t have an estimate for Panama,” she said, before adding that TAA is a “core value.”

Hatch pointed out that the Panama agreement, combined with pending Colombia and South Korea pacts, would bring an estimated $13 billion in business to the United States.

“Everything I’ve looked at says we can create jobs if we do these three trade agreements,” Hatch said. “What is there about this free-trade agreement that is going to cost any jobs?”

The federal Trade Adjustment Assistance program helps U.S. workers who have lost their jobs as a result of foreign trade through initiatives like job training and relocation allowances. The administration has tied renewal of the program to the three pending trade agreements going forward.

Sapiro told lawmakers that “a robust renewal of Trade Adjustment Assistance is so vital” and noted that the Obama administration “fully want[s] to see TAA restored in a manner that benefits those” workers displaced by trade.

So to recap: the Obama administration is loudly demanding that FTAs with Panama, Colombia and South Korea proceed through Congress with TAA - a program which is specifically designed to help American workers harmed (allegedly) by international trade. The White House thus has expressly and proactively linked the pending trade agreements to a policy that mitigates their (again, alleged) harms, but when asked to simply quantify these harms, the White House's spokesperson (DUSTR Sapiro) instantly sounds like a babbling doofus.

Smooth.

And look, it's not like Hatch is playing politics here (well, at least not entirely).  The inherent contradictions of the White House's TAA-FTA stance couldn't be more obvious to anyone paying the least bit of attention, regardless of his or her politics.  Folks who support free trade instantly noticed; for example, the editors at Investors' Business Daily stated:

Three days ago, U.S. Trade Rep. Ron Kirk in testimony before Congress described free trade as a job-creating machine. 'Continued growth in agricultural exports depends on accessing new markets for America's farmers and ranchers and ensuring their continued access to existing markets,' he told the House Agriculture Committee. Now, suddenly, it's a job killer.

Not to be outdone, the anti-trade left also cried foul (albeit for unsurprisingly different reasons):

While White House officials are claiming that a trio of pending trade pacts will result in job creation, they have tacitly revealed that they know the opposite to be true by the actions they have taken in recent days.

The fact that the president is demanding the extension of Trade Adjustment Assistance before sending bilateral free trade agreements with Colombia, Panama and South Korea to congress is a pretty good indicator that he’s aware of the consequences, according to David Sirota, writing at Salon.com.

“The administration is simultaneously selling the trade deals as engines of job growth while admitting that the deals will likely kill so many American jobs that Congress must preemptively cough up money to clean up the corresponding economic wreckage,” he writes.

Awesome.  So if both pro- and anti-trade groups immediately noticed the absurdity of the White House's FTA/TAA demands, you'd think that USTR would have some sort of canned response all ready to go when someone like Sen. Hatch dared to ask the blatantly obvious, right?

Wrong. 
Then again, I guess Sapiro had no choice but to dodge because she couldn't just respond with the truth, like: "Well, Senator, we don't have those numbers because, quite frankly, our TAA demand has nothing to do with these economically beneficial FTAs and instead is simply a political payout to one of our favorite and most powerful supporters, as well as a shrewd way to split the GOP and get congressional Republicans on the record as supporting a big chunk of the Stimulus*.  Sorry."

(Although that would've been awesome.)

And, hey, it's certainly not like Sapiro's the first smart White House official to magically lose a few dozen IQ points when confronted with the obviously problematic results of her boss' cynical political decisions.  Indeed, former CEA Chair Christina Romer became kinda infamous for her valiant-yet-futile attempts in 2009 and 2010 to defend her boss' ridiculous claims about the mythical job-creating effects of the Stimulus* (see, e.g., this hilarious video).  So Sapiro's certainly in good and plentiful company.

Of course, she and her bosses could've avoided this silly dance (and the continued delay of GDP-expanding FTAs that were completed and signed about 4 years ago) if they had just put politics aside for a split second, followed their own advice about these trade agreements and free trade more broadly, and submitted the FTAs to a Congress that had already indicated an overwhelming desire to approve them as soon as possible.  But that would have meant, you know, expending an iota of political capital to confront US labor unions and the ever-expanding protectionist wing of the President's own party.

And I guess anyone who expected this White House to actually do that is the real doofus, eh?

(h/t Andy Roth)

Springfield Man Found Guilty Of Drunk Driving Crash That Killed Elderly Man:

Jeremy W. Arata (mug shot GCSO)

A Springfield man has been convicted of involuntary manslaughter for a 2007 drunk driving crash that killed an elderly man.

After three hours of deliberation a Greene County jury found twenty three year-old Jeremy W. Arata, 23, guilty today of slamming his car into seventy eight year-old Paul Fain's vehicle as he pulled away from a stop sign at Weller and Dale on November 15, 2007.

 

 

Fain was killed in the car crash (courtesy of KOLR/KSFX)

 

Court records say Arata's vehicle had at times reached speeds of 60 m.ph. in the residential area before the crash and the man's blood alcohol level was .146% - .08% is the legal limit in Missouri.

 

Arata, who already has a drunk driving conviction and is on probation for leaving the scene of an accident, faces between five to fifteen years behind bars when he is sentenced on August 5th.

Documenting the Typically Unseen Victims of US Protectionism

One of the reasons that anti-trade policies prevail in spite of the ample economic and moral arguments against them is that the benefits of protectionism are concentrated and seen, while the costs are diffuse and unseen.  For example, when our politicians are mulling the imposition of tariffs on steel, it's easy for them to identify the few US steelmakers and workers who will benefit by a large amount, while it's harder to predict the many, many American steel consumers (and, in many cases, their workers) who are harmed in smaller-yet-equally-real sums.

