Thursday Quick Hits

Here's some more light reading to get you ready for the weekend:

• Cato's Sallie James is back banging her TAA drum again (fortunately for us); this time, she exposes the "flawed logic" behind certain misguided arguments in support of TAA.  James actually raises some of the same arguments that I raised in my comments to this post (but to much better effect, as usual).  Meanwhile, the GOP appears to be stiffening in the face of the Obama administration's TAA demands.

• David Harsanyi beautifully explains why "Buy American" is inherently un-American.  Here's my favorite part: "Nobel Prize-winning economist and New York Times columnist Paul Krugman once explained in his book 'Pop Internationalism' that if he could stress one thing to students, it would be that 'international trade is not about competition, it is about mutually beneficial exchange.' Wasserman Schultz is bright, so she must know all about the counterproductive history of protectionism. Then again, when she says 'Buy American,' maybe she just means 'Buy Union' — buy union because taxpayers subsidize GM and it pays workers and they subsidize unions that subsidize the right candidates. A mutually beneficial exchange."

• Jonah Goldberg quickly explains why E.J. Dionne's liberal fantasies about copying Chinese and European industrial policy are anything but "innovative."

• Utterly unsurprising news of the day: the government subsidizes consumption of Chevy Volts, and people - this time, car dealers - end up gaming the system.  Shocking, I know.

• Iowa Congressman Steve King calls for an end to US Ethanol subsidies.  Yes, you heard that right - a guy representing IOWA supports terminating America's Corndoggle, yet certain presidential candidates (and the current guy in charge) refuse to do so.  Panderiffic! 

• After five grueling months of not-trying-at-all, Treasury Secretary Tim Geithner announces that the administration's vague-and-not-very-bold corporate tax reform "plan" is on indefinite hold.  Meanwhile, "Executives from major U.S. businesses told lawmakers Thursday that they would be willing to give up major tax breaks in exchange for a lower top corporate tax rate." Great timing as usual, Mr. Secretary (and the USA still has the highest corporate tax rate in the industrialized world - sweet).

• More swine at the trough - this time, textile congressmen are "worried" about the imaginary textile section of a thus-far-imaginary FTA, the Trans-Pacific Partnership.  Somewhere, the ghost of Mancur Olson is nodding with approval.

That's all for tonight.  Go Mavs!

Monday Quick Hits

There have been plenty more headlines over the last few days, so let's get right to 'em:

• China's contentious policies on exports of "rare earth" minerals lead to the re-opening of (and foreign investment in) directly competitive US operations by the end of 2010.  Three cheers for the free market.  (Now, let's just hope that US protectionists and/or environmentalists don't doom the new operations and the jobs that come with it.) 

• Ecuador's ICSID arbitration win over a US oil company demonstrates, once again, that "NAFTA-style" investment provisions in international agreements aren't nearly the scary menace that anti-traders would have you believe.

• Mexicans can't get their hands on American Christmas Trees because of absurd US protectionism.  Feliz Navidad!

• Caterpillar publicly presses Congress and the White House on 2011 passage of all pending FTAs, not just the KORUS.  We should expect a lot more of this next year.

• So the WSJ editorial board must read this blog, as they hit on both the US-Colombia FTA and those troublesome subsidies for Big Wind that I discussed last week.  (Or I'm just blogging on really common issues.)

• Here's a little something that doesn't pass the laugh test: "Yet the aramid tariffs flew under the radar in trade talks with South Korea. That could be because concerns from the U.S. textile industry were drowned out by several other large U.S. industries that support the new agreement."  Me: Oh, yeah, that poor US textile industry just doesn't have any disproportionate sway over US trade policy.  Rrrrriiight.

• Once again, Rep. Jeff Flake (R-AZ) gives us hope that not everyone on Capitol Hill is a sleazy politician.

• More proof that the prices of most globally-traded goods (e.g., computers) have declined dramatically since 1980, while non-traded services (e.g., haircuts) have actually increased. 

That'll do it for tonight folks.  

Worst Protectionist Argument Ever?

Last week, Rep. Howard Coble (R-Textile Industry) wrote an op-ed in The Hill newspaper voicing his opposition to the US-Korea FTA.  He writes:

[M]y fellow chairman, Congressman John Spratt, and I just wrote a letter to United States Trade Representative Ron Kirk urging him to negotiate a fairer free trade agreement with the Republic of Korea. The current agreement, we wrote to Ambassador Kirk, is skewed unfairly toward South Korea. While we value our long-standing friendship with the people of South Korea, friends must trade with each other fairly.

The proposed trade pact is wrong because it would allow a massive flow of highly technical industrial textiles from Korea into the United States with few opportunities for reciprocal export of U.S. products to Korea. In its current form, the net result will likely be further job losses in segments of an industry critical to our districts. We have asked Ambassador Kirk, as he reopens the automotive and beef sectors of the agreement, to also revisit the textile provisions and revise sections that could cause great harm to the domestic textile industry.

Umm, ok. Now, leaving aside the obvious arguments about how misguided it is to make "reciprocity" the ultimate goal of US free trade policy, let's for a moment assume that it's really important.  What, pray tell, is one of the awful things causing this terrible lack of trade reciprocity?

The current trade framework will give goods of Korean origin duty-free entry into the U.S. market, while U.S. exports to Korea will still be subject to a 10 percent value added tax. It is misleading for U.S. officials to speak of zero-for-zero duty reductions when the U.S. imposes no comparable border tax on imports from Korea. Remedying this inequity should be part of any Korean trade agreement.

Hmm.  Well, there's only one problem with this argument: a VAT is not a "duty" at all.  A VAT is an internal consumption tax, like a sales tax here in the US, on all domestic sales of a product - imports and domestically produced products.  For example, an American (or Chinese or French or...) T-shirt sold in the Korean market would be subject to the same 10% VAT as a Korean t-shirt sold in Korea.  Thus, the VAT provides perfectly equal (or "non-discriminatory" in legalspeak) treatment among like products, and if it were anything otherwise - for example if the VAT only applied to imports - such disparate tax treatment would be an express violation of WTO rules (and the KORUS FTA).  Indeed, one only needs to conduct a 30-second Google search to see that no such tax discrimination exists in Korea.  Furthermore, the United States might not have a national VAT (to the White House's chagrin, natch), but we do have state sales taxes, to which Korean (and all other) imports would also be subject.  And yet we don't hear the Koreans screaming about that, now do we?

Put simply, it appears that Rep. Coble and his Textile Caucus buddies in Congress are complaining about a lack of "reciprocity" in the KORUS where none actually exists.  Indeed, the only way that the US and Korea could negotiate Coble's version of "reciprocity"would be for Korea to dismantle its entire domestic tax system, or for the United States to adopt a 10% national VAT (and let's not give the administration any ideas).  Put even more simply, Coble's comparing apples and oranges and then complaining that the oranges don't taste like apples.  And in the process, he and his colleagues are throwing up yet another unnecessary political roadblock to the most economically significant trade agreement since NAFTA.

Such actions reflect either a stunning ignorance of global trade rules and basic economics, or a blatant attempt to intentionally mislead the American people to the detriment of the US economy.

But our elected officials would never do the latter, right?  Right?