This classic public choice dilemma has confounded free trade advocates for decades, and it's why surveys like the one recently conducted by the Coalition for GSP are so important for not only the debate about renewing the Generalized System of Preferences program, but also educating American citizens and policymakers about the very real harms that anti-trade policies inflict on American families and businesses.

As you'll recall, GSP and the similar Andean Trade Preferences Act (ATPA) expired at the beginning of the year due to a classic case of congressional ineptitude and backroom dealing.  Once the program expired, GSP-eligible imports from developing countries that used to enter the USA duty-free immediately became subject to tariffs.  Thus, American importers and consumers were immediately hit with a new tax - totaling hundreds of millions of dollars so far - on the products that they need to survive in this rough economic climate.

In the survey, the Coalition asked two simple questions of these unfortunate American importers/consumers:

1. How much in new tariffs has your business paid in 2011 because of GSP expiration?

2. What percentage of your business comes from products imported under GSP?

If you're like me, the answers will disgust you.  Here's a sample:

• “The timing couldn’t be worse with a weak dollar and inflationary prices on raw materials. My company was just starting to experience growth out of this recession when these three factors hit it hard all at once and crippled us.”

• “This inaction is causing 2 problems. We have paid out over $18,000 in additional duties, making what should have been a slightly profitable year into a losing one and forcing us to cut plans to expand. Also the uncertainty of whether or not this will be signed again makes decision-making even more difficult.”

• “We need GSP renewal. We are losing sales as our products are too expensive & we will have to cut jobs in our office.” 

• “I was set to hire at least one employee and possibly two at the beginning of the year which I scrapped after paying about $12,000 in customs that used to be covered under GSP eligibility.”

• "For very small companies like ours, the loss of GSP and ATPA simultaneously has wrought havoc on our finances. We have paid over $61,000 in duty since Jan. 1, 2011 for frozen food imports. These costs cannot be passed along to our customers, who are large food manufacturing companies with long term contracts. With the problems of availability of credit for small businesses having taken its toll, the increase in the cost of health care premiums for employees, and now the loss of GSP/ATPA, for the first time ever we have had to lay off an employee and cut back on benefits."

Some of our elected officials like to talk about trade policy in terms of accepting "economic reality."   Well, you can get any more real than this, can you?  Sheesh.

The RenewGSPToday website has more horror stories of protectionism's "unseen victims," and I highly recommend that you share them far and wide.  It's about time that the other side of the story was told.

Supporters of TAA Expansion Need to Find Another Myth

As I noted last week, the White House has refused to submit implementing legislation on pending FTAs with Colombia, Panama and South Korea until House Republicans agree to extend now-expired provisions of the Trade Adjustment Assistance program.  These provisions, included in the 2009 Stimulus* Bill, dramatically expanded the scope and coverage (and expense!) of the TAA program to include, among other things, services workers whose jobs were allegedly lost because of trade.  Here's how Sen. Debbie Stabenow (D-MI) - of the loudest proponents of the TAA expansion - described the provisions back in February:

In 2009, an update to TAA was enacted to help the program reflect the realities of today's global economy. Created in 1974, TAA originally did not allow service workers to take part in the program, and only those whose jobs were shipped to a country with which the United States has a free trade agreement qualified-in other words, workers whose jobs were sent to China and India were turned away. The 2009 update allowed service workers and those whose jobs were offshored to any country to apply.

Today Sen. Stabenow and some of her Senate colleagues repeated this refrain as they announced their support for the White House's latest FTA extortion demands.  But does their call for expanded TAA coverage to protect American services workers from outsourcing to India, China and elsewhere actually jibe with the global economic "realities" about which the Senators allegedly care so dearly?

In short, no.  Not at all.

As I recently noted, politicians' breathless claims about the rampant outsourcing of American services (and manufacturing) jobs to places like India and China are far more myth than reality.  Indeed, the United States actually ran a trade surplus in services with China (and many other countries) in 2010 and has been a net "insourcer" overall for several years now:

The US ran a relatively tiny services deficit with India in 2010 and a small surplus in 2009, but today comes eye-opening news that Indian corporations might be turning even more often to the US workforce:

[I]n a reversal of fortunes it now appears that large Indian companies are actually now themselves outsourcing - to U.S. shores.

Large corporations that have boomed in India amid the country's nimble economy have been drawn to the U.S. where unemployment has soared....

Experts said that the phenomenon, which could become more widespread in the coming years, is partly due to Indian workers demanding higher wages and higher living standards.

'The U.S. became the fastest-growing location for us last year. We expect that to continue this year,' Genpact chief executive V.N. 'Tiger' Tyagarajan said.

Joseph Vafi, an analyst at Jefferies & Co. in San Francisco told the Washington Post: 'What you have going on in India are salary hikes. As these companies get larger and larger, it just makes sense for them to do some hiring in the States.'

The Indian economy - boosted by a savings culture of large cash deposits - has boomed and is this year predicted to outpace China.

Businesses around the world have targeted India - part of the 'BRIC' emerging economies - for their global expansion.

Residents there have seen an increase in living standards and higher wages, which has led to higher spending.

In short, all that dastardly outsourcing has enriched Indian companies and workers, and now they're looking to the United States for not just new customers but also new employees.  Very cool.  The article even lists the biggest Indian companies that have outsourced work to the United States:

• Tata Consultancy Services.  Tata Consultancy Service is based in Mumbai and had a turnover of $8bn in 2011. They employ more than 200,000 worldwide with a significant number of those, believed to be around 15,000 based as outsourced jobs in the U.S.

• Aegis Communications.  Technology firm Aegis is part of the Essar group based in Mumbai with an annual revenue of $15bn. Aegis employs 9,000 in the U.S. at offices throughout the country.

• Wipro.  Based in Bangalore, IT specialists Wipro employ around 4,000 people in jobs that have been outsourced to the U.S.

• Genpact.  The IT outsourcing company employs 1,500 people in the U.S. but that is expected to triple over the next two years as bosses find it cheaper than employing Indian staff at home.

• Infosys.  The company is based in Bangalore with an annual revenue of $100m. They have 130,000 employees worldwide.

Sen. Stabenow and her colleagues claim that a massive expansion of TAA is absolutely necessary to "reflect the realities of today's global economy," so I'm sure when confronted with these indisputable facts about the global dominance of the American services sector (and its workers) - and the obvious benefits of globalization at home and abroad - these caring Senators will stop holding our pending FTAs hostage to a needless and costly TAA expansion, right?

Rrrrriiiight.

Given the fact that these TAA-loving Senators, as well as the politicians in the White House and elsewhere, desperately want to subsidize America's globally-dominant services workers with (even more) borrowed money, it seems to me that they, not those opposed to TAA expansion/extension, are the ones in dire need of a "reality check."

UPDATE: Mark Perry has more on the rapidly changing global labor market.

The Morality of Profit

One of this blog's most frequent subjects is the moral case for free trade (i.e., voluntary, mutually beneficial commercial exchange across national borders) and the immorality of efforts to thwart such exchanges through protectionism or market-distorting subsidies.  From the Atlas Network's Tom Palmer comes a great new video on the morality of profit that touches on some of the themes raised here.



I understand that the Atlas Network will be making more videos on the inherent morality of the free market. Hopefully, they'll do one specifically on free trade and protectionism.

(Assuming, of course, that the world doesn't end tonight.)

Wednesday Quick Hits

Plenty of great links to share today (the last day of my 34th year on the planet), so let's get right to it.

• The Economist reports on how increasing labor costs in China are once again changing the globalization dynamic - in many cases, back in US manufacturers' favor: "'Sometime around 2015, manufacturers will be indifferent between locating in America or China for production for consumption in America,' says [BCG's] Sirkin. That calculation assumes that wage growth will continue at around 17% a year in China but remain relatively slow in America, and that productivity growth will continue on current trends in both countries. It also assumes a modest appreciation of the yuan against the dollar.... Companies are thinking in more sophisticated ways about their supply chains.  Bosses no longer assume that they should always make things in the country with the lowest wages.  Increasingly, it makes sense to make things in a variety of places, including America."  The whole article is definitely worth a read.  (h/t Mark Perry)

• The WSJ's Mark Gongloff throws some cold water on the "China is dumping US Treasury debt" hysteria.

• Heritage's Bryan Riley makes a great catch:   "People who believe the United States no longer manufactures anything need to check out the newest Consumer Reports “Best Cars” list. The magazine recently selected the top cars for 2011 in 10 categories. Five 'best models' are made in the USA, three in Japan, one in Canada, and one in Mexico. Four of the made-in-the-USA models carry foreign nameplates; by contrast, the one Chevy on the list is made in Mexico."

• Cato's Dan Griswold provides clear and concise arguments for allowing Mexican trucks to travel on US roads.

• AEI's Michael Auslin provides a roadmap for expanding US-India trade and explains why it should be a point of emphasis.

• A must-read story in USA Today shows that US visa restrictions may be driving companies out of Silicon Valley and the United States entirely: "Silicon Valley may be the cradle for tech start-ups, but some foreign-born executives, engineers and scientists are leaving because of better opportunities back home, strict immigration laws here and California's steep cost of living."  I totally get the need for us to secure our borders and staunchly police illegal immigration, but the United States is suffering (and will suffer a lot more in the future) because of our government's inability to develop and implement policies to efficiently and lawfully keep super-smart foreign entrepreneurs and workers here.  Our lack of such policies is, ahem, bordering on the insane. (Sorry, I couldn't resist.) 

• The White House has surprisingly announced that it won't move pending FTAs with Colombia, Panama and South Korea unless the House GOP ties it to the now-expired Trade Adjustment Assistance program.  IBD dismantles the administration's political motivations, while Cafe Hayek's Don Boudreaux eviscerates TAA's shoddy economic foundations.  (More on this issue to come.) 

• Logistics improvements in China would mean huge gains for consumers and exporters, further proof that trade facilitation efforts can dramatically improve global trade when market access negotiations break down: "Logistics costs as a percentage of GDP are around 21%, compared with 10% in the U.S. and 13% in India.... [T]he country has a fragmented system, high tariffs for road transport and multiple providers piling on fees.... A Chinese government investigation found that two-thirds of the retail price of vegetables represents logistics costs. And even though costs are high, service is often poor.  Local logistics providers are famously slow and unreliable. Assuring end-to-end delivery of products across provincial boundaries is a real challenge."  Unfortunately, things appear to be getting worse instead of better:

• Looks like we're seeing a serious bubble in US farmland, yet American agriculture subsidies keep, ahem, plowing ahead. (Sorry, I couldn't resist... again)

• Good news: US exports surge to a new record high.  Less-good-news: as the graphic below makes clear (courtesy of Mark Perry), US exports are still below their pre-recession trendline.

That's all for today.  Enjoy!

Joplin Man Sentenced To 8 Years For 2009 Baseball Bat Beating Death:

Aaron E. Pilgrim (mug shot JCSO)

A man from Joplin has been sentenced to eight years in prison after pleading guilty to beating a man to death in 2009.

Aaron Eugene Pilgrim, 37, of rural Joplin was originally charged with second-degree murder for 50 year-old Ralph "Bub" Ernest Ivy Jr.'s death but pleaded guilty in February to involuntary manslaughter.

Jasper County Sheriff's Captain Derek Walrod says Pilgrim, Ivy and Pilgrim's former girlfriend Crystal Lynch were drinking at the woman's home on Red Fox Road when a fight broke out inside the house.  Acording to Walrod, Pilgrim confronted Ivy about some alleged sexual advances the older man made to Lynch's 11 year-old sister.

Ralph E. Ivy Jr. (mug shot JCSO)

After the fight spilled out onto the front yard Ivy went back inside the house and retrieved a baseball bat while Pilgrim armed himself with "a wooden club," according to Walrod.  Investigators also recovered a silver knife and a pair bloody scissors from the crime scene.

At the plea hearing in February, Pilgrim told Judge David Dally that he took the deal because he was afraid he would be found guilty of murder (which carries up to 30 years in prison) at trial and admitted that he hit Ivy with a bat but that he didn't think it would kill him.

Remember, Kids: "Fair" Is Just Another Four-Letter Word That Starts with "F"

Every time I walk into Starbucks to grab a venti triple skim latte, I get irked by the place's incessant moral preening about "fair trade" coffee - its walls papered with pictures and stories of happy Central American coffee growers, each picture/story letting me know that I should not - I repeat NOT - feel guilty about being stinkingly rich enough to regularly drop 5 bucks on a giant, steamy cup of caffeinated water and milk foam.  Starbucks is certainly not alone, and these purveyors have every right to produce, market and their products however they see fit.  But those of us who work in the trade field know all too well that "fair trade" is really just secret code for "the malicious use of subjective hokum to employ latent protectionism" or "the brazen imposition of developed country standards on the developing world" or, at best, "well-intentioned, but misguided (and economically ignorant) marketing efforts that do nothing but raise prices."  (Sometimes all three!)  So the sight of the "fair trade" label has never sat well with me.

I've always thought that it was this last definition - the well-meaning-but-economically-ignorant one - into which almost all "fair trade" coffee efforts fell, so when I walk into Starbucks, or pretty much any other hipster coffee hangout, I get irked (and smugly so), but not irked enough to walk out.  (I do love me some overpriced latte.)  While the marketing efforts were clearly feel-goodism gone awry, I never really thought that they were hurting anyone other than the dumb/lazy, rich consumers who were willing to pay a little bit more for our "fair trade" drinks.  However, after reading this illuminating piece by Duke University's Mike Munger about the troubling effects of the "fair trade movement" on poor local farmers, I might just need to start getting my sweet, sweet caffeine fix elsewhere:

Here is the basic economics--a rent is being created: a price above market price is being charged. In countries where property rights, contracts, and rule of law is tenuous, feel-gooders and scam artists have put together an unholy coalition. The feel-gooders create something called "Fair Trade" certification, which means that the farmers get paid well above market price for the coffee they produce.

Not surprisingly, many farmers want to get in on this action. But less than all can be certified "fair trade" recipients, since a price that much above the market price would create a surplus. The fair trade feel-gooders would never be able to sell the glut of coffee if EVERYONE gets fair trade certification.

So, the feel-gooders stick their fingers in their ears and shout "LA-LA-LA-LA-LA" and pretend that their partners the scam artists are doing the right thing when they hand out the "fair trade" certifications.

But remember that these are countries with little rule of law, and shoddy police enforcement. So what the scam artists in effect do is sell off the rent (the high price of fair trade certification) to the highest bidder.

The result is that, after a fairly short period, three years at most, the "fair trade" farmers are getting no more, and maybe less, than everyone else, and no more than they got before the "fair trade" scam was started. The scam artists, it's true, are skimming the profits, but the competition to become a scam artist then becomes the valuable commodity, and rent-seeking to get to be the guy who certifies "fair trade" then also dissipates THAT rent. Some government official in the country, the one who licenses the guy who licenses the guy who certifies "fair trade" farmers ends up sucking down the rent.

Consumers pay more, and feel good about themselves. The feel-gooders who started the program move on to abuse some other group of farmers with false promises. And the results are a substantial increase in dead-weight loss.

Don't believe me? Article in the National Post, by Lawrence Solomon, founder of Green Beanery in Toronto, a suburb of Buffalo.

And the German study that really reveals how it all works.  In fact, as the Hohenheimers note, the certification process is so corrupt many don't even bother, and just mislabel the coffee as "fair trade" from the get-go.

Solomon's National Post op-ed summarizes the German study and Solomon's own experiences with the fair trade coffee movement, and let me tell you, it ain't a pretty sight:

Today, on World Fair Trade Day, we have something else to feel guilty about. That fair-trade cup of coffee we savour may not only fail to ease the lot of poor farmers, it may actually help to impoverish them, according to a study out recently from Germany's University of Hohenheim.

The study, which followed hundreds of Nicaraguan coffee farmers over a decade, concluded that farmers producing for the fair-trade market "are more often found below the absolute poverty line than conventional producers.

"Over a period of 10 years, our analysis shows that organic and organic-fair trade farmers have become poorer relative to conventional producers."

These findings do not surprise me. I speak as someone who has had contact with various Third World producers in my capacity as president of Green Beanery, a company I founded seven years ago to raise funds for Energy Probe Research Foundation, a federally registered charity that I manage....

The fair-trade business is filled with contradictions.

For starters, it discriminates against the very poorest of the world's coffee farmers, most of whom are African, by requiring them to pay high certification fees. These fees -one of the factors that the German study cites as contributing to the farmers' impoverishment -are especially perverse, given that the majority of Third World farmers are not only too poor to pay the certification fees, they're also too poor to pay for the fertilizers and the pesticides that would disqualify coffee as certified organic.

Their coffee is organic by default, but because the farmers can't provide the fees that certification agencies demand to fly down and check on their operations, the farmers lose out on the premium prices that can be fetched by certified coffee.

To add to the perversity, it's an open secret that the certification process is lax and almost impossible to police, making it little more than a high-priced honour system. Although the certification associations have done their best to tighten flaws in the system, farmers and middlemen who want to get around the system inevitably do, bagging unearned profits. Those who remain scrupulous and follow the onerous and costly regulations -another source of inefficiency the German study notes in its analysis -lose out....

Most merchants of certified coffees are aware of these contradictions, but most won't be aware of other problems in the certification business. For Third World farmers to qualify as fair-trade producers, and thus obtain higher prices for their coffee, farmers must join co-operatives. In some Third World societies, farmers readily accept the compromises of communal enterprise. In others, they balk. In patriarchal African societies, for example, the small coffee farm is the family business, its management a source of pride to the male head of the household. Joining a co-operative, and being told when and what and how to plant entails loss of dignity....

Some believe that certified coffee is superior in some way. But it is not always so. The small-scale farms whose local ecologies produce distinctive, niche coffee beans can't operate on a scale that would justify official certification. As the German study notes, "Certified coffees have distinct production and marketing systems with different associated costs than the conventional system."

Neither is certified coffee different at all. In fact, at Green Beanery we have received bags of coffee, some labelled fair trade, some not, grown on the very same farm and identical in every respect. The fair-trade certified farmer himself can't tell which beans will be sold as fair trade and which not -that decision is made by the higher-ups.

Because the fair-trade associations are intent on keeping the price of fair-trade coffee up, they limit the supply of coffee that can be labelled as certified. To the certified farmer's chagrin, most of his fair-trade certified crop could end up being sold as uncertified conventional coffee.

And in this well-intentioned pricefixing game, the fair-trade farmer is the pawn and the joke is on the customer.

Be sure to read the whole op-ed.  It's well worth your time.  As the title of this blog post (crassly) states, in the trade world "fair" is just another four-letter word that starts with the letter "F."  And in the case of coffee, it looks like impoverished African and Latin American farmers are getting royally, ahem, faired just so rich coffee-drinkers can feel better about themselves.

(h/t Art Carden)

Stone County Woman Busted For Allegdly Cooking Meth On Church Premises:

Amy Ann Hammers (mug shot SCSO)

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A Stone County woman was busted after authorities allegedly found her cooking meth in the parking lot of the First Baptist Church in Ponce De Leon on Friday May 13th.

Authorities have been watching that location after receiving ongoing reports that people were using the site to manufacture methamphetamine.

According to a news release, Deputy Duane Keithley noticed Amy Ann Hammers, 32, of Ponce De Leon sitting in a suspicious vehicle and asked for permission to search the vehicle. 

Hammers was arrested after the search revealed methamphetamine precursors and a small bottle containing chemicals that were in the “reaction” stage of a “one pot” (AKA shake and bake) method in methamphetamine production inside the vehicle.

Agents with the COMET Drug Task Force were called in to assist in the cleanup of the methamphetamine chemicals and precursors.

Hammers has been charged with possession of a controlled substance and is being held in the Stone County jail on a $25,000 cash only bond.  She could face additional charges after authorities receive lab results on the contents inside the bottle. 

Short Article, Big Lessons

From Colombia Reports comes a great article that, on its face, seems to be just a short piece about foreign investment, but actually provides several great lessons about the global economy:

Colombia's largest cement company Argos has bought several cement plants in Alabama, Georgia and South Carolina for $760 million, reported local media Thursday.

Argos Cements bought the plants from the French company Lafarge. Argos entered the US market in 2005 and says it plans to become the fourth largest ready mix producer in the U.S.

Chief Executive Jose Velez said in an interview as reported by Dow Jones "We are conservative in our outlook but we do expect more activity in 2010." Velez also said that he is not worried by the weak dollar or the strong peso.

"Because of the weakness of the dollar most of our inputs are cheaper now ... The net impact of the appreciation [of the peso] is zero at this time."

The purchase, which is still subject to approval from U.S. regulators, is part of an long term expansion strategy aimed at consolidating Argos' presence in the U.S. market.

So what kind of lessons can we draw from these few paragraphs?  Here's what I came up with:

• The obvious benefits of foreign investment in the US economy.  But for Argos' investment, these French-owned cement plants in Alabama, Georgia and South Carolina may have gone out of business, eliminating hundreds of American manufacturing jobs in the process.  Now, let's just hope that those "US regulators" don't foul things up.

• Where all that great foreign investment wants to go.  All of Argos' $760 million investment is going to Right to Work States. i.e., states with laws prohibiting compulsory union membership.  Of course, as I've often noted here, foreign investment in these states - particularly those in the South - is part of a growing trend.  In fact, the empirical evidence shows that RTW states attract more FDI than their forced-unionization counterparts.  Of course, the economic dominance of RTW states isn't isolated to attracting foreign investment.  As Steve Moore and Art Laffer recently noted in a great WSJ op-ed: "As of today there are 22 right-to-work states and 28 union-shop states. Over the past decade (2000-09) the right-to-work states grew faster in nearly every respect than their union-shop counterparts: 54.6% versus 41.1% in gross state product, 53.3% versus 40.6% in personal income, 11.9% versus 6.1% in population, and 4.1% versus -0.6% in payrolls."

• How global supply chains erode the conventional wisdom on trade and currency and make import liberalization increasingly important.  Velez states: "Because of the weakness of the dollar most of our inputs are cheaper now ... The net impact of the appreciation [of the peso] is zero at this time."  This means that his company is importing raw materials from the United States or from countries whose currencies are pegged to the dollar.  Either way, it's a great example of how global supply chains have made old school currency dogma irrelevant, and why a strong currency and the elimination of import barriers are important for intermediate/downstream producers like, oh I don't know, the United States.  Now, if only there were a way for the United States and Colombia to instantly lower the vast majority of their bilateral trade barriers.  Oh, wait.

• The origins of that Colombian investment capital - the US-Colombia trade deficit.  One of the constant refrains here is that trade deficits are not "bad things" because, among other things, they necessarily lead to foreign investment in the United States.  As Cafe Hayek's Don Boudreaux put it, "another name for 'U.S. trade deficit' is 'U.S. capital-account surplus' – that is, inflows of investment funds into America that supply (directly or indirectly) financing for more capital creation in America."  (Mark Perry adds more here.)  In 2010, the United States had a $3.6 billion bilateral trade deficit with Colombia, and now $760 million is coming back to the U.S. as investment in domestic cement plants.  In short, Americans gave Argos and other Colombian firms our dollars, and now they're re-investing those dollars in the US economy.  Suddenly, those trade deficits aren't so scary anymore, eh?

I'm sure I missed something.  Feel free to add your lessons in the comments.

(h/t Monica Showalter)

Caterpillar CEO on Trade and How to (Really) Win The Future

President Obama and his underlings just love to talk about improving American competitiveness in order to Win the Future.  But what does the US business community - well, those not on the milky-end of the government teet - think about the current state of American policy and its impact on our companies' future global competitiveness?  Courtesy of HotAir comes a fantastic CNBC interview with the CEO of Caterpillar - one the shining stars of America's thriving manufacturing sector - on just those issues.  It's well worth your 15 minutes:



In short, Mr. Oberhelman sees the global economy not as a threat, but as a great business opportunity.  He's smartly positioned Caterpillar to take full advantage of both foreign and domestic market conditions - through things like advocating robust trade liberalization, currency hedging and maintaining near-total control over business operations in interventionist foreign markets - and he sees competitiveness-killing US government policies, not free trade or low-cost competitors in China or Brazil, as the greatest threat to his company's viability and the future of the American economy.

And what kind of US government policies are undermining our global competitiveness and thus jepoardizing our companies and jobs?  I'll let Oberhelman explain:



My favorite quote:

We've announced three or four arguably brand-new facilities [in the United States] bringing work in from outside. And frankly we weigh all of these things in which state is the most business friendly. It's not a question of labor cost or who's cheaper. If you chase cheap labor around the world, you're never going to win. It's a lot more than that. The state's got to be competitive.  The country's got to be competitive....  You see states going the other way [from Illinois], where they're very pro-business and reducing taxes, and guess where we land our plants that are very competitive.... The latest and greatest is in Texas.  We brought a plant that in the past has assembled hydraulic excavators in Japan for shipment to the U.S.... we've moved that plant to south Texas... 5,000 to 6,000 units a year, 600 to 700 high-paying assembly jobs.

Nice.  And how exactly does Mr. Oberhelman think the current administration is doing to keep American companies strong and competitive?  Well, the answer to that is in the second video, but I'll let HotAir spell it out for you.

(Hint: it's not good.)

What Happened To Shawn Spencer? Camden County Authorities Asking For Help In Five Year-old Missing Person's Case:

What happened to Shawn Spencer?  If you know call 573-346-2243

Authorities in Camden County are asking for the public's help in a five year-old missing persons case.

Shawn Eric Spencer, of Montreal, who would now be 31, was reported missing by his mother on April 18, 2007. However, he was last seen alive by family members about a year before that.  Spencer's mother told investigators that her son would sometimes disappear for months at a time, but when she hadn't heard from him in over a year she became concerned and reported him missing.

Spencer is 5' 10", 130 to 150 pounds, with blonde hair and brown eyes.  He has mechanical type tattoos on both legs, a jester with a skull face on his arm and an 8 ball and red alien on his shoulder.  He also has acne scars on his face. Authorities have DNA from both parents on file.

Tattoos on Spencer's right leg

Camden County Detective Wendy Kost says Spencer and his dog, who is also missing, were last seen on April 4, 2006, with a friend who has since moved to Illinois.  "We are trying to track that person down to see what, if anything, they can tell us."

Spencer lived in the Lakes area for about 15 years before his disappearance and authorities would like to talk to anyone who knew him.
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If you have information on Spencer or his possible whereabouts you're asked to contact the Camden County Sheriff's office at 573-346-2243.

Southwest City Man Leads Authorities On Multi County Chase:

Cody Nathaniel Willcoxson

A man from Southwest City is behind bars in Phelps County in connection to a shooting incident involving law enforcers from several agencies following a brief security breach at Fort Leonard Wood and a scare at a nearby university.

Authorities say it all started about 8:36 a.m. when Cody N. Willcoxson tried to get on to the army base through the west gate this morning but was refused entrance because he did not have the proper credentials.  When military police instructed Willcoxson to turn around and exit the post he floored it and led MP's on a chase through the base and exited through the main gate.

As Pulaski County Sheriff's deputies and officers with the the St. Roberts and Rolla police departments pursued Willcoxson eastbound on I-44 he fired shots from an Ak-47 at them from a grey vehicle.

He led authorities to the S & T campus where at approximately 8:45 a.m he ran into McNutt Hall with a rifle.  The hall houses the Mining and Nuclear Engineering department, classrooms, offices and labs.  An Ak-47 was found outside the building after Willcoxson fled the scene. 

Law enforcers surround Willcoxson's car on S & T campus

The school went on lockdown around 9 a.m. and used it's website and text messaging to keep students and faculty updated and says no shots were fired on the campus. The school officially lifted the lockdown about 1:40 p.m.

Rolla police said a few minutes later the suspect broke into a residence in the 1000 block of Crinoidal Ct and demanded the keys to the resident's car and stole it.

A Highway Patrol trooper spotted the suspects vehicle south of Rolla and after a short pursuit,Willcoxson stopped the vehicle and was taken into custody. He suffered minor cuts, likely from broken glass when he shot out his car windows. No one else was injured in the spree.

Willcoxson being taken into custody

He was released from the Oklahoma Department of Corrections in 2008 after serving about 3 1/2 years for burglary.  While he was serving time authorities say he masterminded at least two jail escapes; one involved nine inmates and Willcoxson eluded authorities for 3 years following one of the escapes.

Missouri S&T issued a press release that said the gunman went inside McNutt Hall on the Rolla campus.  The hall houses classrooms, offices and labs.
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According to a notice posted on Missouri S&T's website, no shots were fired on campus and no one was injured.

Missouri S&T gunman search -


More than 150 officers were involved in apprehending Willcoxson.

Willcoxon is facing numerous firearms, assault of law enforcement officer charges and resisting arrest in at least two counties. He was also allegedly in possession of methamphetamine when he was apprehended.

 He is being held on a $1 Million dollar cash only bond.


*********UPDATE 05-13-11- Authorities now believe that Willcoxson made a wrong turn and was lost when he arrived at Fort Leonard Wood and panicked not wanting to be found in possession of the firearm because he is a convicted felon. 

Willcoxson will probably be federally charged as a felon in possession of a firearm.

On Protectionism's Alleged "Conservativism"

A few weeks ago, I documented - in admittedly excruciating detail - the many failings of Donald Trump's anti-China trade policy.  Given Trump's magically evaporating poll numbers, the man himself is quickly becoming an afterthought in the US political discussion (thank goodness), but unfortunately his protectionist trade policy isn't making a similarly hasty retreat.  In fact, several misguided souls have taken to the interwebs to loudly defend Trump's indefensible (and hilariously hypocritical) stance on free trade.  I think that my original post and others like it handle a large majority of these defenses, so I won't rebut them here.  However, one new defense deserves further discussion because it comes from someone who really, really should know better - current trade lawyer and former USTR official (under Reagan) Robert Lighthizer - and whose argument rests not on the economic, strategic or moral strengths of Trump's grand plan, but instead on its alleged "conservativism" - something I superficially addressed in my original blog entry.

In today's Washington Times, Lighthizer argues that, while Trump's support for eminent domain abuse and universal health care might be liberal, his trade policy is actually quite "Republican" and "conservative":

Mr. Trump’s GOP opponents accuse him of wanting to get tough on China and of being a protectionist. Since when does that mean one is not a conservative? For most of its 157-year history, the Republican Party has been the party of building domestic industry by using trade policy to promote U.S. exports and fend off unfairly traded imports. American conservatives have had that view for even longer.

Lighthizer's op-ed essentially trots out two arguments to support his thesis that anti-China protectionism is a "conservative" policy.  First, he notes that lots of Republicans and Founding Fathers - like Hamilton, Clay and Lincoln, McKinley, Taft, Coolidge, Nixon and Reagan - supported protectionist policies, while liberals like FDR and Woodrow Wilson supported free trade.  Second, Lighthizer argues that anti-China protectionism is really, deep-down a "core conservative" principle:

On a purely intellectual level, how does allowing China to constantly rig trade in its favor advance the core conservative goal of making markets more efficient? Markets do not run better when manufacturing shifts to China largely because of the actions of its government. Nor do they become more efficient when Chinese companies are given special privileges in global markets, while American companies must struggle to compete with unfairly traded goods.

Thus, Lighthizer concludes:

When viewed in this context, the recent blind faith some Republicans have shown toward free trade actually represents more of an aberration than a hallmark of true American conservatism. It’s an anomaly that may well demand re-examination in the context of critically important questions facing all conservatives on trade policy.

Given the current financial crisis and the widespread belief that the 21st century will belong to China, is free trade really making global markets more efficient? Is it promoting our values and making America stronger? Or is it simply strengthening our adversaries and creating a world where countries who abuse the system - such as China - are on the road to economic and military dominance? If Mr. Trump’s potential campaign does nothing more than force a real debate on those questions, it will have done a service to both the Republican Party and the country.

Now, leaving aside some of Lighthizer's more dubious assumptions - such as China's inevitable dominance or the pro-tariff motivations of certain conservative leaders - do either of his two primary arguments really hold water?  Is protectionism - in particular aggressive, unilateral trade action against China - really a policy that "true conservatives" should inherently embrace?

In short, no.  Of course not.

First, the idea that conservatives and Republicans should support protectionism - or any other policy for that matter - because certain of their former leaders did so is laughably misguided.  For example, President Nixon also supported economy-crushing wage and price controls, so should Republicans support those too?  President Eisenhower was a pretty big fan of the New Deal, so should conservatives support similar progressive expansions of the American welfare and regulatory apparatus?  (And let's not even get into some of the misguided policies of our antebellum conservative founders.)

Indeed, conservatives rightly advocate the exact opposite of such an approach to policy - a government, as arch-conservative John Adams famously quipped, "of laws and not men."  In that sense, conservativism and libertarianism, unlike progressivism, are not about discrete, ephemeral policies or individual leaders but instead about fundamental principles.  The policies and leaders change, but the principles are constant.  Among them are devout commitments to limited government, economic liberty, the free market and the rule of law.

Yet Lighthizer's anti-China protectionism reflects none of these principles.  As Dan Ikenson and I wrote a few months ago:

[V]oluntary economic exchange is inherently fair, benefits both parties, and allocates scarce resources more efficiently than a system under which government dictates or limits choices. Moreover, government intervention in voluntary economic exchange on behalf of some citizens necessarily comes at the expense of others and is inherently unfair, inefficient, and subverts the rule of law. At their core, trade barriers are the triumph of coercion and politics over free choice and economics. Trade barriers are the result of productive resources being diverted to achieve political ends and, in the process, taxing unsuspecting consumers to line the pockets of the special interests that succeeded in enlisting the weight of the government on their side.

Protectionism is akin to earmarks, but it comes out of the hides of American families and businesses instead of the general treasury. Policymakers on the right should support free trade because it is consistent with their principled opposition to higher taxes on American businesses and consumers and to big government telling people how and where they should spend their money. A vote for free trade is a vote to cut taxes and to get government out of the business of picking winners and losers in the market....

[W]hen people are free to buy from, sell to, and invest with one another as they choose, they can achieve far more than when governments attempt to control their decisions. Widening the circle of people with whom we transact brings benefits to consumers in the form of lower prices, greater variety, and better quality, and it allows companies to reap the benefits of innovation, specialization, and economies of scale that larger markets afford. Free markets are essential to prosperity, and expanding free markets as much as possible enhances that prosperity.

I recently applied these arguments to the very protectionism -  Trump's anti-China tariffs - that Lighthizer so vigorously defended:

[Protectionism is] the height of statist redistributionism. Trump forgets that American consumers are buying Chinese goods voluntarily - last time I checked China wasn't loading missiles with TVs and launching them into the US (although that would be kinda awesome). And he freely admits that the goal of his policy is to force American businesses and families to subsidize (by paying higher prices) that small minority of American manufacturers who directly compete with China. So not only is Trump saying that he knows better than us about what we should be consuming, but Trump's also saying that because we just can't help ourselves but buy cheap Chinese goods ("ooh, they're so cheap and pastic-y"), he has no choice but to enlist the full force of the US government to stop us from harming ourselves. President Trump will tell us to pay more for less in order to line the pockets of a select few because we're just too dumb and helpless, and we can't be trusted to make the decisions that he, and he alone, deems "right."

It's for our own good, you see. Now please someone, anyone, explain to me how this is the policy of a fiscal conservative?

(Answer: it's not.)

But hey, Presidents Taft and Nixon opposed free trade, so who cares about all those crazy principles, right?!

Lighthizer's second, "intellectual" argument in support of Trump-style, unilateral protectionism - that conservatives should support it because China is cheating at trade and destroying the American economy thereby - is equally problematic.  Leaving aside the economic illiteracy of this argument (cleverly captured today by Cafe Hayek's Don Boudreaux and also shown in my original blog post on Trump) or the fact the term "fairness" is a loaded term routinely championed by progressives and derided by conservatives (including Milton Friedman in this classic video), I'm frankly surprised that Lighthizer, an accomplished trade lawyer, would so freely allege that China is rampantly and wantonly engaging in "unfair" and "injurious" trade.

As he well knows, such terms have very precise meaning under US law, and by that metric - one that's extremely favorable for American companies, by the way - only a small minority of Chinese imports into the United States are "unfairly traded."  And according to the Petersen Institute's Gary Clyde Hufbauer and Jared Woollacott, the level of trade disputes between the US and China is quite "normal" given the nations' rapidly growing commerce (about 12% of total bilateral trade, similar to the US-Canada relationship in the late 1980s).  If Lighthizer and his clients would like to challenge the "fairness" of any of the other Chinese imports that American families and companies are voluntarily purchasing each year, they are certainly free to do so under the US anti-dumping or countervailing duty law (and, of course, they can challenge fairly-traded, surging Chinese imports under Section 421).  Heck, they can even lobby Congress to have US trade laws changed (again) to make findings of injury or unfair dumping or subsidization even easier.  Questionable economics aside, such actions are at least arguably "conservative."  But what clearly isn't conservative are public demands (or backroom lobbying requests) that our political leaders circumvent US law and global trade rules to implement protectionist tariffs by fiat based on unsupported allegations of "unfair" and "injurious" trade.

Even when such demands invoke the dear old ghost of William McKinley.